[pic] | COMMISSION OF THE EUROPEAN COMMUNITIES |

Brussels, 16.1.2007

COM(2007) 4 final

REPORT FROM THE COMMISSION TO THE COUNCIL

1985-2005 Report on the financial situation of the Community unemployment benefit scheme for former temporary or contract agents who are unemployed after the termination of their service in a European Community institution (see Articles 28a and 96 of the Conditions of Employment of other Servants of the European Communities - CEOS)

{SEC(2007) 13}

REPORT FROM THE COMMISSION TO THE COUNCIL

1985-2005 Report on the financial situation the Community unemployment benefit scheme for former temporary or contract agents who are unemployed after the termination of their service in a European Community institution (see Articles 28a and 96 of the Conditions of Employment of other Servants of the European Communities - CEOS)

TABLE OF CONTENTS

SUMMARY 4

PRELIMINARY REMARKS 4

I. LEGAL FRAMEWORK 5

A. Legal references 5

B. Summary of the remuneration schemes introduced by the various Regulations 6

II. FINANCIAL SITUATION OF THE SCHEME – 1985-2005 6

A. Preliminary remarks 6

B. Overview of each five-year period, 1985-2005 7

C. Annual charts showing expenditure and receipts for 2000-2005 9

1. 2000-2002 Period 9

2. 2003-2005 Period 9

D. Table showing expenditure and receipts in relative terms (percentage in relation to annual totals) for the 2000-2005 period 10

E. Change in average cost of individual cases – 2000-2005 10

F. Comments 11

III. INFORMATION ABOUT CONTRIBUTORS AND BENEFICIARIES – 2000-2005 12

A. Table showing the annual number of temporary and contract agents in service on 31 December for the period 2000-2005, broken down by grade 12

B. Table showing the number of unemployed agents (who were paid unemployment benefit for the month of December in the year in question) for 2000-2005, broken down by grade 13

C. Totals from tables A and B, with their relation to the respective total population expressed as a percentage 14

D. Table showing number of dossiers handled (at least one payment calculated during the year in question) broken down by institution 15

E. Number of unemployed who received benefit payments for at least one month during the year in question, broken down by country of residence for the 2000-2005 period 16

F. Analysis of the length of contracts for CA and TA receiving unemployment benefits, broken down by institution 17

G. Analysis of the length of time during which unemployment benefits are paid, broken down by institution 18

H. Comments 18

IV. THE SITUATION SINCE THE REFORM ENTERED INTO FORCE (2004 and 2005) 20

A. Explanation 20

B. Analysis of average cost per payment 20

C. Analysis of contributions paid to the unemployment fund 20

D. Analysis of the duration of contracts – broken down by institution 21

E. Analysis of the duration of the payment period – broken down by institution 22

F. Comments 23

V. FINAL COMMENTS AND CONCLUDING REMARKS 24

SUMMARY

This report corresponds to the request from the Council as formulated in Articles 28a(11) and 96(11) of the CEOS, and presents the financial situation of the Community institutions unemployment fund since its creation in 1985. This is the first presentation of the figures.

The scheme has always worked well in the past, and there have been no real threats to its equilibrium. With the exception of a few years, the scheme has posted a surplus. The current reserves are amply sufficient to soak up a few deficit years.

There is, however, now a case for launching a specific study of developments in the numbers of temporary and contract agents, and their impact on future unemployment figures. This would enable the fund to be balanced in the medium and longer term, and any necessary adjustments to be made regarding receipts (i.e. contribution levels) and expenditure (benefit rights).

Initial figures for the modified scheme (introduced as part of the May 2004 Reform) indicate that the picture is unchanged, and may even be more solid, although it must be remembered that the modified scheme will only hit its stride in a few years’ time, in 2007-2008.

The number of people eligible for Community unemployment benefit has doubled since the Reform entered into force, as everyone in the contract agent category (which almost entirely replaced the auxiliary agent category) is eligible, whereas auxiliary agents were not. The potential number of eligible unemployed people has therefore increased considerably, and there is now a clear case for stepping up electronic exchanges of information between the Commission and national administrations. This should certainly be the case for countries where significant numbers of former agents are registered as jobseekers.

