RESTRICTEDWORLD TRADE
ORGANIZATIONWT/BFA/W/80
10 October 2002
(02-5487)
Committee on Budget, Finance and Administration
NOTE BY THE SECRETARIAT
Pursuant to Staff Regulation 6.2, the WTO salary scale and its method of adjustment are
subject to review every three years.  In order to facilitate this review, a survey has been undertaken by
a joint Secretariat working group assisted by an outside expert with extensive experience in
international compensation and benefit comparisons.  The attached report is submitted for theconsideration of the Committee on Budget, Finance and Administration.WT/BFA/W/80
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WT/BFA/W/80
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TABLE OF CONTENTS
EXECUTIVE SUMMARY ...................................................................................................................4
I. INTRODUCTION ....................................................................................................................5
II. GRADING EQUIVALENCE ..................................................................................................6
III. RESULTS OF SALARY COMPARISON ..............................................................................7
IV. INTERPRETATION OF THE RESULTS .............................................................................8
V. ALLOWANCES ......................................................................................................................10
VI. THE SALARY ADJUSTMENT PROCESS .........................................................................11
ANNEX ............................................................................................................................... ..................12WT/BFA/W/80
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EXECUTIVE SUMMARY
1. As provided for under Staff Regulation 6.2, a salary survey was carried out for the World
Trade Organization (WTO) with an effective date of July 2002. The comparators included in the
survey were:
European Union (EU),
International Monetary Fund (IMF),
Organization for Economic Co-operation and Development (OECD) and
United Nations (UN).
2. Grade level equivalences were established between WTO grades and those of the
comparators, which are set out in paragraph 2.2. WT O grades 3, 6, 9 and 12 were used to compare
salary levels.
3. Section 3 of this report describes in detail the calculations undertaken to arrive at a result,
including the method chosen to convert to a common base salaries that are expressed in differentcurrencies and applicable to different locations. The result of midpoint comparison of the
comparators’ salary scales with those of WTO is given in the Annex to this report and shows that the
WTO salary scale lags behind  the comparator group by 10.7 per cent on a weighted average basis.
The lag, however, is not uniform and the largest difference appears at the managerial grades.
4. It is proposed that the current WTO salary scale midpoints be increased in a uniform manner
by 10.7 per cent as stated in paragraph 4.1.  The actual increase to be awarded to staff will, however,
be less than the increase to the midpoints of the salary  scale. It is proposed that the increase awarded
to staff should reflect the trend of the market disclosed in this survey and should, therefore, be
differentiated by grade. The proposed amounts are shown in paragraph 4.6.
5. Allowances were also examined and the calcu lations outlined in Section 5 show that the
spouse allowance paid by WTO should increase from CHF 5,686 to CHF 5,976 per annum, while the
dependent child’s allowance and the secondary dependant’s allowance should increase from levels of
CHF 3883 and CHF 1308 to CHF 4,752 and 2,112, respectively. The allowance for the first
dependent child of a staff member with no spouse should increase from CHF 9569 to CHF 10,776.
6. A review of the rental subsidy indicates that, at the present time, it appears to be fulfilling the
limited purpose for which it was established.
7. The final section of the report deals with the salary adjustment process as currently defined in
Staff Regulation 6.2. In paragraphs 6.3 and 6.4 of the report, proposals are made for an improvedsalary adjustment formula for the future.WT/BFA/W/80
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I. INTRODUCTION
1.1. The development of a salary survey requires an organization to adopt a logical methodology
so that the resulting comparator data are both sta tistically relevant and meaningful to the institution.
