Currency of payment to staff entitlements
(1) At its 15th session (April 1954: CO-ORDINATION/R.162, section C.a.18) the Committee agreed that although varying circumstances in the organizations made standardization in this area of the salary system unlikely at that time, it would nevertheless review comparative practices periodically, the basic principle being that the proportion of a staff member's salary payable in other than local currency should ordinarily relate to commitments outside the country of the duty station.
(2) At a special session on salary matters (March 1957: CO-ORDINATION/R.244, paras. 40-45) CCAQ agreed that (a) assignment allowance should normally be paid in the currency of the duty station; (b) any "plus" post adjustment should be paid in the currency of the duty station; (c) service benefit should be paid in the currency of the home country or of the duty station, or in both, according to the staff member's choice. As regards salary (and family allowances), the organizations agreed that (d) subject to further study and periodic review by CCAQ, the policy should be to reduce hard currency payments. In this respect, WHO agreed to consider reducing hard currency payments to project staff in the light of such agreement as the other organizations reached on this matter, and on the acceptance by all staff of a proportion of pay in the currency of the duty station.
(3) See Section 2.10 for the question of the rate of exchange in converting payments of education fees to entitlement to education grant.
(4) At the 31st session (March 1970: CO-ORDINATION/R.798, para. 59) CCAQ agreed that the lump sums payable with installation allowances should normally be paid in local (duty station) currency, but might be payable, if the official so requested, in other (home country or convertible) currency if so doing would better serve the purposes for which the lump sums were intended.
(5) At the 37th session (March 1973: CO-ORDINATION/R.985, paras. 39 and 40) CCAQ examined the situation in Chile. In February 1973 most organizations had agreed by correspondence to a proposal by UN that with effect from 1 March 1973 there should be a change in the arrangements for salary payments in that country. As a result, 25 per cent of net salary would become payable in local currency and post adjustment would be revised to class O instead of the previous class C. In principle, any future post adjustment would be payable in full in local currency, but assignment allowances would continue to be paid in dollars.
(6) Possible changes in the arrangements for the currency distribution of salary payments were discussed at the 38th, 39th and 40th sessions (September 1973 and March and September 1974). At the 41st session (March 1975: CO-ORDINATION/R.1088, paras. 4-6) CCAQ agreed on a new formula, by which the emoluments of all Professional staff would be payable as follows:
(a) Base salary and dependency allowances: a minimum of 25 per cent in the currency of the duty station and a maximum of 75 per cent in a single other currency;
(b) Assignment allowance and post adjustment (and deductions for negative post adjustments): 100 per cent in the currency of the duty station.
CCAQ developed a set of principles for the implementation of this formula (CO-ORDINATION/R.1088, annex B), and the Committee recognized that exceptions might have to be made in certain countries. The target date for implementation was set at 1 July 1975.
(7) A draft circular explaining the agreed formula to the staff was discussed at a special session of CCAQ(FB) in July 1975 (CCAQ/SEC/356). CCAQ agreed that the new system would be implemented progressively between 1 September 1975 and 1 January 1976, depending on the amount of time needed by the different organizations.
(8) At the 42nd session (September 1975: CO-ORDINATION/R.1114, paras. 24-34), following a review by UN and UNDP of the situation in duty stations where economic conditions might justify country-wide exceptions to the new formula, CCAQ agreed on a revised list of such countries (CO-ORDINATION/R.1114, annex F). At subsequent sessions further revisions were agreed and the revised lists annexed to the Committee's sessional reports.
