Reform 2013: The Commission proposes a new and improved Method for adjusting remuneration and pensions

Current situation

The “Method”, first adopted by the Council in 1972, has a proven record of effectiveness over 40 years as an efficient, transparent and simple tool for adjusting remuneration and pensions, with the intention of avoiding annual salary negotiations and lengthy strikes in the Institutions.

The salaries of EU staff are adjusted annually in line with changes in the purchasing power of remuneration of the Member States’ public services, based on the fundamental principle of parallelism between the evolution of EU officials’ remuneration and pensions and that of salaries of national civil servants. The Method is not an indexation based on inflation: it is simply an adjustment to the evolution of national civil servants’ purchasing power.

The current Method was adopted in the framework of the 2004 reform and will expire on 31 December 2012.

The Method, as it stands now, has led to a major clash with the Council in 2009, due to of the following perceived shortcomings:

 

  • a time lag between the statistical data collected by Eurostat and the economic and social developments in the Member States at the time of formal adoption of the annual adjustments;
  • an exception clause, which is considered by the Member States as unworkable;
  • the Brussels International Index (BII),[1] which might be perceived as a “luxury” inflation index.

The Commission proposal proposal – a new Method, exception clause and solidarity levy

The new Method will preserve the principle of parallelism and resolve the current shortcomings in the following ways:

  • Ten Member States will be used in the sample: the eight current ones plus Poland and Sweden.
    The new Method will reflect the nominal salary changes in the sample of Member States (instead of real salary changes).

The Brussels International Index will no longer be used; instead, our reference point will be national inflation data for Belgium and Luxembourg. In the beginning, a joint correction coefficient for Belgium and Luxembourg will be fixed at 100. In cases where inflation in BE and LU is different from the inflation in the sample Member States, the correction coefficient will be increased if BE and LU inflation is higher, or decreased if it is lower. For other places of employment, correction coefficients would be adjusted according to the national inflation.
Review of the ‘exception clause’

Through the principle of parallelism, the Method has fully taken account of any developments in purchasing power of national officials in Member States. It reflected changes of purchasing power of national civil servants, both in times of economic growths and in times of downturns.

Current Member States’ austerity measures, such as decisions to cut, freeze or cap salaries of national civil servants, have impacted on the salaries of EU officials, and, as a consequence, the 2010 adjustment resulted in what was essentially a salary freeze (0.1 % increase).

The exception clause should be applied when there are extreme developments in the Union and only in cases where the Method is not able to measure them. In order to better respond to the effect of the considerable time lag under the current Method, the exception clause will be amended as follows:

the application of the exception clause will be made automatic. It will apply if the following conditions are met:

  • the forecasted Gross Domestic Product (GDP) of the Union is negative;
  • the annual adjustment is positive and exceeds the change in the GDP by two percentage points;

In this case, the annual adjustment would be split into two equal parts and paid over two years;
this will not require the ordinary legislative procedure to be used, but would be applied automatically by the Commission;

the new exception clause will provide for an automatic reaction to decreases in the EU’s GDP, which, of course, reflects changes in the economic situation in the Member States.
Prolonged special levy (renamed ‘solidarity levy’)

The special levy was re-introduced on 1 May 2004, at an initial rate of 2.5% of basic salary. It has gradually risen over the past 8 years to the current rate of 5.5%.

The special levy will be prolonged for the duration of the new Method, i.e. from 1 January 2013 to 31 December 2020, at the present maximum rate of 5.5%. It will be re-named the ‘solidarity levy’, as it takes account of a difficult economic context and the ramifications for public finances throughout the Union.

[1] Expatriate inflation index in Brussels calculated on a yearly basis by Eurostat.

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