Report from the Commission to the European Parliament AND to the Council on Annex XI to the Staff Regulations
Date: 2008-07-10
Institutions: European Commission
Subjects: European official, pay policy, regulations for civil servants, servant (EU)

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COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 10.7.2008 
COM(2008) 443 final 

REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND 
TO THE COUNCIL  

on Annex XI to the Staff Regulations 

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REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND 
TO THE COUNCIL  

on Annex XI to the Staff Regulations 

1. 

INTRODUCTION 

Article  15(2)  of  Annex  XI  to  the  Staff  Regulations  provides  that  the  provisions  of 
Annex  XI  are  to  be  reviewed  at  the  end  of  the  fourth  year  after  1  July  2004, 
particularly in the light of their budgetary implications. To this end, the Commission 
must  submit  a  report  to  the  European  Parliament  and  the  Council  and,  where 
appropriate,  a  proposal  to  amend  this  Annex  on  the  basis  of  Article  283  of  the  EC 
Treaty. 

This  report  implements  the  aforementioned  provision.  It  focuses  on  the  issues, 
whether  Annex  XI  serves  its  purpose  and  whether  any  amendments  are  needed  to 
ensure smooth application of the "method". 

1.1. 

Basic objectives and principles of the method 

The provisions of the current method for adjusting remuneration and pensions apply 
from 1 July 2004 until 31 December 2012 and are expressed in Articles 64, 65 and 
65a of the Staff Regulations and Annex XI. 

The main objectives of the method are: 

–  automatic  salary  adjustment1  in  order  to  avoid  that  the  work  of  all  Community 
Institutions and Agencies is disrupted by annual negotiations and social unrest; 

–  transparent,  efficient,  relatively  straightforward  rules 

to  determine  salary 

adjustments for officials and other servants of all EU Institutions.. 

In  order  to  ensure  proper  functioning  of  the  method,  the  following  principles  have 
been laid down: 

–  parallelism with national officials in the evolution of purchasing power; 

–  equality of purchasing power among civil servants in different duty stations. 

This  report  analyses  whether  the  method  laid  down  in  Annex  XI  to  the  Staff 
Regulations follows the principles and reaches the objectives mentioned above. 

1 

The automatic salary adjustment applies only for the period agreed among the Council, the Commission 
and the staff representatives (from 1 July 2004 to 31 December 2012). It corresponds to the application 
period for the special levy. 

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2. 

SPECIFIC INDICATOR 

The Specific Indicator measures changes in the purchasing power of civil servants in 
central governments of Member States. 

2.1. 

Specific indicator trends for individual countries 

A  full  time  series  of  data  for  each  of  the  27  EU  Member  States  is  not  available 
(Bulgaria  and  Romania  joined  with  effect  from  2007,  and  Estonia  has  not  supplied 
data). The TABLE 1 summarises the available data for each country for  the period 
2004-2007,  together  with  a  simple  arithmetic  mean  value  for  the  period.  The  next 
table shows the same data, re-expressed as a cumulative index (2003=100). 

2.2. 

Trend of the global specific indicator as currently defined 

Under  the  May  2004  Staff  Regulations,  the  global  specific  indicator  is  computed 
using a sample of eight reference countries, rather than using data for all the Member 
States  of  the  EU.  The  eight  countries  are:  Belgium,  Germany,  France,  Spain,  Italy, 
Luxembourg,  Netherlands  and  the  United  Kingdom.  This  choice  was  based  on  the 
estimate that salary development in the sample countries would be similar to the one 
in EU15. 

Prior to 2004, the global specific indicator was calculated by reference to the EU as a 
whole (i.e. EU12 1987-1994, EU15 1995-2003). 

The  2007  enlargement  and  recent  economic  development  reduced  the  EU  GDP 
percentage of this sample over time and it is likely that in the coming years this trend 
will continue. Annex XI lays down a simplified procedure for the Council acting on a 
Commission  proposal  under  Article  65  (3)  of  the  Staff  Regulations  to  adopt  a  new 
sample. Such a sample should represent at least 75% of the European Union GDP. 

Annual and cumulative data (by country) 

TABLE 2 shows the time series for these eight countries since 2004, together with a 
simple  arithmetic  mean  value  for  the  period.  TABLE  3  shows  the  same  data,  re-
expressed as a cumulative index (2003=100). 

It  is  apparent  that  national  civil  servants'  net  salaries  in  real  terms  have  decreased 
over  this  period  by  around  6%  in  Germany,  by  around  3%  in  Luxembourg  and  by 
around  1%  in  Spain.  Over  the  same  period,  they  have  increased  by  around  1%  in 
Italy and by around 2% in the Netherlands and the United Kingdom. 

Global specific indicator for eight countries 

GRAPH 4 shows the time series since 2004 of the global specific indicator computed 
using data for these eight reference countries (weighted by GDP), together with the 
Brussels International Index and the consequent annual adjustment for EU staff. 

TABLE  5  presents  these  time  series  data,  re-expressed  as  a  cumulative  index  over 
the period. The global specific indicator, computed as a simple average for the four-
year period, is -0.3%; the cumulative impact to July 2007 (2003=100) is -1.0%. The 
average  annual  inflation  in  Brussels  over  this  period  was  +1.9%;  the  cumulative 

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impact is +7.8%. The average annual adjustment to remuneration and pensions was 
+1.7%;  the  cumulative  impact  is  +6.8%.  The  cumulative  impact  is  illustrated  in 
GRAPH 6. The cumulative negative specific indicator (-1%) resulted in a decrease of 
purchasing power of EU civil servants. 