There are five distinct steps of definition, analysis and interpretation that should be followed to makea salary survey reliable:
Definition of the market,
Choice of comparators to be surveyed,
Choice of functions or grades to be compared,
Data collection and analysis,
Establishing a relationship to the chosen market,
1.2. Definition of the market:  The WTO is an intergovernmental organization that competes for
staff primarily with other international institutions, in particular for key technical functions, such as
economists, lawyers and translators.  Accordingly, it is proposed that WTO compare itself to a group
of international organizations.  At the same time,  it is essential for the WTO to respect long-term
relationships with civil service pay structures in a number of Members. In order that the survey be
representative of competitive salaries in different Members, and to avoid  bias towards one country’s
pay levels, only one organization was  from any given Member.  The data has also been analysed to
take account of national government salaries.  The results are reported on in Section 3 - Results of
Salary Comparison.
1.3. Choice of comparators:  In a salary survey, comparators are normally chosen for their
relevance, their business line and size. Organi zations which are well established and which have
stable salary systems are generally favoured. A comparator group was chosen consisting of
international organizations with which WTO competes directly for staff. The comparators chosen forthe salary survey were:
European Union - headquartered in Belgium;
International Monetary Fund - located in the USA;
Organization for Economic Co-operation and Development - headquartered in France;  and
United Nations – using its Swiss-based salary scales.
1.4. Choice of functions and grades:  Each organization in the comparator group has a formal job
classification system and there are known equivale ncies of grade between organizations which have
been built up over time and which are used in several organizations.  These grade equivalencies are
taken as the basis for comparing salary scales. The grade equivalencies were confirmed through
analysis of three independent studies and the results are reported upon in Section 2 – GradingEquivalence.
1.5. Data collection and analysis:  The data collected from the comparators were in the form of
salary scales applicable to their respective locations. These data were converted to a common Geneva
base, as will be described in Section 3 - Results of Salary Comparison.
1.6. Establishing a relationship to the market:  In Section 4 of this report - Interpretation of the
Results – an analysis is given of the data in terms of the WTO salary structure and proposals are made
for establishing a relationship between WTO salary scales and those of the comparator group.WT/BFA/W/80
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II. GRADING EQUIVALENCE
2.1. Three independent checks were made to verify the accepted grade relationships used for
comparisons between international organizations. The first check was to examine the results of a
comparison undertaken by Danish consultants of three organizations: EU, UN and NATO. NATO,
being a Co-ordinated Organization, has an equivalent  grade structure to that of OECD, one of the
comparators chosen for this study.  The second check was made using the grade equivalencies of a
Bank for International Settlements (BIS)/IMF/OE CD survey, undertaken in 2001, by matching WTO
jobs in the economist, legal and human resources streams to BIS survey job descriptions.  The final
check was undertaken by a job evaluation specialist with knowledge of the Washington-based
international financial institutions.  This evaluation  matched mainstream professional positions in
WTO with those in Washington.
2.2. The results of the three studies confirm the grade equivalencies used in this study, as
tabulated below. As can be seen, in a number of cases there are so called “split matches” to WTO
grades.  When a split match occurs, the figures used for the calculations are the averages of the
relevant midpoints of the grades included in the split match. WTO salaries were compared to thecomparators’ salary scales at four key grades to establish an overall salary relationship to the
comparator group. These were:
Grade 3 The entry level for a secretary,
Grade 6 The crossover grade at the top support level and entry professional jobs,Grade 9 The full career professional level, and
Grade 12 Senior Division Directors.
Table of grade equivalencies used in WTO salary comparisons
WTO UN IMF OECD EU
DDG DDG DMD DSG A1
ADG ADG B5 A7 A2
12 D2 B4 A6/A7 A2/A3
11 D1 B3/B2 A6/A5 A3
10 P5 B1/A15/A14 A5/A4 A4/A5
9 P4 A14/A13 A4 A5
8 P3 A12/A11 A3 A6
7 P2/GS7 A10 A2/B6 A7
6 P1/GS6 A9 A1/B5 A8/B1
5 GS5 A8/A7 B5/B4 B2/B3
4G S 4 A 6 / A 5 B 4 B 3 / B 4
3 GS3 A4 B3 B5
2G S 2 A 3 / A 2 B 2B 6
1G S 1 A 1B 1WT/BFA/W/80
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III. RESULTS OF SALARY COMPARISON
3.1. When time, currency and location differences exist, data have to be brought to a common
baseline.  With the exception of EU, all the comparator salary scales have recently been updated to a
point in time close to the survey reference date (July 2002).  When scales are out of date, as compared
to the survey reference date, it is normal practice to date-adjust the data to reflect any known,anticipated increases.  EU expects a normal cost-of-living adjustment to be granted in December of
this year, backdated to July 1st.  In this survey, EU salaries have been increased by two per cent, the
amount by which their scales are expected to increase.  EU salaries are also normally expressed on a
gross basis and they were brought to a net-of-tax level by application of internal EU staff taxation
rates.
