RESTRICTED
WORLD TRADE WT/GC/W/11
27October 1995
ORGANIZATION(95-3324)
GENERAL COUNCIL
30October 1995
SALARIES AND PENSIONS OFTHE WTO STAFF
ThefollowingletterfromtheChairmanoftheCommitteeonBudget,FinanceandAdministration
totheChairman oftheGeneral Council, iscirculated forinformation ofWTO Members.
_______________
Dear Mr.Chairman,
Asyouknow, theCommittee onBudget, Finance andAdministration hasbeenconsidering
proposals bytheDirector-General toestablish conditions ofservice oftheWTO outside theframework
oftheUNCommon System. Inparticular, theDirector-General hasproposed thatsalaries ofstaff
intheprofessional andhigher categories should beincreased, instages, by25percent, andthatthe
WTO should withdraw fromtheUnited Nations JointStaffPension Fund andestablish itsownplan.
Manyweeksofintensivediscussion,fromwhichitemergedthatmembersweregenerallyattached
totheCommon System asaframework fortheWTO secretariat, confirmed awidely shared recognition
thatasfaraspensions wereconcerned, certain features oftheUNsystem wereinappropriate andshould
beremedied. Itwasatthesametimegenerally agreed thattherewereinsufficient grounds forsupporting
asalary increase.
Onmyownresponsibility, therefore, Ipresented adraftdecision totheCommittee, which
itconsidered atitsmeeting on13October. (Thedraftdecision isattached, together withmycover
note; Ialsoattach apaper showing revised Budget estimates for1996, which would besubmitted in
duetimetotheBudget Committee andtheGeneral Council).
While asubstantial number ofmembers supported thedecision, certain others hadreceived
instructions totheeffect thattheycould notsupport anydeparture from theUNCommon System,
notevenaproposal towithdraw fromtheUNPension Fund andestablish aWTO Pension Planwhile
preserving inallother respects theWTO 'sadherence totheCommon System.
Inthese circumstances, andintheabsence ofaclearconsensus inonedirection ortheother,
Iinformed theCommittee ofmyintention totransmit thedraftdecision totheGeneral Council for
consideration, again onmyownresponsibility. Theterms ofthedecision reflect theconsensus that
emerged among those supporting theproposal.WT/GC/W/11
Page2
Ishould begrateful therefore ifthismatter could beplaced ontheagenda ofthemeeting of
theGeneral Council, which Iunderstand youintend toconvene on25October 1995.
Itisalsomyunderstanding thatthere willbeaconsultation ofthestaffatlarge prior tothat
meeting, sothattheGeneral Council willbeaware oftheviews ofthose most directly concerned.WT/GC/W/11
Page3
DRAFT DECISION
Proposal bytheChairman oftheBudget Committee
TheJointWTO/GATT Committee onBudget, Finance andAdministration recommends that
the[General Council] [Executive Committee] adopt thefollowing decision:
"The General Council/Executive Committee:
Considering Article VIoftheAgreement establishing theWTO which provides thataWTO
Secretariat shallbeestablished,
Considering theMarrakesh ministerial decision onOrganizational andFinancial Consequences
Flowing from Implementation oftheAgreement Establishing theWTO,
Having examined theproposal oftheDirector-General asregards salaries andpensions:
Decides asfollows:
1. toapply toWTO staff,inrespect ofconditions ofservice otherthanpensions, theUnited
Nations Common System, asreflected intheStaffRegulations andStaffRules ofthe
WTO;
2. toestablish netremuneration scales forallstaffoftheWTO which areexpressed in
Swiss francs andwhich correspond tothecommon system scales applicable inGeneva;
3. torequest theDirector-General tomake provision fortheWTO toparticipate fully
intheactivities oftheCommon System organs;
4. toinform theUnited Nations Joint StaffPension Fund (UNJSPF) ofitsintention to
establish aWTO Pension Plan(WTOPP) on1January 1996 along thelinessetout
inAnnex 1andtoterminate themembership oftheInterim Commission forthe
International Trade Organization (ICITO) intheFund, with effect from
31December 1995, inaccordance withtheprovisions ofArticle 16oftheRegulations
oftheFund. Withdrawal fromtheUNJSPF andestablishment ofthenewpension plan