2.3. 

Other possible approaches to the computation of global specific indicators 

A  range  of  alternative  calculations  are  possible  for  the  global  specific  indicator. 
These test calculations carried out by Eurostat include: 

–  A  simple  average  of  Brussels  and  Luxembourg  values  (on  the  logic  that  this 

reflects the location of the headquarters of the EU institutions) 

–  Calculations for EU25 

–  EU15, euro area and other country groupings 

–  Alternative GDP weightings 

–  Weighting country values using national population totals 

–  Weighting country values by population of national civil servants in central public 

administration 

–  Weighting country values using Qualified Majority Voting rights. 

A  hypothetical  global  specific  indicator  calculated  using  available  data  for  all 
member states (i.e. EU25 in absence of time series data for Bulgaria and Romania, 
and  excluding  Estonia  in  absence  of  data)  would  be  quite  different  from  the  one 
calculated  for  the  sample  of  8  countries.  The  simple  average  for  the  4  year  period 
would  be  +0.2%  instead  of  -0.3%;  the  cumulative  impact  to  July  2007  (2003=100) 
would be +0.8% instead of -1.0%.  

2.4. 

Departure from the general principle of parallelism 

2.4.1.  The impact of EU social contributions 

The  current  methodology  aims  to  monitor  the  evolution  of  net  salaries  of  national 
civil servants in an attempt to ensure equivalence of the purchasing power of net EU 
staff  salaries.  It  is  important  to  note  that  the  net  salaries  of  national  civil  servants 
already take into account the impact of pension contributions, medical insurance, etc. 
payable  in  the  Member  States.  Where  there  is  a  change  in  such  compulsory 
deductions  for  one  or  more  countries,  this  would  be  reflected  in  the  measured 
evolution of the net salary, which is a key indicator for the annual increase in basic 
pay of EU officials. However, where there is a change in the coverage of risks, it is 
not taken into account. 

(a) Social contributions paid by EU officials 

EU officials pay obligatory social contributions, which are deducted from their take-
home salary. These include pension contributions and medical (health and accident) 
insurance  contributions.  The  contributions  are  periodically  increased,  and  are  set 

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entirely 
consequently an element of double-counting in the current system.  

independently  of 

reference  countries'  contributions.  There 

the 

is 

TABLE 7 attempts to quantify the cumulative impact of departure from parallelism 
due to social contributions (situation at May 2004 = 100), by deducting the impact of 
changes in the pension contribution rate payable by staff from the annual adjustment, 
to identify the actual combined effect. 

Over the period 2004-2007, the actual cumulative salary adjustment is around 0.7 per 
cent  lower  than  the  published  annual  adjustment,  due  to  the  further  impact  of 
changes in the pension contribution rate. 

(b) Risks coverage 

National  civil  servants  may  pay  various  social  contributions  which  guarantee  them 
protection from certain risks. The risk coverage in each Member State is specific to 
that  country.  Similarly,  only  a  specific  set  of  risks  are  covered  by  the  EU  welfare 
system.  These  differences  in  coverage  and  the  impact  of  any  changes  in  coverage 
make comparison difficult, and no attempt is made to correct this. Nevertheless, this 
situation  also  creates  an  element  of  departure  from  parallelism.  The  salaries  of  EU 
staff  are  affected  by  changes  in  social  contributions  for  risk  coverage  in  Member 
States,  protection  to  which  they  themselves  may  not  be  entitled.  In  particular,  they 
are penalised if national civil servants' contributions are increased, and they benefit if 
national civil servants' contributions are decreased. 

2.4.2.  The impact of the EU special levy 

The special levy is an additional deduction from the remuneration of EU officials. It 
introduces another element of double counting. 

TABLE 8 attempts to quantify the cumulative impact of departure from parallelism 
due  to  the  special  levy  (situation  at  May  2004  =  100),  by  deducting  the  impact  of 
changes  in  the  special  levy  from  the  annual  adjustment,  to  identify  the  actual 
combined effect. 

Over the period 2004-2007,  the  actual cumulative salary  adjustment  is  0.6  per cent 
lower  than  the  published  annual  adjustment,  due  to  the  further  impact  of  the 
introduction and the (ongoing) annual changes in the special levy payable by staff. 

2.4.3.  Combined impact of EU social contributions and the EU special levy 

TABLE 9 indicates the combined additional impact on the annual adjustment of the 
evolution of pension contributions and the evolution of the special levy since 2004. 

The cumulative impact is shown in GRAPH 10. If the cumulative change in salaries 
since July 2003 of +6.8% (i.e. annual adjustments 2004-2007) is adapted to take into 
account the cumulative impact of the changes in the pension contribution rate and the 
changes in the special levy since May 2004, the actual overall cumulative change is 
only  +5.4%,  i.e.  1.3  per  cent  lower.  This  is  less  than  the  cumulative  inflation  in 
Brussels for the same period, of +7.8%. 

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2.5. 