PRELIMINARY REMARKS

- This report is intended to supply information that is as correct and relevant as possible for the period 1985-2005. It is not intended to make any forecasts about the future equilibrium of the scheme, nor does it claim to do so. That matter will be addressed in a separate document.

- Between 1985 and 1998, the fund was managed in Belgian francs. To facilitate comparisons and ensure standardisation, amounts for the period in question have been converted into euros at the fixed rate of EUR 1.00 = BEF 40.3399.

- The report looks mainly at the financial situation of the unemployment fund for former temporary and contract staff. Each specific year is considered in terms of all expenditure and receipts for that year, even if the accounting process was carried out during a previous or subsequent year. This enables the balance of the Community unemployment scheme to be assessed.

- An overview of the accounting situation – reflecting bookings for the funds as historically recorded – is included in Annex III (current account open in Commission books) and IV (investment of surpluses).

- Between 1994 and 1999, the Economic and Social Committee and the Committee of the Regions entrusted a number of administrative and other tasks to a Common Organisational Structure. Staff employed under that structure contributed to and benefited from the complementary Community unemployment benefit scheme. Receipts and expenditure related to former staff of the structure have been divided equally between the Committee of the Regions and the Economic and Social Committee.

- The Reform, which entered into force on 1 May 2004, had a significant influence on fund receipts and expenditure. Chapter IV analyses the 2004-2005 period, making a distinction between dossiers where the previous regulations were applied and those where the new ones are used. A calculation is included for average cost per type.

- The Reform's introduction of contract agents added a new category of staff who contribute to and benefit from the unemployment benefit scheme, and who therefore influence its equilibrium.

- Another consequence of the Reform has been that large numbers of temporary staff in permanent positions (temporary agents who had contracts of indefinite duration), mainly in the field of Research, were given permanent contracts. This resulted in a considerable loss of revenue for the fund (see the Commission figures for 2003-2004-2005).

- A vade-mecum has been drawn up for future recipients of complementary Community unemployment benefits, clearly indicating their rights and obligations. It also contains practical instructions and general information to enable the smooth and efficient handling of dossiers, which is in the mutual interest of both beneficiaries and the Institutions.

I. LEGAL FRAMEWORK

A. Legal references

- Article 28a of the Conditions of Employment of Other Servants of the European Communities (CEOS) introduced by Article 33 of Council Regulation No 2799/85 of 27 September 1985 (OJ L 265, 8/10/1985); amended by Council Regulation No 723/2004 of 22 March 2004 (OJ L 124, 27/4/2004).

- Commission Regulation No 91/88 of 13 January 1988 laying down provisions for implementing article 28a (2) of the Conditions of Employment of Other Servants of the European Communities (OJ L 11, 15/1/1989).

- Commission Rules of 14 July 1988, common accord having been recorded by the President of the Court of Justice of the European Communities on 4 July 1989, laying down the detailed arrangements for applying the provisions relating to the grant of the unemployment allowance to members of the temporary staff, implementing Article 28a(10) of the Conditions of Employment of Other Servants of the European Communities.

- Council Regulation No 2458/98 of 12 November 1998 (OJ L 307, 17/11/1998) on the introduction of the euro.

- Communication from the Commission to the other institutions concerning the conversion into euro of the amounts provided for in the Staff Regulations No 1999/C 60/09 (OJ C 60, 3/02/1999).

- Article 96 of the Conditions of Employment of Other Servants of the European Communities introduced by Council Regulation No 723/2004 of 22 March 2004 (OJ L 124, 27/4/2004).

- Article 5 of the Annex to the CEOS introduced by Council Regulation No 723/2004 of 22 March 2004 (OJ L 124, 27/4/2004).

- Remuneration eligible for annual adjustment (cf. annually adjusted remuneration) last amended by Council Regulation (EC, Euratom) No 2104/2005 of 20 December 2005 (OJ L 337, 22/12/2005).

