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Brussels, 10 November 2010

Calculating adjustments in EU civil servants' salaries/pensions: the 2010/11 adjustment

The Staff Regulations lay down clear rules on the annual adjustment of remuneration and pensions for EU civil servants of all institutions and agencies, linking them to the evolution of purchasing power for civil servants in eight Member States representing 76% of EU GDP. EU civil servants' salaries thus move in line with those of national civil servants in the eight countries concerned (DE, FR, UK, IT, ES, NL, BE, LU). These rules do not give any discretion to the Commission or the Council to apply other criteria.

The method for adjusting remuneration and pensions was an integral part of the whole reform package of 2004, which also included creation of the contract agent category with lower salaries; higher retirement age, lower pension rights, higher pension contributions, a special levy increasing every year to 2012 (up to a maximum 5.5%), and lower recruitment salaries.

The method for adjustment under the Staff Regulations ensures parallelism between the evolution of purchasing power of national civil servants and European civil servants. A loss in purchasing power in the eight member states mentioned translates into a similar loss of purchasing power for the EU civil servants. For officials working at headquarters, the salary adjustment has to be seen against developments in the cost of living in Brussels (the amount of the adjustment is obtained by multiplying the index representing the variation of the cost of living in Brussels by the specific indicator measuring changes in the purchasing power of national civil servants). For EU officials working elsewhere, indexes comparing the cost of living in their place of work to Brussels are applied.

Eurostat calculates the adjustment on the basis of statistical data supplied by the eight Member States and the Council has to take a decision before the end of each year.

There is always a time lag because the annual adjustment is based on figures provided by Member States that reflect developments during the previous reference year and which determine the adjustment of EU civil service salaries and pensions for the following year. Hence, some of the recent salary reductions at national level are reflected in this year's adjustment. Others will influence next year's adjustment. The criticism of the method last year was the result of the time lag before Eurostat received the national data.

The method has proved its worth over time as a mechanism that is fair to staff and to the European taxpayer by linking the adjustment of salaries in the EU institutions to evolution of the purchasing power of national civil servants. It has also prevented the need for contentious annual salary negotiations with the Council.

What is the situation for 2010/11?

The purchasing power of the civil servants in the eight reference Member States decreased by - 2.0%.

This has to be reflected on the European level for civil servants of the European Union.

The Brussels International Index – a targeted inflation index for expatriate staff in Brussels which is the reference – is + 2.4%. To arrive at a purchasing power decrease of – 2.0%, the salaries have to be increased by + 0.4% for staff in Brussels and Luxemburg (both are treated equally).

N.B.: The Belgian inflation index is higher (+ 2.7%) than the targeted international index, which relies upon the different purchasing patterns of local and expatriate populations (e.g. higher share of international travel and communications costs and of renting accommodation than for the local population).

A salary increase of + 0.4% in Brussels and Luxembourg does not mean that this increase applies to all places of employment for EU civil servants. It is the – 2.0% decrease in purchasing power which has to be reflected in all places of employment and leads to different adjustments in different centres.

E.g. in Varese/Italy which is after Brussels and Luxembourg the third biggest Commission site (Joint Research Centre) with ca. 1500 staff, salaries will decrease by - 4.6% given the decrease in the cost of living there.

The definitive annual adjustment figure is higher than the provisional figure announced in early October because the information Member States provided to EUROSTAT has changed. This is due to the fact that the UK provided Eurostat with additional figures which result in a lower reduction of purchasing power for British civil servants and Spain communicated that part of the austerity measures would be in application only next year.

Since 2004, when the method was introduced into the Staff Regulations, EU staff salaries have lost 5.3% of their purchasing power.

Other relevant elements for remuneration of EU civil servants:

The pension contribution EU civil servants have to pay will go down from 11.3% to 11.0% of their monthly salary.

The special levy, a special tax established in 2004 in the framework of the reform, will increase from 5.07% to 5.50%.

The total impact on the budget will be a spending increase of 9.7 million €. This is an increase of the salary and pension mass in the budget of +0.2%.

What's happening in the Court case (C-40/10 Commission v Council)?

The Council unanimously decided last year not to follow the Commission proposal which took into account the increases that took place in Member States. Council adopted a 1.85% increase instead of the 3.7% calculated in accordance with the method as laid down in the Staff Regulations.

The Commission acting as guardian of the Treaty and of EU law and supported by the Parliament, subsequently submitted an action for annulment against the Council Regulation for breaching the Staff Regulations. The hearing took place on 21 October 2010 and the judgment can be expected in the first half of 2011.

Main figures of the 2010/2011 annual adjustment:

Reduction in purchasing power of civil servants in the eight reference Member States: - 2.0%.

Purchasing power loss for EU civil servants: - 2.0%.

Brussels International Index (inflation): + 2.4%.

Belgian Inflation: + 2.7%.

Increase of gross basic salary for EU civil servants assigned to Brussels or Luxembourg: + 0.4%.

Impact on the total amount spent on salaries and pensions including the reduction of the pension contribution and the increase of the special levy (tax): + 0.2%.

Impact on the total (draft) budget 2011: 0.0068%.

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