Problems encountered and solutions implemented or proposed 

2.5.1.  Availability of data and metadata   

Member States may experience some practical difficulties in supplying Eurostat with 
the  necessary  information.  Measurement  difficulties  could  include  applying  the 
correct  definition  of  gross  pay;  relating  pay  information  to  the  correct  reference 
period;  collecting 
the  correct  reference  population  within 
government; transmitting this information to Eurostat. These issues are discussed in 
more detail below. 

information  for 

Measurement difficulties with certain components of gross pay and their definition 

The current methodological guidance states that all elements of remuneration which 
affect  the  purchasing  power  of  national  civil  servants  should  be  taken  into  account 
when calculating the gross remuneration for transmission to Eurostat. In addition to 
basic salaries, all general bonuses and premiums should be reported, including non-
pensionable lump-sum amounts, together with allowances (e.g. child benefit, family 
allowances).  For  measurement  reasons,  non-monetary  income  components  are 
typically  excluded.  Occasional  interpretation  issues  arising  in  the  past  have  been 
clarified  bilaterally  on  a  case-by-case  basis.  However,  some  standardised 
methodological  guidance  is  now  provided2  on  the  interpretation  of  components  of 
gross pay, treatment of irregular payments, identification of reference population in 
order  to  assist  data  suppliers  with  a  more  detailed  understanding  of  the  source 
information to be calculated and supplied to Eurostat, and permit end-users to have a 
more detailed understanding of indicators produced by Eurostat. 

2.5.2. 

Interpretation of the Staff Regulations 

Issue of statutory contributions becoming voluntary 

The  issue  of  dealing  with  the  transition  of  some  contributions  from  statutory  to 
voluntary arose in 2006 when one Member State communicated data with two sets of 
figures  for  the  previous  year.  The  need  of  two  sets  of  figures  for  previous  year,  as 
explained  by  the  Member  State,  was  due  to  the  changes  in  the  health  insurance 
system  when  some  statutory  contributions  became  voluntary  giving  an  option  for 
civil  servants  to  choose  from  three  standard  packages.  The  Member  State  claimed 
that  the  average  package  should  be  considered  as  statutory;  however,  the 
Commission considered that the least costly package which allows them to comply 
with  the  legislation  in  force  shall  be  considered  as  statutory,  as  civil  servants  can 
choose other packages on voluntary basis. This interpretation gained the support of 
the  Council  Legal  Service,  which  declared  that  the  Commission  proposal  complied 
with the relevant provisions of the Staff Regulations and the request of the Member 
State gave rise to a number of specific reservations which it set out in the opinion. 

As there were diverging opinions on this issue in the Council Working Group on the 
Staff  Regulations,  the  Working  Group  asked  the  Commission  to  examine  it  in  the 
framework of the Article 65 Working Group in order to reach a joint understanding. 

2 

See  method  manual  adopted  by  Art  65  Working  Group  in  March  2008  ("Calculation  of  specific 
indicators in accordance with Article 65 of the EU Staff Regulations"), Appendix 3. 

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In  the  Article  65  Working  Group,  the  Commission  proposed  the  text  for  the  joint 
understanding, which was endorsed by the majority of the members in this Working 
Group. The text was subsequently integrated into the method manual3 adopted by the 
Art 65 WG in March 2008: 

•  A change in the social security system or taxation regime is not considered to be a 
change  in  the  salary  scale.  Changes  between  year  t-1  and  year  t  are  taken  into 
account in the calculation of the indicator for the current year. 

•  In the case where statutory deductions increase or new ones are introduced, this 
will  be  reflected  in  a  decrease  of  net  salaries  used  to  compute  the  specific 
indicator. Similarly, where statutory deductions decrease or are withdrawn, this 
will be reflected in an increase of net salaries. 

•  In the case where a voluntary social contribution becomes a statutory deduction, 
this  will  be  taken  into  account  by  decreasing  net  salaries.  Where  a  statutory 
deduction becomes voluntary, this will no longer be taken into account. 

Where  a  choice  amongst  different  packages  is  possible,  the  least  costly  package 
allowing  minimum  compliance  with  legislation  in  force  shall  be  considered  as 
statutory. 

2.5.3.  Changes to salary scale 

In  itself  a  change  of  salary  scale  does  not  necessarily  impact  on  the  pay  of  current 
staff. Some grades disappear, others are introduced, existing staff are reallocated to 
new  grades.  A  change  in  the  social  security  system  or  taxation  regime  is  not 
considered to be a change in salary scale. 

Such  large-scale  changes  are  rare  events.  They  do,  however,  raise  a  practical 
problem:  how  to  compare  the  information  available  at  time  (t)  and  identify  the 
evolution from time (t-1).  

A practical solution to this problem was proposed to the Article 65 Working Group 
and was subsequently integrated in the method manual4.  

Other  things  being  equal,  the  key  principle  is  that  immediately  prior  to  the  change 
and immediately after the change, the total number of employees and the total salary 
bill are unchanged.  

2.5.4. 

Samples covering less than 100%   

Selected grades for each functional category (administrators; assistants) are required 
to be representative of the category (e.g. modal) and to cover at least 75% of actual 
employment  numbers.  In  practice,  most  countries  supply  data  covering  100%  of 
staff. 

3 
4 

Ibid. Appendix 4, Part 4. 
Ibid. Appendix 4, Part 4. 

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A problem potentially arises where it is proposed to change the sample composition, 
as  this  could  impact  on  the  weighted  average  salary  used  at  time  (t)  and  the 
comparison with (t-1). 

A  practical  solution  was  proposed  to  the  Article  65  Working  Group  and  was 
subsequently integrated in the method manual5. 

With  a  given  distribution  of  staff  numbers  and  salaries,  different  samples  could 
initially be selected, both of which respect the requirement to cover at least 75% of 
employees. If, twelve months later, the sample of grades is changed (e.g. following 
substantial movements  of  staff), this  leads to the logical conclusion that,  where the 
decision  is  taken  not  to  cover  100%  of  employees  and  having  once  selected  a 
representative sample, that sample should then be retained without modification for 
future  comparisons.  Any  proposal  to  change  the  sample  should  be  signalled  in 
advance and only agreed in consultation with Eurostat. 