3.2. Several options exist for converting the salary data to a Geneva base. A common theme of
these options is that  they all use combinations of exchange rates and cost-of-living data.  The Boards
of the World Bank and IMF, in 1986, made a detailed study of the options available and concluded
that the most suitable conversion factor for salary data was a 50/50 weighting of Parity of Purchasing
Power (PPP) and one-year averages of nominal exchange rates (NER).  PPP provides an accurate
reflection of the domestic purchasing power of salaries based on historical data.  There are a numberof PPP indices available for use on an international basis.  The need, however, is for an index which is
transitive and consistent. Transitivity implies that, for example, US/French comparisons and
US/Swiss comparisons would lead to equally valid French/Swiss comparisons.  Consistency implies
that there would be no bias in the database developed for each country so that data can be directly
compared with similar data from a different country.  The PPP index developed by the InternationalComparison Project, a project of IBRD and UN and used by OECD and EU is felt to be the most
appropriate index.
3.3. The nominal, or market, exchange rate is both readily ascertainable and simple to use, as well
as being the most common conversion method considered by either staff or potential recruits.However, NER is not a particularly sensitive reflection of the domestic purchasing power of one
currency vis-à-vis another.  First, there are short-term fluctuations that do not reflect the underlying
economic variables and, second, developments in domestic prices are likely to lag behind exchange
rates.  Although a PPP index might be preferred as providing a better comparison of living standards,
there are problems of timeliness.  Analysis shows that PPP follows the five-year average of exchange
rates more closely than the one-year average.  On the other hand, NER are more up-to-date and better
reflect current perceptions, but give too much weight to short-term fluctuations.  Thus, using a 50/50combination of PPP and one-year average NER gives a degree of recognition of current trends and at
the same time counteracts some of the lag resulting from the use of PPP alone.
3.4. Data were, therefore, converted to a common base of Geneva by using the 50/50 mix of
PPP/NER.  PPP data were only valid for June 2001.  To bring this data up-to-date and yet to maintaincompatibility with the UN system of Post Adju stment, which has a built-in four-month lag when
applied to UN Geneva salaries, PPP data were date-adjusted to March 2002.  The PPP and NER data
were:
Country PPP PPP underlying
exchange rateOne-year average
NER
Belgium (base) 1.000 1.000 1.112
France 1.149 1.000 1.112
Switzerland 12.071 1.519 1.643
USA 1.211 .8512 1.000
                                                     
1 PPP data for Switzerland were based on the city of Geneva.WT/BFA/W/80
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3.5 Both OECD and EU pay their international staf f an expatriation allowance over and above the
base salary payment.  This is a percentage of salary in each case, 14 per cent for OECD and
16 percent for EU.  These percentages have been added into the net matching salaries.  The other two
comparators have base pay systems that include some allowance for an expatriation margin.