shallbecome effective, retroactively, atthetimetheGeneral Council takes itsfinal
decision onthematter, onthebasis oftheprecise anddefinitive conditions toapply
tosuchwithdrawal andestablishment andnolaterthan31July1996;
5. totakethenecessary steps:
(a) toplace therequest fortermination ofmembership ontheagenda ofthe50th
(1995) Session oftheUnited Nations General Assembly;
(b) noting thattheUNJSPF Standing Committee agreed atits177th meeting that
aspecial session oftheBoard should beconvened intheevent ofaformal
application forwithdrawal byICITO, torequest thatthespecial session be
heldpriorto30November 1995andthat,pursuant toparagraph AoftheRules
ofProcedure oftheUNJSPF, itsagenda include thefollowing items:WT/GC/W/11
Page4
- application byICITO fortermination ofitsmembership intheFund
on31December 1995, including anoutline ofthealternative pension
plantobeestablished bytheWTO;
- method tobeusedtodetermine theproportionate share intheassets
oftheFund tobepaidtoICITO asaresult ofthetermination ofits
membership;
6. that, pending themutually agreed arrangement referred toinArticle 16ofthe
Regulations oftheFund, pension contributions payable totheWTOPP shallbeheld
inaninterest-bearing account forthesolepurpose oftheplan;
7. thatthenecessary measures betaken toensure that,ifasaresult oftransfer tothe
WTOPP, staffmembers intheProfessional andhigher categories suffer areduction
intake-home paywithout benefitting from alltheadvantages ofthenewplan, such
reduction iscompensated inaccordance withtheprovisions setoutinAnnex 2.
8. thatthesupplementary costofnewpension planshallbefinanced byusing:
(a) thepartofthe1995 surplus account inexcess ofSF500,000;
(b) thebalance through asetaside inthe1996 ordinary budget;
(c) andthat,should thisfinancing prove insufficient, thematter andpossible
alternative solutions shallbereferred totheCommittee onBudget, Finance
andAdministration foritsrecommendation totheGeneral Council."ANNEX 1WT/GC/W/11
Page5WTO PENSION PLAN
SUMMARY OFPRINCIPAL PROPOSED PROVISIONS AND COMPARISON WITH UNJSPF PROVISIONS
PROVISION WTOPP UNJSPF
Remuneration
Netremuneration Netsalary, including postadjustment for
Professional andhigher category staffIdem.
Pensionable remuneration Netremuneration grossed upusing current WTO
internal taxation rates.ForGStaff:Idem.
ForPStaff:Netremuneration inNewYork
grossed upusing current WTO internal taxation
rates.
Final average remuneration (FAR) Highest pensionable remuneration forany36
months inthelastfiveyears ofservice.Idem.
Participation Allstaffholding afixed-term orregular contract
andallshort-term staffwithacontract ofatleast
6months 'duration orhaving completed six
months ofservice without abreak ofmore than
30days.Idem.PROVISION WTOPP UNJSPF
Normal retirement benefitWT/GC/W/11
Page6
Eligibility Age62 Age62forstaffhired onorafter1.1.1990,
otherwise age60
Accumulation rate 2%ofFAR foreachofthefirst35years of
service.Forstaffhired before 1.1.1983, 2%ofFAR for
first30years ofservice, then1%.
Forstaffhired onorafter1.1.1983, 1.5% of
FAR forfirst5years, 1.75% fornext5years,
2%fornext25years, then1%.
Inbothcases, totalbenefit amount maynot
exceed 70%ofFAR.
Early retirement benefit
Eligibility 5years'service toretirement age. Idem.
Benefit amount deferred toage62 Calculated likenormal retirement benefit. Idem.
Benefit amount starting before 62 Same asabove reduced bythesmaller of:
(a)3%times years before age62,
(b)1.5% times amount bywhich 85exceeds the
sumofageandyears ofservice.6%peryearforeachyearlessthannormal
retirement age.
Ifservice >25years and<30years 2%per
year.
Ifservice >30years 1%peryear.
Disability benefit
Eligibility Total andpermanent incapacity forperformance
ofanydutythatemployer mayreasonably
require.Idem.
Basic amount Calculated likenormal retirement benefit, using
projected service tonormal retirement date.Idem.PROVISION WTOPP UNJSPF
Deferred retirement benefitWT/GC/W/11
Page7Eligibility Payable toaparticipant whose ageonseparation
islessthanthenormal retirement ageandwho
has5years ormore ofcontributory service.Idem.
