Workshop on the Post Adjustment System

Workshopon the Post Adjustment System Montreal, 26 June 2009 Workshop on the Post Adjustment System

Outline • Introduction • Operation of the Post Adjustment System • Components of the Post Adjustment Index • Updating Post Adjustment Classifications (PACs) over time – Group I • Factors influencing evolution of Net Take-home Pay • Issue #1: Salaries not keeping up with local inflation • Issue #2: Comparison of NTPs based on PAI and other indices • Latest developments for the 2010 round • Proposed modifications to the Operational Rules Workshop on the Post Adjustment System

UN Salary structure Net salary Staff assessment Post adjustment Gross base salary Net base salary Workshop on the Post Adjustment System

Post Adjustment Circular(as of 1 June 2009) Workshop on the Post Adjustment System

Commission ACPAQ Staff at large Local Post Adjustment Committee Secretariat National/International Statistical Agencies Operation of the PA System Workshop on the Post Adjustment System

Operation of the PA System(at base of the system - New York) New York Post Adjustment moves along with disaggregated CPIs plus special indices movements if margin is within 110 and 120. Increases in New York could be triggered if a full 5% increase in cost of living has accumulated since the preceding review or after 12 months, whichever comes first. Workshop on the Post Adjustment System

Operation of the PA System(duty stations other than New York) Goal - Equalization of purchasing power of UN remuneration at duty stations relative to that in New York Method - Periodic cost-of-living surveys (compare prices/cost of a given volume of goods and services) Result – Post Adjustment Index (PAI) indicates how much to pay staff at a duty station in order to maintain Purchasing Power Parity (PPP) with New York. Workshop on the Post Adjustment System

Operation of the PA System(duty stations other than New York) Question – How is PPP with New York maintained over time? • PAI calculated on the basis of Cost-of-Living Survey guarantees that PPP is exactly correct • PAI adjusted at least once every month to reflect: • Exchange-rate fluctuations • Movements in all PAI components • PPP approximately maintained • Revised PAI determines PAC Workshop on the Post Adjustment System

Components of the PA Index Major Components (System-wide): 33% Out-of-Area 31% In-Area (excluding Housing) 22% Housing 10% Pension Contribution 4% Medical Insurance Workshop on the Post Adjustment System

Out-of-Area Index Average of US dollar-based inflation in 21 selected countries Weight of: Eurozone Eurozone + Euro-like Euro-like 68.2% US Dollar US Dollar-like US Dollar + US Dollar-like Mixed behaviour 13.6% Mixed behaviour 18.2% Workshop on the Post Adjustment System

OA Index Workshop on the Post Adjustment System

Inflation experienced by international staff In-area excluding Housing (local) inflation Inflation experienced by international staff Out-of-area “inflation” Housing inflation Medical insurance “inflation” Pension contribution “inflation” Workshop on the Post Adjustment System

Updating of PACs • GENERAL PRINCIPLES: • Maintain approximate PPP with New York by adjusting PACs • Adjustment according to specific economic circumstances: • Inflation experienced by international staff (not just local inflation) • Exchange-rate fluctuations Workshop on the Post Adjustment System

Updating of PACs0.5% rule Multipliers for Group I duty stations are adjusted on a monthly basis for exchange rate movement. Net Take-home Pay (NTP) in local currency is maintained within a range of +/- 0.5%of established pay level. Aim:To stabilize NTP in local currency Workshop on the Post Adjustment System

Updating of PACs(5%, 12-month rule, Group I) Review for inflation, or PAC review, is made after: whichever comes first! A full 5% movement in the cost of living OR 12 months have elapsed from the reference date The PAC review date becomes the new reference date for future PAC reviews. Workshop on the Post Adjustment System

Updating of PACs(0.5% rule - Vienna) 5% rule Pension contribution +62.13 US$ Consolidation 2.33% 12-month rule Workshop on the Post Adjustment System

Updating of PACs Workshop on the Post Adjustment System

Updating of PACs Latest PAC Reviews for Headquarters duty stations Note: TMR – Twelve-month review FPR – Five-percent rule Workshop on the Post Adjustment System

Factors influencing evolution of NTPs • Local inflation • Affects only the In-area excluding housing component • Measured by local CPIs • Charts show local CPIs Workshop on the Post Adjustment System 27

Factors influencing evolution of NTPs Local inflation Workshop on the Post Adjustment System 28

Factors influencing evolution of NTPs Housing component • Rents: • Based on IOS/OECD data • Direct comparison by dwelling size/type • Protections for housing-cost fluctuations • Protections for payments in non-local hard currency • Charts show evolution of rents • Others: • Maintenance and repair • Water • Refuse collection • Electricity, gas and fuel • Other housing costs • All these elements are based on price comparisons with New York, with the exception of “Other housing costs” and “Refuse collection”, which are based on information provided by staff Workshop on the Post Adjustment System 35

Factors influencing evolution of NTPs Housing component (rent) Workshop on the Post Adjustment System 36

Factors influencing evolution of NTPs • Medical insurance contribution • Average medical insurance contribution at a duty station • Component with the lowest weight in the PAI • Charts show the evolution of the medical insurance contribution over time Workshop on the Post Adjustment System 44

Factors influencing evolution of NTPs Medical insurance contribution Workshop on the Post Adjustment System 45

Workshop on the Post Adjustment System