As the staff of the United Nations and its specialized agencies work in over 600 duty stations around the world a complex salary structure has developed over the years to ensure that all salaries have equal purchasing power no matter where a staff member is posted. The following information is intended to shed light on the complexities of pay setting in the UN common system.

Article 101 of the Charter of the United Nations states that:

"The paramount consideration in the employment of the staff and in the determination of the conditions of service shall be the necessity of securing the highest standards of efficiency, competence and integrity ..."

To ensure that this provision of the Charter is implemented, i.e., that the UN family of organizations is able to recruit and retain staff of the highest quality, the organizations need to offer salaries and benefits that are competitive with those of other employers competing for the same quality of staff; these competitors include the public sector, other international organizations and, increasingly, the private sector.

A common system of salaries and allowances

Compensation for an international civil servant is based on a common system of salaries, allowances and benefits. The system applies to over 54,000 staff members serving at some 600 duty stations, 42% of whom are employed at headquarters duty stations, 41% at other established offices and 17% on technical assistance projects.

The common system of salaries and allowances was established at a time of low inflation and stable exchange rates and resulted in a relatively simple system of salary adjustment applied to a limited number of duty stations outside New York, the base of the system.

In the late 1970's, soaring inflation rates and monetary instability required refinement of the salary system. Data collection techniques were revised to compile up-to-date information on fluctuations in cost-of-living and to keep pace with ever-changing currency exchange rates worldwide. Moreover, the relatively simple salary system became increasingly complex as the activities of the UN system organizations increased in number, size and scope. This technical note is intended to clear up some of the common misunderstandings about the UN salary system.

Staff assessment

All international civil servants in every category are subject to the payment of a staff assessment which is comparable to a national income tax. Despite the fact that the United Nations General Assembly decided that international civil servants should not pay tax to any national government, some countries still tax the salaries of their nationals working in the UN common system. Therefore, staff assessment is paid into a special fund that is used to reimburse staff members who pay national income tax; the balance remaining is credited to Member States in proportion to their contribution to the budget of the UN family of organizations. Staff assessment ensures that the net salary of each staff member liable for national tax is the same as the net salary of one who is not.

Salary scales of staff in the Professional and higher categories in the United Nations and its specialized agencies are expressed in US dollars regardless of the country in which an international civil servant works. They are determined by means of a comparison of the salaries of Professional staff working at the United Nations in New York with the salaries of US civil servants in Washington, D.C., plus a small differential or margin to take into account factors such as expatriation, more limited career prospects, shorter career spans, adaptation to living in another country, work in a language other than the staff member's own, and limitation on social and political involvement. The expatriation factor is recognized by all governments whose personnel working abroad receive more than they would working in the home country. About 90% of Professional staff in the UN system work outside the home country.

The Noblemaire Principle

The margin is the amount by which common system salaries exceed those of the comparator to offset the disadvantages of expatriation. In 1984 the United Nations General Assembly decided to define a desirable level of 115 for the margin and to establish a range of 110-120. This decision meant that UN salaries in New York should be 15 per cent higher than those of the comparator in Washington, D.C., after taking into account the cost-of-living difference between the two cities. The range meant that UN salaries in New York would not be allowed to exceed those of the comparator in Washington by more than 20 per cent. Yet, in the comparator, there is a difference between the salaries of national civil servants serving at home and those serving abroad, with the latter earning far in excess of 15 per cent more than salaries paid at home. The result is that, in almost every duty station outside the United States, common system remuneration is much lower than that of the comparator's civil servants abroad.

Post adjustment

Professional staff are accorded a post adjustment which is an integral part of the salary structure. The post adjustment is designed to ensure that, regardless of duty station, salaries of Professional staff have equal purchasing power. When currency values change, the post adjustment alters to maintain local purchasing power parity. When the local cost-of-living changes as compared to New York, the post adjustment follows suit. The actual take-home pay of Professional staff varies according to duty station as the pay check consists of a base salary that is the same for all staff at the same level and a post adjustment specific to a duty station.

Until 1990, post adjustment did not compensate fully for inflation. As a result the value of salaries in many duty stations had fallen since the last real increase in base salary in 1975. Staff working in the field in countries where the local currency is subject to large-scale devaluation have suffered a steep decline in their dollar salaries, making it difficult for them to meet their financial commitments outside the duty station. These problems have been greatly aggravated by a post adjustment freeze applied between 1985 and 1991, at some duty stations. The post adjustment freeze was again applied at five out of the seven headquaters duty stations in 1996.

Determining the post adjustment index

Surveys, called place-to-place surveys, are carried out periodically at every duty station. A place-to-place comparison takes into account expenditure patterns of international staff members both at a duty station and in the base city, New York. Two indices are computed. One index compares the cost of buying a basket of goods and services generally purchased by international staff in the base city, and another index compares the same costs for a basket of goods and services generally purchased by international staff in a duty station. These two indices are used to determine the appropriate post adjustment to apply at each duty station.

Freezes

Between 1976 and 1984 the margin averaged 115.3, ranging from 109.3 to 118.2, although in earlier years the margin had climbed as high as 144. Since 1985, if the margin surpasses 120, post adjustment is not allowed to progress along with the increase and a freeze on post adjustment occurs. Because of this margin control, UN salaries were frozen for several years in the late 1980's at many duty stations having a high cost-of-living. Consequently, staff in the Professional and higher categories have seen the purchasing power of their salaries decline - by as much as 30% in European duty stations.

Purchasing power of Professional salaries

Decision-makers in the UN common system have acknowledged that the salaries of staff in the Professional category and above are no longer competitive enough to attract high quality staff. The problem is particularly acute at several of the UN specialized agencies in Europe that compete with other multinational organizations for the services of highly specialized experts. At the root of this problem lie several factors that have given rise to a loss of purchasing power of salaries of staff in the Professional and higher categories. First and foremost, the salaries of the comparator lag behind those of that country's private sector by 32 per cent. National legislation has been passed to rectify this situation in the comparator beginning in 1994; until that time, various interim pay rises have been accorded to staff in the comparator's civil service. As an additional interim arrangement, certain U.S. government agencies have placed their employees on special rate pay scales which are approximately 30 per cent higher than the U.S. General Salary Schedule. Unfortunately, the UN common system has not agreed to accord its Professional staff equivalent interim arrangements. Second, the limitation of 120 on the fluctuation of the margin has meant that post adjustment has been frozen for quite some time for Professional staff. Third, inflation and currency fluctuations have had a devastating effect on salaries that are expressed in U.S. dollars. Especially for staff working in the field in countries where the local currency has been subject to large-scale devaluation, there has been a steep decline in dollar salaries.