2.5.5.  Retrospective revision of figures 

At  some  stage  during  or  after  the  process  it  is  conceivable  that  an  error  may  be 
identified  either  by  a  Member  State  or  by  Eurostat.  Such  errors  must  be  officially 
communicated (Eurostat to Member State or the other way round). This then raises 
budgetary and administrative questions about whether/how to adjust such corrections 
retrospectively.  

Where  errors  are  detected,  the  Staff  Regulations  impose  no  limit  on  retrospective 
adjustment.  However,  to  limit  the  practical  administrative  and  financial  burdens,  a 
gentleman's  agreement  was  reached  in  January  2005  and  is  now  integrated  in  the 
method manual6. This policy provides for revision in the following circumstances: 

–  If identified prior to Council adoption, the Eurostat Report will be revised and a 

new draft Regulation will be submitted to the Council. 

–  For  a  period  of  six  months  after  the  adoption  of  this  Regulation  there  is  a 
possibility to start a revision of the adjustment (which can result in a retroactive 
correction).  

–  After this six-month period, data for year t are considered as final. 

2.5.6. 

Several datasets for the same year 

A  negative  legal  opinion  was  presented  to  the  Council  in  November  2006, 
concerning the existence of more than one dataset for any given year. If a dataset for 
a given year is found to be incorrect, provision should be made for a formal revision.  

In its opinion7 the Council Legal Service made several important clarifications: 

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Ibid. Appendix 4, Part 3. 
Ibid. Main text, Section 9. 
Opinion of the Legal Service of the Council of 30 November 2006 No. 15190/06 STAT 38 FIN 556, 
paragraphs 10, 11 and 12. 

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–  When Eurostat calculates the specific indicators for these purposes, the only data 
to  be  taken  into  account  for  the  previous  year  are  those  used  for  the  adjustment 
exercise for the year in question. 

–  It would be possible, for duly justified reasons, to alter the statistical data used for 
a given year, but this would make it necessary to carry out a correction, following 
the  applicable  procedure,  of  the  results  of  the  calculation  for  which  these  data 
were used – i.e. amending the Regulation concerning the annual adjustment of the 
remuneration of officials for the previous year. 

–  In  the  case  of  statutory  deductions  become  becoming  non-compulsory,  the 
Council cannot take account of these data as if the deductions were compulsory. 

3. 

THE BRUSSELS INTERNATIONAL INDEX 

The  Brussels  International  Index  (BII)  is  simply  a  measure  of  consumer  price 
inflation in Brussels. It is a Laspeyres price index, computed as a weighted average 
of the component price indices, using Family Budget Survey expenditure patterns of 
EU civil servants in Brussels as the weights.  

CHART  11  shows  the  BII  time  series  (annual  increase  June-June  by  reference  to 
previous year), together with comparable information for Belgian HICP. 

Differences in the trend are due to the use of different index sources for certain basic 
headings, and the different weights used for aggregation. 

The average BII over the period from 2004 to 2007 has been 101.9. The cumulative 
index for the whole period to June 2007 (base June 2003 = 100) is 107.8. 

By  comparison,  the  average  HICP  in  Belgium  over  the  period  was  102.2  and  the 
cumulative total for the period was 109.1. 

4. 

CORRECTION COEFFICIENTS 

The remuneration of officials serving in places of employment outside Brussels and 
Luxembourg  is  expressed  in  euro  and  adjusted  by  a  correction  coefficient  for  their 
location which is set above, below or equal to 100%. 

Correction coefficients are mathematical factors which, when applied to a monetary 
amount expressed in euro (e.g. Brussels salary), together with the official exchange 
rate to the euro (e.g. for a particular duty station city), identify the economic parity, 
which  is  a  statistical  value  reflecting  the cost-of-living  difference  (e.g.  between  the 
duty station city and Brussels). The economic parity is the average ratio of prices. It 
thus reflects the amount in national currency in a particular location which is needed 
to purchase the equivalent basket of goods and services in Brussels with one euro. 

4.1. 

Trends of correction coefficients   

TABLE  12  shows  correction  coefficient  values  for  individual  duty  stations  for  the 
period 2003-2007.  

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From  this  table  it  is  apparent  that  the  correction  coefficients  for  different  locations 
have  followed  different  trends  over  time.  In  10  locations  they  have  decreased  over 
the period, whilst 20 locations have experienced increases. 

Some care is needed when interpreting these data, because the underlying economic 
parities are designed to give a robust estimate of spatial differences at each point in 
time,  rather  than  a  time  series  evolution.  Some  observations  can  nevertheless  be 
made. 

The  places  of  employment  with  the  largest  number  of  staff  are  Brussels  and 
Luxembourg.  The  next  duty  station  locations  in  rank  order  by  numbers  of  staff 
affected  by  correction  coefficients  would  be:  Varese  (IT)  (2.5%),  Alicante  (ES) 
(1.6%),  Karlsruhe/Frankfurt (DE) (1.2%), Dublin (IE)  (0.7%) and The Hague (NL) 
(0.6%). 

4.2. 