B. Summary of the remuneration schemes introduced by the various Regulations

NB

1. A more detailed description of the remuneration schemes can be found in Annex 1 below.

2. Contracts which began before 1 May 2004 and finished after that date are covered by transitional arrangements.

The original scheme , which ran from 1985 to April 2004, covered temporary agents against the risk of unemployment at the end of their duties. The Community unemployment benefit complemented any national benefits that former agents could claim. Temporary staff who had worked a minimum of six months could claim benefits for up to two years. Complementary Community unemployment benefits had both a lower limit and an upper limit. Neither limit changed over the years the scheme was operational. The scheme – in fact a genuine fund – was funded by contributions from employees and employers.

The modified scheme applicable since May 2004 also provides cover against the risk of unemployment at the end of duties, this time for the new category of contract agents.

Eligibility is now limited to a third of the period spent effectively working as a temporary or contract agent, and may not exceed 36 months. The upper limit (which only applies from the seventh month of unemployment) and the lower limit have been revised, and will be adjusted annually from now on (like salaries).

II. FINANCIAL SITUATION OF THE SCHEME – 1985-2005

A. Preliminary remarks

The amounts recorded under “unemployment benefits” systematically include the basic unemployment benefit, any family allowances and, for the original scheme only, the effect of the weighting. Any social benefits received at a national level (including unemployment benefits, family allowances, sickness benefits, maternity benefits, etc.) are deducted.

JSIS contributions are covered in their entirety by the Community unemployment scheme (see also Annex I). Personal contributions to the JSIS are not therefore deducted from Community unemployment benefit.

B. Overview of each five-year period, 1985-2005

Remarks:

3. Financial information about expenditure (unemployment benefits and JSIS contributions), broken down by institution, for each year , is not available for the 1985-1999 period. The tables therefore show total unemployment benefits booked for each year in question. For the JSIS contributions, the figures show the expenditure for each year indicated;

4. To facilitate comparisons over the whole period covered by the report, the table below follows the same approach for 2000 to 2004 and 2005. This enables a clear overview of the balance of the scheme over the first 21 years of its existence;

5. The data below is broken down into five-year periods (other than for 2005, which is presented separately). Annex II contains an annual breakdown of each year inside these five-year periods;

6. The lower section of the table demonstrates changes in the financial assets of the fund (on current account in the European Commission's accounting and in the investment accounts managed by DG ECFIN). The figures shown reflect the accounting position on 31 December for the period in question. The annual result is reflected in a increase or decrease in the size of the assets.

1) Table

[pic]

2) Chart

[pic]

C. Annual charts showing expenditure and receipts for 2000-2005

Information shown indicates unemployment benefit paid for each year in question.

Differences between the charts in point II.B. (and Annex II) and point II.C. are due to the fact that there is no direct IT connection between the programme that calculates Community unemployment benefits (created using Access) and the actual payments. Some calculations are therefore also made not using the programme.

Information under this point shows the best available estimates, breaking down expenditure by institution.

The information in this point would seem however to be a more reliable gauge of the true equilibrium of the scheme.

1. 2000-2002 Period

[pic]

2. 2003-2005 Period

[pic]

D. Table showing expenditure and receipts in relative terms (percentage in relation to annual totals) for the 2000-2005 period

On the basis of data from C:

[pic]

E. Change in average cost of individual cases – 2000-2005

[pic]

Average cost is calculated as follows: total expenditure (unemployment benefits + JSIS contributions) is divided by the total number of payments.

A payment can be defined as a right to Community unemployment benefit linked to a certain calendar month. This right might be paid in full (30/30ths) or partially (a fraction thereof), depending on the supporting documents supplied each month.

The average monthly cost of unemployment benefits in any given year can then be calculated.

The table shows the total number of payments made – divided up by institution – for each year indicated.

A more detailed analysis of the average monthly cost of unemployment benefits for 2004 and 2005 can be found in Chapter IV of this document.

F. Comments

- When all the receipts and expenditure related to the scheme is taken into account, it appears that the scheme has been in deficit four times (in 1991, 2000, 2001 and 2004) over the course of its existence. If receipts from interest on invested surpluses are not included, the scheme can also be considered to have been in deficit in 1990 and 2002.

- There was a marked surplus for 2005 of more than 11% compared to receipts (excluding interest).