3.6. To derive an overall increase for WTO, a weighted average across grades has been calculated.
For this purpose the grade–level results were weighted by the number of WTO staff covered by each
representative grade.  WTO grades were grouped as follows:
Grade  3 –  covers grades 1, 2, 3 and 4
Grade  6 –  covers grades 5, 6 and 7Grade  9 –  covers grades 8, 9 and 10
Grade 12 – covers grades 11, 12, ADG and DDG
3.7. A test was made of the relationship between the salaries of the comparator group and those of
national public sectors. UN follows the US Federa l Civil Service (USFCS) plus a margin of 15per
cent (normally).  OECD and EU both  use the average civil service salaries of a group of their member
states adjusted by PPP. IMF, in its comparator calculations, gives a 60 per cent weighting to the US
public sector, including the Federal Reserve Board.  As OECD calculates its pay structure from an
average of the civil service salaries of its European members states, increasing the OECD weight in
the salary comparison would give greater emphasis to average government pay in Europe indetermining the WTO salary structure.  The impact of an increase of 50 per cent in the OECD weight
was calculated and is shown in Table 3 of the Annex to this report – but it did not materially alter the
overall weighted average.  As all the comparators already include some national public sector element
in their own comparison, increasing the weight of the national public sector does not have any impact
as, in aggregate, comparator salaries reflect national public sector values, with a margin added forexpatriation.
3.8. The results of the survey and the consequent  PPP/NER calculations, compared to conversion
using NER and Post Adjustment, are to be found in the Annex to this report.
IV. INTERPRETATION OF THE RESULTS
4.1. The results of the comparison indicate that the midpoints of the comparators’ pay scales are,
on a weighted average basis, 10.7 per cent above the midpoints of the WTO’s current salary scale
(Annex, Table 3, column 1).  It is proposed that the current midpoints of the WTO salary scale be
increased in a uniform manner by 10.7 per cent.  The difference between the WTO salary scale and
the comparators’ weighted averages increases fairly uniformly, from grade 3, which is basically at thelevel of the market, to grade 12, which is almost 30 per cent under the market.
4.2. A traditional step-in-grade salary system provides control over the maximum salaries payable
to staff.  In such a system,  salary ranges are narrow and steps have a small value.  Staff can progress
up the grade range and reach the top step of their grade in due course.  Organizations that have movedfrom step-in-grade to performance-based salary systems (IMF, IBRD, the Regional Development
Banks, etc.) have all retained some form of midpoint control of salaries.  In such systems, the
midpoint of a grade range is considered to be the desirable average salary level for fully performing
staff members.  The annual salary increase is aimed at maintaining a defined relationship between
average staff salaries and the salary scale midpoints.  This relationship is known as the comparatio,which is the target percentage by which average staff salaries fall below or rise above the midpoints.WT/BFA/W/80
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4.3. Thus, using a low comparatio, it is projected that average salaries fall below the mid-point by
a defined percentage (e.g. comparatio of 90);  using exact midpoint control it is projected that average
salaries equal the mid-point (e.g. comparatio of 100);  while an organization with recruitment and
retention difficulties in certain professions may let the salaries in those jobs rise to levels in excess ofmidpoints, projecting that average salaries rise  above the mid-point (e.g. comparatio of 105).
4.4. It should be stressed that the increase in the level of salary scale mid-points does not have to
translate into an equivalent increase in salaries for staff. In 1988, when IBRD, IDB and IMF adopted
new market-driven pay scales the salary scale was increased by around fifteen per cent, yet but staff
salary awards were lower.  A similar approach  could be considered for WTO, so that a more
competitive pay positioning can be obtained for recruitment purposes without passing on the full
budget impact to Members.
4.5. The result of the salary comparison does, however, highlight one problem that will have to be
faced.  The lag in pay at senior levels is considerably greater than at lower levels. This is not
surprising.  First, the UN pay system, from which the present WTO scales are derived, is veryrestrictive at the managerial grades.  While most international organizations accept that management
salaries are subject to a degree of compression, due to the level of pay established for executive heads
and for political reasons, the extent to which this is apparent is much less in most of the comparators.
This finding reflects the reality of the markets and of public sector pay trends.  Managerial salaries
have generally moved ahead of other salaries (albeit within the context of mature performance paysystems).  Furthermore, local staff salaries have been traditionally set at the 75th percentile of local
private sector pay while pay of higher-level st aff has been based on the 50th percentile plus an
expatriation percentage.