Problems encountered and solutions implemented or proposed 

4.2.1.  Obtaining robust consumer expenditure weightings (small populations)  

Over time, comparison of consumer expenditure patterns for the national population 
and the spending pattern of EU officials has repeatedly demonstrated that expatriate 
staff  can  differ  markedly  in  their  purchasing  habits.  In  consequence  it  is  not 
appropriate to use national figures to aggregate the economic parities to produce an 
overall  value.  Instead,  information  has  to  be  collected  from  EU  officials  in  the 
various duty stations. 

These  consumer  expenditure  weightings  are  obtained  from  Family  Budget  Surveys 
(FBS)  conducted  at  periodic  intervals  (5  to  7  years).  Whilst  the  target  populations 
and sample sizes are clearly smaller, the percentage response rate is comparable with 
Household Budget Surveys conducted at national level.  

4.2.2.  Obtaining robust survey parities 

Price  data  from  the  European  Comparison  Programme  are  considered  to  be  robust. 
However,  the  review  process  to  establish  data  which  are  suitable  for  computing 
multilateral purchasing power parities logically focuses on that outcome, and not on 
data  suitability  to  establish  bilateral  purchasing power parities with Brussels. Some 
re-examination  of  underlying  data  is  therefore  desirable,  and  could  improve  the 
quality of bilateral parities. 

4.2.3.  Enlargement (transition from extra-EU to intra-EU) 

From  TABLE  12  it  is  clear  that  for  certain  duty  station  locations,  notably  those  in 
certain new Member States, the apparent evolution in price levels relative to Brussels 
has  been  particularly  significant.  Standard  reasons  for  this  are  described  and 
quantified in the Eurostat Annual Report.  

GRAPH  13  shows  the  overall  PPP  evolution  for  the  new  Member  States  for  the 
period 2004-2007 (2003=100). From this graph it is clear that the global parity has 
decreased for the period 2003-2007 by 15-25% in Czech Republic and Slovakia, and 
by 5-10% in Lithuania and Poland, with a decrease overall of less than 5% in Malta. 

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By contrast the parity movement has been positive in Estonia, Cyprus, Hungary, and 
has exceeded 5% in Slovenia and Latvia. 

4.2.4.  Misunderstandings by end-users 

The  presentation  of  correction  coefficient  results  for  July  2007  has  generated 
particularly  high  numbers  of  queries  relating  to  duty  stations  in  certain  of  the  new 
Member  States,  in  Varese,  Italy  and  in  Spain.  Staff  representatives  in  Luxembourg 
have also raised queries about the cost-of-living difference relative to Brussels. 

Particular  efforts  have  been  made  during  2007  to  clarify  and  explain  methodology, 
both to staff representatives (during the social dialogue process) and in the form of 
extensive correspondence with delegations, for whom a standardised presentation has 
been developed.  

4.3. 

Smoothing techniques (e.g. moving average) 

To  help  decipher  trends  in  data  series,  analysts  often  apply  various  “smoothing 
techniques” designed to reduce or eliminate volatility in data.  

The  “moving  average”  is  one  simple  smoothing  technique,  which  works  by 
consolidating  the  periodic  data  points  into  longer  units  of  time  –  for  example  an 
average  of  several  years’  data.  The  larger  the  number  of  years  included  in  the 
average, the smoother the series. 

There  is  a  downside  to  using  a  moving  average  to  smooth  a  data  series,  however: 
because the calculation relies on historical data, some of the variable’s timeliness is 
lost.  And  the  application  of  a  moving  average  could  cause  discrepancies  in  the 
equality of purchasing power in different duty stations. 

Other techniques are being explored in the Article 64 Working Group. 

5. 

BUDGETARY 
ADJUSTMENT OF REMUNERATION AND PENSIONS 

IMPLICATIONS  OF  THE  FUNCTIONING  OF  THE  METHOD  FOR 

The  method  has  fulfilled  its  aims  because  the  EU  officials  pay  has  followed  the 
national official pay increases in real terms. 

The results of the method 

EU Officials Basic Pay (and pensions) 

Increase at current prices 

Brussels International Index 

Basic pay increase in real terms 

Cumulated increase in real terms 

2004 

0,7% 

1,9% 

-1,2% 

-1,2% 

2005 

2,2% 

2,2% 

0,0% 

2006 

2,3% 

2,1% 

0,2% 

2007 

1,4% 

1,4% 

0,0% 

-1,2% 

-1,0% 

-1,0% 

Difference EU Officials / EU8 national officials 

Pay increase in real terms 

EU Officials basic Pay 

National Officials net pay (EU8 average) 

2004 

-1,2% 

-1,2% 

2005 

0,0% 

0,0% 

2006 

0,2% 

0,2% 

2007 

0,0% 

0,0% 

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11 

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Difference EU Officials / EU8 national officials 

Cumulated Difference EU Officials / EU8 

0,0% 

0,0% 

0,0% 

0,0% 

0,0% 

0,0% 

0,0% 

0,0% 

Including  the changes  in the pension  contribution and in the  special levy rates,  EU 
officials have had a lower pay increase in real terms than national officials. 