- The current assets of EUR 9.2 million are sufficient to fund:

- more than a year and a half of expenditure (reference year 2005: EUR 5.9 million)

- six times the largest recorded annual operating deficit, excluding receipts from interest (EUR 1.46 million, in 2001).

- Table C clearly demonstrates a systematic disparity between receipts and expenditure for the Economic and Social Committee. The total cost of unemployment benefits paid to former agents of this institution is several times larger than their respective contributions. The reverse is true for expenditure on former agents from Agencies and Offices. These observations are confirmed by figures on the numbers of contributors and beneficiaries (see III.C)

- Average cost tended to fall between 2000 and 2003. This phenomenon can be explained by the fact that the Community maximum and minimum unemployment benefit payments are unchanged since 1985, while national social benefit payments, which are indexed and have risen in line with the cost of living, are deducted from Community payments. Community family benefits have been indexed, but this only compensates partly for the fall.

III. INFORMATION ABOUT CONTRIBUTORS AND BENEFICIARIES – 2000-2005

A. Table showing the annual number of temporary and contract agents in service on 31 December for the period 2000-2005, broken down by grade

[pic]

Annex VI below breaks down the agents employed by the different offices and agencies.

B. Table showing the number of unemployed agents (who were paid unemployment benefit for the month of December in the year in question) for 2000-2005, broken down by grade

[pic]

C. Totals from tables A and B, with their relation to the respective total population expressed as a percentage

1) Table

[pic]

2) Chart

[pic]

D. Table showing number of dossiers handled (at least one payment calculated during the year in question) broken down by institution

[pic]

These statistics complement the statistics presented under point B above, and are a better indication of the management required. Opening new dossiers – even if relatively few payments are ultimately involved – represents an administrative burden that is far from negligible.

The figures also illustrate the true number of unemployed actually paid by each of the institutions.

E. Number of unemployed who received benefit payments for at least one month during the year in question, broken down by country of residence for the 2000-2005 period

1) Table

[pic]

2) Chart

[pic]

F. Analys is of the length of contracts for CA and TA receiving unemployment benefits, broken down by institution

This table breaks down benefit recipients (expressed as a percentage for each year 2000-2005) according to the length of the contract or contracts that made them eligible for complementary unemployment benefits (up to one year, up to two years, etc).

[pic]

A more detailed analysis of the situation during 2004 and 2005 can be found in Chapter IV below.

G. Analysis of the length of time during which unemployment benefits are paid, broken down by institution

This table shows the average duration of payments made between 2000-2005. Taking the number of unemployment dossiers handled in the year in question (for which at least one payment was calculated during the year in question) as its base, the total number of days from the opening of a dossier until 31 December in the year in question is divided by the number of dossiers and then again by 30 to arrive at an average number of payments.

A more detailed analysis of the situation during 2004 and 2005 can be found in Chapter IV below.

[pic]

H. Comments

- For many years, more than half of all temporary agents working for the Institutions were employed by the Commission. To a large extent, this could be explained by the considerable number (> 700) of temporary agents who were contracted “for an indefinite duration” to carry out research. Since 2004, persons employed under such contracts have been given permanent contracts instead, and by the end of 2005 the Commission employed less than a third of all temporary agents.

- The numbers of staff employed in the agencies and offices are constantly rising. Staff numbers in these bodies now represent a considerable proportion (> 1/3) of all temporary agents.

- In addition to the above, it should be noted that the number of Agencies and Offices has grown almost exponentially in recent years.

- Over the last 6 years, the highest number of temporary agents in service are A grade (35 to 45%), while the highest proportion of unemployed former agents receiving benefits are C grade (also 35 to 45%). Confirming the evidence of the previous Chapter (see II.E.), the proportion of unemployed receiving benefits from ECOSOC is several times higher than the number of agents actually working there.

- The number of unemployed receiving benefits (former contract agents) is still too small for any reliable conclusions to be drawn.

- The number of contributors to the fund employed by the Agencies and Offices is considerably larger than the number of unemployed who receive benefits from these bodies. This is confirmed by the figures on expenditure and receipts (see II.D). This is partly because many of these Agencies and Offices were created fairly recently, and many contracts are therefore still ongoing.