4.6. If, as proposed, the salary scales were to be increased at the midpoints in a uniform manner by
10.7 per cent, the comparatio of staff salaries to the new midpoints would be 92.0 on a weighted
average basis.  This indicates that an increase of 8 per cent would be needed to bring average staff
salaries to the level of the proposed salary scale midpoints (i.e. a comparatio of 100).
4.7 Taking account of the differences between comparator salaries and WTO current salaries at
higher grades, it is proposed to increase staff salaries by the following amounts:
Grades 1 – 4 inclusive 5.4 per cent
Grades 5 – 7 inclusive 7.4 per cent
Grades 8 – DDG inclusive 9.4 per cent
This would result in a weighted average increase of 8.0 per cent, which would bring staff salaries to
the target level of 8 per cent indicated by strict midpoint control.  It would also go some way to
addressing the pay gap at senior staff levels.
4.8 The salary scales that would be needed to accommodate the proposed uniform increase of
10.7 per cent in the salary scales midpoints and differential staff increases by grade will be presentedto the Committee, for its approval, once it has had time to consider this proposal.WT/BFA/W/80
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V. ALLOWANCES
5.1. Spouse Allowance:  Grade 9 in WTO has been taken as the single point of calculation for
reviewing dependency allowances.  The tax pass-through value of a dependent spouse has been
calculated at a gross salary level of CHF 175,801-176,400 which is the tax bracket most closelyapproximating the gross-up of the WTO net salary at the mid-point of Grade 9 (net salary
CHF 132,741, gross CHF 176,275).  At the stated gross salary, a single tax payer would be taxed at a
rate of 24.7 per cent while a married person with no children would be taxed at a rate of 21.75 per
cent.  This 2.95 per cent difference plus the pass-through value of pre-tax allowances/tax rebates is the
amount that should be taken into account in calculating the WTO spouse allowance.  This amounts to
a tax allowance of CHF 5,976 per annum.  The present level of the allowance is CHF 5,686.
5.2. Dependent Child’s Allowance:  As in the case of the spouse allowance, Grade 9 in WTO was
taken as the single point of calculation.  All calculations have been based on a family unit with a
dependent spouse and two dependent children. The results were then averaged to produce an amount
for one child.  Two elements make up the dependent child’s allowance, the pass-through value of tax
allowances and the actual level of social security payments made in the Canton of Geneva fordependent children.  The calculated tax pass-through value is CHF 2,248 per annum.  This is
calculated by application of pre tax allowances and from a difference in tax rates between the “with
spouse” rate of 21.75 per cent and that for – a spouse and two children of 19.2 per cent, or 1.275 per
cent per child.  In the Canton of Geneva the levels of social security payments are:
At the time of birth: CHF 1000.
From age 0 to 14 years:  CHF 2,400 p.a.
From age 15 - 18 years: CHF 2,640 p.a.
If payments are averaged out over the 18-year period of dependency they amount to CHF 2,504 p.a.
The calculated child’s allowance is thus CHF 4,752 compared to the present level of CHF 3,913.
5.3. Secondary Dependant’s allowance:  The secondary dependant’s allowance is calculated in a
similar manner as the child allowance but using married plus one child tax rates.  No allowances are
paid by the Canton of Geneva.  Thus, the calculated secondary dependant’s allowance is CHF 2,112
p.a.
5.4. First dependant of a single staff member:  The allowance for the first dependent child of a
staff member who has no spouse, calculated using the same methodology, is CHF 10,776 p.a.
5.5. Rental subsidy:  With the exception of UN, none of the chosen comparators has a universal
rental support scheme.  UN is also the lowest pa ying comparator.  Only OECD has some form of
limited rental support but it is restricted to the lowest professional grade (which has two steps only)
and support grades.  The other comparators do not have rental schemes because their base pay levels
are sufficiently adequate at their headquarters, that staff members do not need additional support to
meet their short- to medium-term housing costs.