Net Pay increases including changes in special levy and the pension contribution rates 

EU Officials Net Pay 

Basic Pay increase in real terms 

Net effect of changes in the special levy rate 

2004 

2005 

2006 

2007 

-1,20% 

0,00% 

0,20% 

0,00% 

-0,2% 

-0,2% 

-0,2% 

Net effect of pension contribution rate changes 

-0,35% 

-0,35% 

Net Pay increase in real terms 

Cumulated net pay increase in real terms 

Net pay difference EU Officials / EU8 national officials 

Net Pay increase in real terms 

EU Officials net Pay 

National Officials net pay (EU8 average) 

Difference EU Officials / EU8 national officials 

Cumulated Difference EU Officials / EU8 

-1,55% 

-0,55% 

0,0% 

-0,2% 

-1,5% 

-2,1% 

-2,1% 

-2,3% 

2004 

2005 

-1,55% 

-0,55% 

-1,2% 

0,0% 

2006 

0,0% 

0,2% 

2007 

-0,2% 

0,0% 

-0,35% 

-0,55% 

-0,2% 

-0,2% 

-0,3% 

-0,9% 

-1,1% 

-1,3% 

The  expected  evolution  of  administrative  expenditure,  which  is  dominated  by  pay 
and pension's expenditure, is compatible with the financial framework.  

The Heading 5 financial programming table below  
(extracted from 2009 Preliminary draft Budget doc V): 

Amounts in EUR million at current 
prices 

2007 

2008 

2009 

2010 

2011 

2012 

2013 

3 709
Commission without pensions 
1 135
Pensions 
2 803
Other institutions excluding pensions 
7 648
Total heading 5 * 
7 777
Heading 5 ceiling with footnote** 
Heading 5 expected margin 
129
* The difference between the total and the sum are due to rounding. 
** The H5 ceiling includes the staff contribution to the retirement scheme 

3 441
960
2 577
6 978
7 115
137

3 553
1 055
2 674
7 282
7 457
175

3 822
1 220
2 972
8 014
8 088
74

3 934 
1 312 
3 083 
8 328 
8 415 
87 

4 045 
1 410 
3 214 
8 669 
8 755 
86 

4 164
1 516
3 346
9 025
9 181
156

6. 

CONCLUSIONS 

The  system  of  remuneration  laid  down  in  the  Staff  Regulations  guarantees 
equivalence  of  purchasing  power  between  Community  officials,  taking  account  of 
their family situation and the cost of living in their place of employment. 

The  2004  method  was  the  result  of  negotiations  between  the  Council,  the 
administrations of the Community institutions and representatives of the staff of the 
institutions.  It  is  applicable  from  1  July  2004  to  31  December  2012,  and  has 
produced the following results: 

(1) 

Since  2004,  national  civil  servants  of  eight  reference  Member  States  have 
seen the purchasing power of their salaries fall (the cumulative global specific 
indicator for 2004-2007 is -1.0%). 

EN 

12 

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(2) 

(3) 

(4) 

(5) 

(6) 

(7) 

(8) 

(9) 

The use of data for alternative country groupings, or using alternative weights 
or using alternative definition of salaries would produce different figures. For 
example,  the  equivalent  cumulative  global  specific  indicator  for  2004-2007 
for the EU25 would be +0.8%. 

The principle of parallelism inherent in the method has automatically applied 
this reduction (-1.0%) to the net salaries of Community officials. 

The  increase  of  the  pension  contribution  rate  and  the  changes  in  the  special 
levy resulted in an additional loss of purchasing power (-1.3%). 

The  combined  effect  has  thus  been  a  loss  of  purchasing  power  for 
Community officials (-2.3% in four years). 

The budgetary impact of Annex XI for the period 2004-2007 was a reduction 
of 1% in real terms on pay and pensions expenditure. 

Only the fact that the method works automatically has enabled conflicts over 
annual negotiations to be avoided. 

It  can  be  said  that  Community  officials'  salaries  have  moved  in  line  with 
changes in the economic and social situation, with a loss of purchasing power 
going beyond parallelism with national civil servants. 

Several  problematic  issues  were  identified  by  Eurostat.  However,  they  were 
addressed  or  will  be  addressed  in  the  Article  64  and  Article  65  Working 
Groups and do not therefore require modification of the Staff Regulations. 

(10)  The percentage of total EU GDP represented by the present reference sample 
for  the  calculation  of  the  specific  indicator  has  decreased  over  the  period 
2004-2007 and is approaching 75%. There is not an immediate need to update 
this sample. Nevertheless the Commission may consider proposing an update 
in the coming years. 

For the above reasons, the Commission takes the view that the method has achieved 
its  objectives  and  followed  the  principles  laid  down  in  Annex  XI  and  that 
improvements are possible through actions that do not imply an immediate revision 
of Annex XI. The Commission therefore considers that no modification of the Staff 
Regulations is needed. 

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ANNEX  

TABLE 1 

Specific indicator. Available data for all countries.

Annual data. Percentage change from previous year.

[2]

BG

[1]

BE

-0.6

0.0

-0.3

0.6

[6]

EE

[3]

CZ

-1.1

2.0

5.5

2.5

[4]

DK

4.5

1.8

-2.9

0.3

[5]

DE

-0.9

0.3

-1.6

-3.7

[7]

EL

-2.1

-1.3

0.2

-0.6

[8]

ES

-1.0

-0.7

-0.7

1.5

[9]

FR

-0.9

-0.2

0.1

0.5

[10]

IE

5.8

5.2

2.1

4.3

[11]

IT

-2.3

-0.3

2.0

1.7

[12]

CY

0.3

0.8

1.1

2.4

[13]

LV

1.9

18.7

16.3

36.5

[14]

LT

-1.3

-0.8

28.0

-4.1

[15]

LU

0.5

-0.6

-1.5

-1.4

[16]

HU

14.3

3.9

10.8

-4.9

[17]

MT

-0.5

-0.4

-3.4

4.7

[18]

NL

-3.4

-2.9

5.0

3.1

[19]

AT

0.2

1.9

0.1

0.1

[20]

PL

3.4

-2.2

0.6

-0.1

[21]

PT

-0.4

2.3

-1.7

-0.7

[22]

RO

13.2

[23]

SI

-1.1

3.2

-1.1

2.5

[24]

SK

-0.5

1.8

0.5

3.2

[25]

FI

3.9

2.9

2.7

3.8

[26]

SE

3.3

3.3

2.1

7.1

[27]

UK

-0.6

1.4

0.6

0.8

2004

2005

2006

2007

average

-0.1

2.2

0.9

-1.5

-0.9

-0.2

-0.1

4.3

0.3

1.1

18.4

5.5

-0.7

6.0

0.1

0.5

0.6

0.4

-0.1

13.2

0.9

1.2

3.3

3.9

0.5

Specific indicator. Available data for all countries.