- The difference between the number of unemployed who received benefits in December (see III.B) and the number of unemployment dossiers handled during the year indicates a considerable rise in the numbers of dossiers to be handled. The figures are a good indication of the real administrative burden.

- The figures showing the place of residence of recipients of Community unemployment benefits confirm that more than half of them register as jobseekers in Belgium. The numbers – which have risen constantly (except for in 2005) – give no indication of such people's nationality. In other words, people who register in Belgium may originate in any EU Member State and are certainly not exclusively Belgian. If the numbers from the five countries with the highest registered numbers of unemployed are added together (i.e. Belgium, France, Spain, Luxembourg and Italy), this accounts for more than 80% of the total number of dossiers that are handled. This proportion has remained more or less constant for the last six years. It also emerges that former staff from Agencies and Offices who register as jobseekers are significantly more likely to come from countries other than those listed above.

- The following points can be made regarding the table in III.F. (duration of contracts):

- There is a trend towards shorter contracts in recent years: in 2000 more than 75% of contracts were for a period exceeding two years. That proportion fell to 45% in 2005. It is, however, still too soon for the impact of the Reform to be discerned;

- ECOSOC stands out here again: half of their contracts are for one year at the most. In 2005, ECOSOC accounted for 8.1% of all unemployed; 4.8% of all unemployed had had contracts of no more than one year from this institution.

- The following should be noted regarding table III.G. (duration of payments):

- In the past, under the initial scheme, payments were received for approximately one year. The years 2000 and 2004 were exceptional: in 2000, a large number of dossiers were opened due to staff changes in Commissioners' cabinets. The dossiers were open for a short period. It is unclear why payments were for markedly shorter periods in 2004. The phenomenon appears most clearly with contracts originating in the Commission. The modified scheme has yet to make a significant impact.

- The shortened payment period for 2005 may perhaps be explained by a rise in the number of the unemployed who were covered by the modified scheme, and were therefore eligible for a shorter time (1/3 of the time spent working).

IV. THE SITUATION SINCE THE REFORM ENTERED INTO FORCE (2004 AND 2005)

A. Expla nation

The Reform changed the eligibility for complementary Community unemployment benefit. Details of these changes can be found in Annex I below.

The two schemes are to run side-by-side over a transitional period, the duration of which is hard to predict. Agents who are eligible for complementary Community unemployment benefits on account of a temporary agent contract signed before 1 May 2004 may choose between the two schemes. Provided such people have continued to acquire rights since 30 April 2004 without interruption, they may opt for either scheme when they qualify for unemployment benefit. Their choice is however irrevocable.

B. Analysis of average cost per payment

This table analyses average cost per monthly payment for temporary agents (TA) and contract agents (CA), broken down by scheme applicable to each dossier.

[pic]

C. Analysis of contributions paid to the unemployment fund

The data in the table below is taken from the new application pay (NAP) payroll system. The figures include all institutions, agencies and offices.

For each month shown, the figure given is the number of dossiers for which a salary was calculated even if the calculation was made during a subsequent month. Personal contributions and contributions from employers have been added together for each dossier.

This means that an average contribution per agent can be calculated, which can be compared among the different months.

[pic]

D. Analysis of the duration of contracts – broken down by institution

This table breaks down benefit recipients for whom at least one benefit was calculated (expressed as a percentage for 2004 and 2005) according to the length of the contract or contracts that made them eligible for complementary Community unemployment benefits (up to one year, up to two years, etc).

[pic]

E. Analysis of the duration of the payment period – broken down by institution

This table shows the average length of time for which unemployment payments were received during 2004 and 2005. Using the number of unemployed who were handled during the year in question as a base (i.e. for whom at least one payment was calculated during the year in question), it shows the total number of days for which payments were made, from the opening of the dossier until 31 December for the year in question. This total is divided by the number of dossiers handled, and again by 30 to give an average number of monthly payments.

The figures are also broken down by contract type and scheme.

[pic]

F. Comments

- It is clear that the monthly cost – for former temporary agents – of complementary Community unemployment benefits is markedly higher under the modified scheme. However, the monthly cost for 2004 (under the modified scheme) is somewhat distorted by the fact that many of the recipients were still inside the initial six-month benefit period during which the ceiling is not applied to the basic unemployment benefit. By 2005, the cost had already fallen, although the scheme had still not reached cruising speed. Average cost should therefore continue to fall.