(9) At the 43rd session (March 1976: CO-ORDINATION/R.1145, paras. 16-18 and CO-ORDINATION/R.1146, paras. 34-41) and again at the 45th session (September 1976: CO-ORDINATION/R.1174, paras. 25-33) the Committee considered means of responding to a request made by the UNDP Governing Council at its January 1976 session, calling for salary payments to experts in the currency in which their country's pledge was made, in cases where UNDP had accumulations of non-convertible currencies. Bearing in mind the need to continue to provide for uniform and non-discriminatory treatment of all staff, the Committee recommended that:
(a) The organizations should inform staff of the financial problem facing UNDP as a result of its holdings of non-convertible currencies and of the Governing Council's request to all executing agencies to co-operate in utilizing such currencies, and should invite staff to accept voluntarily part of their base salary and dependency allowances in one of UNDP's accumulated non-convertible currencies if they had a need for such currency;
(b) The organizations should comply with all requests received from staff for the payment of emoluments in accumulated non-convertible currency.
A policy statement embodying these principles was subsequently agreed by ACC (CO-ORDINATION/R.1191, annex I).
(10) At the 47th session (CO-ORDINATION/R.1238, paras. 38 and 39) the Committee also considered whether to maintain the exceptional practice of paying the local currency element of Professional salaries at certain duty stations at the rate of exchange prevailing on the date of payment, rather than at the UN operational rate of exchange used for determining the post adjustment classification of the duty station. The Committee concluded that variations in the exchange rate over the past year in at least 7 of the 13 countries involved (Bolivia, Colombia, Costa Rica, Ecuador, Paraguay, the Philippines and Sudan) were not significant enough to justify maintaining the practice, and proposed that it should be discontinued with effect from 1 January 1978 for the 7 countries concerned.
(11) At the same session (CO-ORDINATION/R.1238, para. 40) the Committee agreed that the normal practice of paying installation allowance in local currency should be maintained in all cases where it was not demonstrated that expenses that it was designed to cover could not be met in local currency.
(12) Also at the 47th session (CO-ORDINATION/R.1238, para. 45 and annex X) the Committee adopted a revised list of currencies for voluntary third-currency salary payments.
(13) At the 48th session (March 1978) the Committee agreed that a complete review of the list of agreed country-wide exceptions should be made once a year; and noted with satisfaction the downward trend in the number of exceptions authorized by the organizations to the standard formula (CO-ORDINATION/R.1279, paras. 40 and 41).
(14) Discussing this subject again at its 49th session (September 1978) CCAQ reiterated its view that requests for changes in the list of country-wide exceptions should be circulated well in advance of its sessions (CO-ORDINATION/R.1307, paras. 40-42).
(15) In line with a recommendation made by CCAQ(PER) at its January-February 1979 session, CCAQ(FB) at its 59th session (March 1979) agreed to amend the standard formula for the currency of salary payments to staff in the Professional category and above to read as follows:
(a) Base salary: A minimum of 25 per cent in the currency of the duty station and a maximum of 75 per cent in a single other currency;
(b) Dependency allowances: 100 per cent either in the currency of the duty station or in the single other currency chosen under (a);
(c) Assignment allowance and post adjustment (including deductions for negative post adjustment): 100 per cent in the currency of the duty station.
In accordance with existing arrangements, a change in the currency choice, or in the amount or percentage involved, would normally be permitted twice a year (ACC/1979/R.11, paras. 41-43).
(16) At the same session the Committee asked UNDP to prepare a draft list of objective criteria for determining exceptions to the standard formula. It also agreed that reviews of exceptions granted to the standard formula in individual cases could be discontinued (ACC/1979/R.11, paras. 45-48).
(17) At the 51st session (September 1979) the Committee agreed, subject to some amendments, the UNDP list of criteria requested at its previous session. In response to representations by FICSA it confirmed that it would remain willing to consider country-wide exceptions at each session on financial and budgetary questions. Where urgent action was needed between sessions, it authorized UN and UNDP, acting jointly, to approve exceptions on a temporary basis if they involved an increase in payments in convertible currency (ACC/1979/R.69, paras. 27 and 28 and annex VII).