Cumulative data. Percentage change from base year 2003.

[2]

BG

[1]

BE

-0.6

-0.6

-0.9

-0.3

[6]

EE

[3]

CZ

-1.1

0.9

6.4

9.1

[4]

DK

4.5

6.4

3.3

3.6

[5]

DE

-0.9

-0.6

-2.2

-5.8

[7]

EL

-2.1

-3.4

-3.2

-3.8

[8]

ES

-1.0

-1.6

-2.3

-0.9

[9]

FR

-0.9

-1.1

-1.0

-0.5

[10]

IE

5.8

11.3

13.6

18.5

[11]

IT

-2.3

-2.6

-0.7

1.0

[12]

CY

0.3

1.1

2.2

4.6

[13]

LV

1.9

20.9

40.6

92.0

[14]

LT

-1.3

-2.1

25.3

20.2

[15]

LU

0.5

-0.1

-1.6

-2.9

[16]

HU

14.3

18.7

31.5

25.1

[17]

MT

-0.5

-0.9

-4.3

0.2

[18]

NL

-3.4

-6.1

-1.4

1.7

[19]

AT

0.2

2.1

2.2

2.3

[20]

PL

3.4

1.1

1.7

1.6

2004

2005

2006

2007

[21]

PT

-0.4

1.9

0.2

[22]

RO

[23]

SI

[24]

SK

-1.1

-0.5

2.2

1.1

3.6

1.3

1.8

5.0

[25]

FI

3.9

6.9

9.8

[26]

SE

3.3

6.7

8.9

14.0

16.6

[27]

UK

-0.6

0.8

1.4

2.2

-0.5

13.2

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14 

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[1]

BE

-0.6

0.0

-0.3

0.6

2004

2005

2006

2007

average

-0.1

[1]

BE

-0.6

-0.6

-0.9

-0.3

2004

2005

2006

2007

TABLE 2 
Specific indicator. Available data for 8 sample countries. 
Annual data. Percentage change from previous year.
[4]

[2]

[5]

[3]

[6]

DE

-0.9

0.3

-1.6

-3.7

-1.5

ES

-1.0

-0.7

-0.7

1.5

-0.2

FR

-0.9

-0.2

0.1

0.5

-0.1

IT

-2.3

-0.3

2.0

1.7

0.3

LU

0.5

-0.6

-1.5

-1.4

-0.7

TABLE 3 

Specific indicator. Available data for 8 sample countries. 

Cumulative data. Percentage change from base year 2003.
[4]

[2]

[6]

[5]

[3]

DE

-0.9

-0.6

-2.2

-5.8

ES

-1.0

-1.6

-2.3

-0.9

FR

-0.9

-1.1

-1.0

-0.5

IT

-2.3

-2.6

-0.7

1.0

LU

0.5

-0.1

-1.6

-2.9

GRAPH 4 

[7]

NL

-3.4

-2.9

5.0

3.1

0.5

[7]

NL

-3.4

-6.1

-1.4

1.7

[8]

UK

-0.6

1.4

0.6

0.8

0.5

[8]

UK

-0.6

0.8

1.4

2.2

Global specific indicator, Brussels International Index and 
Annual Adjustment, 2004-2007

102.2

102.2

102.3

102.1

100.0

100.2

100.0

101.4

101.4

GSI

BII

AA

101.9

100.7

98.8

103.0

102.0

101.0

100.0

99.0

98.0

97.0

2004

2005

2006

2007

Years

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TABLE 5 

Global specific indicator (data for the 8 Member States in the sample), Brussels 
International Index and Annual Adjustment.

2004

2005

2006

2007

Global 
Specific 
Indicator

98.8

100.0

100.2

100.0

Simple avg. 
2003-2007
99.7

cumulative Price index

cumulative

Annual 
adjustment

cumulative

98.8

98.8

99.0

99.0

101.9

102.2

102.1

101.4

101.9

104.1

106.3

107.8

100.7

102.2

102.3

101.4

100.7

102.9

105.3

106.8

Simple avg. 
2003-2007
101.9

GRAPH 6 

Simple avg. 
2003-2007
101.7

Global specific indicator, Brussels International Index and 
Annual Adjustment. Cumulative data 2003=100

GSI

BII

AA

2003

2004

2005

2006

2007

TABLE 7 

Calculated annual adjustment
( Index  t-1 = 100 )

Actual total adjustment
( Index  t-1 = 100)

Global Specific 
Indicator *

Brussels 
International 
Index

Annual 
Adjustment

Change in 
Pension 
Contribution**

Actual 
Adjustment

98,8

100,0

100,2

100,0

101,9

102,2

102,1

101,4

100,7

102,2

102,3

101,4

99,65

99,65

100,00

100,00

100,35

101,84

102,30

101,40

Cumulative Adjustment
( Index  2003=100 )