Amount ofbenefit Calculated likenormal retirement benefit,
commencing atnormal retirement age. Early
retirement conditions mayalsoapply.Idem.
Commutation ofpension Anyparticipant eligible toreceive apension
may, before itstarts, electtoreceive the
commuted value ofaportion ofhispension.
Theportion maynotexceed ofhisunreduced
pension. Commutation doesnotreduce any
benefits payable upon theretired participant 's
death.Idem.
Withdrawal benefit
Eligibility (a)Active participant whoceases participation
other thanbydeath ordisability retirement and:
1.hasunder 5years service, andisunder 62,or
2.has5ormore years service, isunder 62,and
elects awithdrawal benefit.Idem.
Benefit Sumofthefollowing: 10%offinalaverage
remuneration foreachofthefirst20years of
serviceParticipant 'sowncontributions increased by
10%foreachyearofservice inexcess of5
years, uptoamaximum of100% after15
years.PROVISION WTOPP UNJSPF
Surviving spouse pensionWT/GC/W/11
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Death while active participant 60%ofdisability pension thatwould havebeen
payable ifparticipant hadbecome disabled on
dateofdeath.50%ofdisability pension thatwould havebeen
payable ifparticipant hadbecome disabled on
dateofdeath.
Death while inretirement 60%ofretirement pension payable todeceased
participant.50%ofretirement pension payable todeceased
participant.
Currency ofpaymentsBenefits payable inanycurrency selected by
beneficiary atrateofexchange applicable for
Planpurposes.Idem.
Cost-of-living adjustment (COLA)
Applicable to: Anypension inpayment toaretired participant,
surviving ordivorced spouse, former participant
entitled toadeferred pension orchild receiving
benefit.Idem, except from age55onlyforformer
participant entitled toadeferred pension.
Initial adjustment Adjustment ofpension ateffective date, ifcost-
of-living incountry ofretirement exceeds cost-
of-living inSwitzerland by 5%.Idem.
Subsequent COLAs When relevant consumer price index moves by
3%.Idem.WT/GC/W/11
Page9
ANNEX 2
Compensation forReduction inTake-Home Pay
Under theproposal foranalternative WTO pension plan, thehigher scale ofpensionable
remuneration fortheProfessional staffwillleadtohigher contributions andconsequent reductions in
take-home payifasalary increase isnotdecided upon atthesame time.
Inorder tocompensate forthese reductions, amechanism would beintroduced which would
operate asafunction ofthegaininincome replacement (tobecompared withtheanticipated average
lossintake-home payof4.5%) experienced bytheProfessional staffmember transferring from the
UNJSPF totheWTO plan. Thismechanism would remain inplaceuntiltherewasanincrease insalaries
forstaffintheProfessional andhigher categories.
Estimated gainin
income replacement Total staffaffectedCompensation for
lossintake-home
payCost
0-4.5% 18 100% SF130,000
4.5% -10% 33 75% SF170,000
10%-15% 40 50% SF130,000
15%-40% 95 25% SF130,000
TOTAL 186 SF560,000WT/GC/W/11
Page10
NOTE BYTHE CHAIRMAN OFTHE
COMMITTEE ONBUDGET, FINANCE AND ADMINISTRATION
1. After intensive work within theWorking Group onPersonnel Questions andtheBudget
Committee, andafterthorough consultations withtheMembers, thetimeseems tohavecome tofind
acompromise solution between therequest ofthemanagement oftheWTO, onsalaries andpensions,
andthepositions ofMembers. Thisisthepurpose oftheattached draftdecision oftheGeneral Council
andtheExecutive Committee ofICITO thatIintend tosubmit totheBudget Committee onFriday,
13October 1995, before transmission forapproval totheGeneral Council.
2. Theissues ofpensions andsalaries arelinked onlytotheextent thatnothing canbedecided
onsalaries without establishing astand-alone pension planfortheWTO.
3. Considering thefactthat,notwithstanding theautonomous nature oftheWTO, avastmajority
ofMembers wishtocontinue toapply UNcommon system salaries totheWTO staff, itdoesnotappear
possible toreach aconsensus onadecision which would embody anincrease ofsalaries fortheWTO,
suchamove being adefacto departure from thecommon system.