- 2005 was the first year in which the average cost of unemployment benefit paid to a former contract agent could be calculated. Despite the fact that the figures are artificially inflated (see the preceding paragraph), the cost is still 60% lower than for former temporary agents.

- The following can be noted about contributions to the scheme:

- The new method for calculating contributions has brought an increase of around 80% (51.13 in April 2004; 91.00 in May 2004);

- In 2005, it took 27.50 working temporary agents (contributing €88.11 per month) to fund one unemployed former temporary agent (costing €2420.74 per month). Under the initial scheme, it took 29.15 working agents to fund one unemployed person (i.e. with a contribution of €51.13 per month, compared to an average cost of €1490.53 per month). The proportion has therefore changed little under the modified scheme, and if anything, is now slightly lower;

- In 2005, it took 28.60 working contract agents (making contributions of €35.85 per month) to fund one former contract agent who was unemployed (costing €1026.15 per month);

- It can therefore be concluded that the funding for each category of agent is more or less in equilibrium.

- Regarding the duration of contracts that resulted in eligibility for Community unemployment benefit, the only discernible differences between those drawn up under the initial scheme and those governed by the modified scheme appear in 2005. Contracts seem to have been for longer periods of time for the latter. It should however be remembered that this is a transitory scheme: agents who worked before and after 1 May 2004 are still entitled to choose either scheme, and this may have an impact on these figures.

- The following can be noted about the table in point IV.E. (duration of payments):

- The figures confirm that in 2004, Commission unemployed enjoyed a considerably shorter payment period;

- from 2005, by which time the number of unemployed former temporary agents covered by the modified scheme had increased considerably, it can be concluded that the payment period for such dossiers will in all probability be considerably shorter than under the initial scheme;

- the initial indications, although sketchy and far from complete, show the same tendency for unemployed former contract agents, although it should be remembered that the first dossiers were only opened in 2005.

V. FINAL COMMENTS AND CONCLUDING REMARKS

- Following the Reform, and therefore after contract agents were introduced, principally to replace auxiliary agents, the number of workers eligible for Community unemployment benefits nearly doubled. Auxiliary agents were covered exclusively by the national social security system. They were not therefore eligible for social security payments from the European Community.

- As a general rule, for three-quarters of the time it has been in existence, the complementary Community unemployment benefit scheme has posted a surplus in its operating budget.

- The current reserves are sufficient to cope with approximately six years of deficit functioning.

- There is a continuing disparity between receipts from the Economic and Social Committee and unemployment payments to former agents from that body.

- Occasional events like a change of Commission and therefore of staff in Commissioners' cabinets and changes among the staff of political groupings in Parliament in the wake of elections have a significant impact on the financial equilibrium of the fund over the years.

- The number of Agencies and Offices, and the numbers of staff they employ, are constantly growing, and now account for more staff than temporary and contract agents employed by the Commission.

- A large majority of Community unemployed are concentrated in a small number of Member States. There is a strong case for optimising electronic information exchanges for calculating complementary Community unemployment benefits.

- It is likely that the Reform, and therefore the implementation of the complementary Community unemployment benefit scheme, will be fully operational by 2007-2008. Early data on the operational equilibrium of the scheme is available already. The data shows that:

- contributions from temporary agents have risen considerably;

- although the cost of unemployment payments is now considerably higher than under the initial scheme, there are reliable indications that the current contributions cover more or less the same proportion of expenditure as before;

- the schemes applicable to former temporary agents and former contract agents do not seem to incur a level of expenditure that differs significantly from the level of receipts from these two categories of agents;

- if the shortened payment period continues under the modified scheme over the coming years (and initial indications seem to point clearly in that direction), the equilibrium of the scheme would seem to be ensured.

- A question remains regarding the situation of the scheme during 2007-2008, as the contracts of a large number of contract agents will end during that period.

- A prospective study is in order to assess the longer-term equilibrium of the modified scheme, and the possible need to adapt the size of contributions and/or rights.