5.6. Rent “thresholds” are 22 per cent (dependency rate) and 25 per cent (single rate).  This means
that it is expected  staff will pay up to 22 per cent or 25 per cent of salary on rent.  Above that
threshold, a staff member may be eligible for rental subsidy to cover 80 per cent of the excess above
the threshold.  Qualifying WTO staff members do not in general receive large amounts.  Only 29 staff
(7 per cent of the total number of staff) qualify for rental subsidies.  With two exceptions, all arebetween grades 6 and 11.  This group of staff receive, on average, a payment of 4.4 per cent of salary
as rental subsidies, the highest payment being 12.5 per cent of salary and the lowest 0.7 per cent of
salary.WT/BFA/W/80
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5.7. This review of the rental subsidy scheme, under the present rules, indicates that it appears to
be fulfilling the specific purpose for which it was established..
VI. THE SALARY ADJUSTMENT PROCESS
6.1. A good salary adjustment system provides a conservative yet responsive way to adjust
salaries in periods between major salary surveys.  Ideally, such a system should provide no surprises
and should be relatively simple to understand and operate.  In the 1960s and 1970s the preferred
adjustment mechanism was usually cost-of-livin g (COLA) based but COLA systems went out of
fashion in the mid 1980s when high inflation in many countries produced salary increases which
moved considerably ahead of real pay levels.  As a result the tendency in recent years has been to
follow some form of market pay indicator. In times of low inflation pay increases, though usually
small, also tend to be real increases when adjusted for inflation whereas in times of high inflation pay
increases generally lag behind inflation.
6.2. WTO uses a complex formulation for moving salaries on an interim basis in which the
movement of the Swiss COLA is compared to the movements of civil service pay in five countries(France, Germany, Japan, UK and US).  The five-country index is made up from current OECD data
for three countries, Japanese government data, whic h is two years old and USFCS data, which is also
two years old.  In the short-term the five-country  aggregate drives the amount awarded but in the
longer term the increase can be no greater than the Swiss COLA.  However, because the data span
two different years, the five-country index will not respond to or reflect current global economicconditions.  To all intents and purposes th is means that WTO follows the Swiss COLA.
6.3. A mechanism for interim adjustments which is both transparent and meaningful would be to
apply, in a conservative manner, the actual year-on-year movements of pay in the comparator group.
Thus for example WTO could adjust its pay by 80 per cent of the movement of its comparators.  In astable economic environment this would almost cert ainly mean that at the three-year salary review
there might be some small adjustment but that it would be unlikely to be significant.WT/BFA/W/80
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ANNEX
Table 1
Salary data obtained from comparators, including expatriation allowances
Organization WTO (CHF) EU (∈) IMF ($) OECD ( ∈)UN (CHF)
WTO Grade
3   67,352   40,139   39,020   40,574   69,288
6   88,048   60,913   65,320   50,736   82,195
9 132,741   79,580 114,705 100,017 133,196
12 175,705 111,055 196,780 137,106 176,231
Table 2
Salary data brought to a common base using 50/50 NER/PPP (CHF)
Organization WTO EU IMF OECD UN
WTO Grade
3   67,352 70,085   62,796   65,545   69,288
6   88,048 106,358 105,121   81,961   82,195
9 132,741 138,952 184,597 161,572 133,196
12 175,705 193,909 316,683 221,489 176,231
Table 3
Percentage difference by grade, all comparators combined
Calculation Comparator group
using NER/PPP
conversionGroup with OECD
weight increased by
50%Comparator group
using NER and UN
Post Adjustment
WTO Grade
3   (0.6)   (0.9)   3.2
6   6.7   5.1   9.8
9 16.5 17.0 21.6
12 29.2 28.9 33.9
Weighted avg. 10.7 10.4 14.9
Simple avg. 12.9 12.6 17.1
__________