4. Paragraphs 1to3ofthedraftdecision, therefore, statethattheWTO salary scalewillbethe
common system scaleconverted toSwiss francs forpractical reasons. TheStaffRegulations andRules
oftheWTO, which arecurrently being drafted andwillbesubmitted induecourse totheGeneral
Council forapproval, willbeinstrict conformity withthecommon system.
5. Nevertheless, ithasbeentheintention ofMembers toreflect inthese Regulations andRules
theirwishtoestablish theWTO asamodern andeffective organization. Thisisthereason why, inter
alia,these Regulations andRules aremore elaborate thaninthepastonissues likecontract policy
linked tosatisfactory performance orcontinuous performance evaluation. While being innowaya
departure fromthecommon system, thesenewrulesmayestablish newmethods ofmanagement which
willbebothintheinterests ofMembers andwillimprove further thereputation oftheOrganization.
Apositive attitude towards thepensions issue ispartofthepackage which willmake thestaffaccept
these newmethods ofmanagement.
6. Because ofthewaytheUNJointStaffPension Fund (UNJSPF) operates andthewaydecisions
aretaken inNewYork, aproposal mustbeputtotheGeneral Assembly before theendofthisyear
towithdraw fromtheUNJSPF andestablish ourownpension plan. Itis,however, notmyintention
thattheWTO atthisearly stage takeanirrevocable decision. Pending afullknowledge ofallthe
conditions ofwithdrawal, including notonlythecapital toberefunded toWTO, itmustbeunderstood
thattheGeneral Council retains therightnottopursue theestablishment ofaWTO pension planif
Members feeltheyarenotsatisfied withthese conditions. Thisisthepurpose ofparagraph 4and
especially itslastsentence.
7. Thequestion ofcompensation forreductions intake-home pay,addressed inparagraph 7,is
equivalent tohaving theemployer beartheadditional contribution ofstaffmembers inthenewpension
plan. Such ascheme cannot inmyview, which iswidely shared, beapplied toallstaffmembers.
Itshould onlybeapplied tothose PandDstaffwhodraw littleorinsignificant benefits from their
participation inthenewpension plan, duetoashort period ofcontribution. Such compensation can
bescientifically calculated andrelated totheactuarial benefit totheindividual, orcould, forgreater
convenience, belimited tothose individuals whowould participate inthenewplanonlyforadefined
shortperiod. Annex 2tothedraftdecision presents different options onwhich Members should decide.
There again asolution based onfairness should befound.WT/GC/W/11
Page11
8. Paragraph 8addresses thequestion ofthefinancing ofthescheme. Thefinalfigures willhave
tobedecided when alloptions (mainly oncompensation oftake-home pay)arechosen. Inallcases
itismyintention topropose thatthefinancing be"contribution neutral" for1996, which means that
thecontributions shallnotexceed those ofthe1995budget plusthestatutory andunavoidable increases
assuming atotalcostofSF3.5million. Thiscanbeachieved byusing partofthe1995surplus account
(assuming asurplus ofaround SF3million, andapayment ofSF500,000 totheWorking Capital
Fund forgood management, anamount ofSF2.5million could bereserved), andeconomies inthe
proposed 1996 budget. Economies would represent thecollective effort oftheOrganization andits
Management, inconjunction withtheefforts ofMembers.
9. Itisclear thatifsuchfinancing proves tobeinsufficient atthetimewhen allconditions of
establishment ofthenewplanareknown (which seems veryunlikely), theGeneral Council should
takethatfactintoaccount initsfinaldecision (which explains theadditional safeguard ofparagraph
8(c)).
10. Ifaconsensus decision cannot bereached onFriday nextontheattached draftdecision, Iwill
referittotheGeneral Council forfurther discussion.Revised Budget Estimates for1996WT/GC/W/11
Page12
Secretariat
proposalsChairman 's
proposals Comments
1995 Budget
Unavoidable increases
including common system increases
Savings in1995
Other requirements for1996
Pensions
Salaries (DG'sproposal)105,389,500
11,046,003
(1,576,000)
(1,225,000
1,648,200
4,660,000
34,000105,389,500
11,046,003
(1,576,000)
(1,225,000
225,000
3,400,000
0§79
§22
§25
§79
§79
Total Budget 1996 121,552,703 118,835,503
Financing:
Contributions
Miscellaneous income
1995 Surplus Account120,000,000
1,552,703114,882,800
1,552,703
2,400,000-4.2%