Original

Modified

100,7

102,9

105,3

106,8

100,3

102,2

104,5

106,0

110

108

106

104

102

100

98

96

Year

2004

2005

2006

2007

* Sample of 8 countries
** Pension contribution rate applicable at 1.5.2004 of 9.25% increased by  +0.5% 1.7.2004,  +0.5% 1.7.2005
     (note: pension contribution is deductible from taxable salary: 0.35% change shown is estimate of actual impact after taxation instead of 0.50%)

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TABLE 8 

Calculated annual adjustment
( Index  t-1 = 100 )

Actual total adjustment
( Index  t-1 = 100)

Global Specific 
Indicator *

Brussels 
International 
Index

Annual 
Adjustment

Change in 
Special Levy**

Actual 
Adjustment

98,8

100,0

100,2

100,0

101,9

102,2

102,1

101,4

100,7

102,2

102,3

101,4

100,0

99,8

99,8

99,8

100,7

102,0

102,1

101,2

July

2004

2005

2006

2007

Cumulative Adjustment
( Index  2003=100 )

Original

Modified

100,7

102,9

105,3

106,8

100,7

102,7

104,9

106,1

* Sample of 8 countries
** Permanent special levy 2.50% introduced 2004, increasing by  +0.43% 1.1.2005, 1.1.2006, 1.1.2007, etc. to 1.1.2011
     (note: only applies to salary after deduction of an amount equal to salary of an official in grade 1 step 1: 0.20% change shown is estimate of actual impact instead 
of 0.43%)

TABLE 9 

Calculated annual adjustment
( Index  t-1 = 100 )

Actual total adjustment
( Index  t-1 = 100)

Global Specific 
Indicator *

Brussels 
International 
Index

Annual 
Adjustment

Change in 
Pension 
Contribution**

Change in 
Special Levy***

Total change

Actual 
Adjustment

98,8

100,0

100,2

100,0

101,9

102,2

102,1

101,4

100,7

102,2

102,3

101,4

99,65

99,65

100,0

100,0

100,0

99,8

99,8

99,8

99,7

99,5

99,8

99,8

100,3

101,6

102,1

101,2

GRAPH 10 

Cumulative Annual Adjustment without pension contribution 
and special levy (original) and with adjustment (combined)

Original

combined

Year

2004

2005

2006

2007

108,0

106,0

104,0

102,0

100,0

98,0

2003

2004

2005

2006

2007

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CHART 11 

Brussels International Index (=B.I.I.)  and 
Belgian Harmonised Index of Consumer Prices (=HICP)

102.7

BII HICP

102.3

102.2

102.5

102.1

101.4

101.3

103.0

102.5

102.0

101.9

101.5

101.0

100.5

2004

2005

2006

2007

Years  (June t, base June t-1 = 100)

TABLE 12 

Intra-EU correction coefficient 1.7.2003 - 1.7.2007, values

Country and 
place of employment

1.7.2003

1.7.2004

1.7.2005

1.7.2006

1.7.2007

BG

CZ

DK

DE

EE

EL

ES

FR

IE

IT

CY

LV

LT

HU

MT

NL

AT

PL

PT

RO

SI

SK

FI

SE

UK

Sofia

 Prague

 Copenhagen

 Berlin

 Bonn

 Karlsruhe

 Munich

 Tallinn

 Athens

 Madrid

 Paris

 Dublin

 Rome

 Varese

 Nicosia

 Riga

 Vilnius

 Budapest

 Valletta

The Hague

 Vienna

 Warsaw

 Lisbon

Bucharest

 Ljubljana

 Bratislava

 Helsinki

 Stockholm

 London

 Culham

88.8

135.7

101.7

95.7

95.0

107.3

77.5

91.4

98.5

119.1

123.3

106.7

98.2

88.0

76.1

77.6

81.9

87.9

115.1

107.0

72.3

90.6

84.9

83.8

120.6

116.7

139.6

111.5

87.1

136.7

101.2

96.2

95.4

107.3

79.5

93.5

100.6

120.2

122.3

109.8

100.6

90.4

77.9

78.6

88.3

89.9

110.5

108.0

72.0

91.8

84.4

90.9

119.4

117.4

142.7

115.4

90.6

135.9

100.2

96.0

95.0

106.4

80.3

93.0

101.2

119.0

122.4

111.8

99.0

92.0

76.1

77.1

90.0

89.6

109.7

107.1

81.4

91.5

83.0

92.9

117.7

112.4

143.8

115.4

64.1

85.3

137.9

100.1

97.2

95.8

106.6

79.5

93.3

102.2

118.2

122.0

112.5

100.3

91.3

76.7

75.5

76.2

90.6

110.2

106.5

76.6

91.9

64.7

86.8

88.1

116.6

114.9

139.4

114.2

65.8

81.2

139.4

99.3

98.3

96.9

106.6

79.6

95.3

100.4

117.4

121.8

110.6

98.6

89.9

79.3

71.3

89.8

84.8

111.5

107.8

80.7

92.2

76.3

88.3

81.3

117.8

117.0

143.1

115.9

1.7.2003 values for EUR12 countries computed for this report on consistent basis.

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18 

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GRAPH 13 

PPP evolution 2004-2007 (2003=100)

LV

SI

EE
HU
CY

M T

PL

LT

CZ

SK

1.7.2003

1.7.2004

1.7.2005

1.7.2006

1.7.2007

120

115

110

105

100

95

90

85

80

75

70

EN 

19 

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