(18) At the 51st session the Committee also discussed suggestions that the standard formula for the currency of salary payments (see para. 16 above) might no longer be required in that form; it agreed that this matter was an important element in the conditions of service of field staff, and accordingly decided to ask CCAQ(PER) to ensure that it was drawn to the attention of ICSC with appropriate emphasis (ACC/1979/R.69, para. 26).
(19) At the 52nd session (March 1980: ACC/1980/16, paras. 27-29) CCAQ(FB) was informed that CCAQ(PER) had given agreement to revising the formula for the currency of salary payments to provide that the minimum amount payable in local currency would correspond to a percentage of net base salary plus post adjustment plus assignment allowance, and had invited CCAQ(FB) to determine an appropriate standard percentage figure. CCAQ(FB) considered that children's allowance should also be included in the entitlements for which a percentage would be approved, and fixed this percentage at 30 per cent. The resulting new formula was stated in the following terms:
Net base salary, post adjustment (including deductions for negative post adjustment), assignment allowance and children's allowance - a minimum of 30 per cent in the currency of the duty station and a maximum of 70 per cent in a single other currency.
(20) This formula was to be implemented as from 1 July 1980 or as soon as possible thereafter. Meanwhile UN and UNDP were to reconsider the status of each of the currencies to which country-wide exceptions had been applicable under the previous formula, in consultation with the secretariat of ICSC. The new country-wide exceptions would provide for obligatory payments of either 20 or 10 per cent of emoluments in local currency unless an emergency or security considerations intervened, but organizations were to retain the right to authorize individual or other exceptions on an ad hoc basis. UN and UNDP were also to provide a draft text for a note by which organizations might inform their staff of the new arrangements.
(21) At the 53rd session (September 1980) CCAQ reviewed implementation of the new standard formula and noted that it would be fully operational in October 1980 (ACC/1980/32, paras. 28 and 29).
(22) Also at the 53rd session, the Committee agreed to review arrangements in effect for the payment of repatriation grant and other entitlements accruing on separation from service, with a view to possible adoption of a common position. It requested its secretariat to submit a study of this question, taking account of the entitlements involved, any necessary distinctions between them, the currencies in which they arose, options for payments in different currencies and possible consequences for organizations and staff of changes in operational or market exchange rates where payments were made at rates different from those in effect on the date of separation (ACC/1980/32, para. 30).
(23) In the documentation submitted at the 54th session (March 1981) it was suggested that CCAQ should pursue consideration of two issues: the currency in which entitlements on separation from service were paid and the rate of exchange to be applied where the payments were made in a currency other than the currency of entitlement. It was noted that most organizations paid such entitlements in a second currency, and several organizations felt that in this case the operational exchange rate on the date of entitlement had a firmer legal base and offered fewer grounds for contestation than the rate on the date of payment (ACC/1981/10, paras. 28 and 29).
(24) At the 55th session (September 1981) the Committee agreed that the payment of non-local currency to locally-recruited staff was a question to be left to the discretion of individual organizations, which would make such payments only in exceptional circumstances. A paper by UNDP urging that the agreed procedure for the payment of installation allowance (see paras. (4) and (11) above) should be strictly applied was noted (ACC/1981/30, paras. 49 and 50).
(25) At the 56th session (March 1982) the Committee agreed that in future documentation underlying the recommendations of UN and UNDP on country-wide exceptions was to be provided to the Committee for information (ACC/1982/6, paras. 20 and 21).
(26) At the 56th session the Committee in addition noted reasons militating in favour of the use of non-convertible currency for salary payments in local currency where the latter was available in both convertible and non-convertible forms; it agreed after some discussion that the non-convertible form should be used whatever the authority responsible for payments (ACC/1982/6, para. 22).
(27) In further discussions at the 56th session, the Committee reverted to matters relating to the payment of entitlements on separation from service (currency used; rate of exchange applied in case of payment in a currency other than the currency of entitlement) (see paras. 22 and 23 above). It was noted that most organizations favoured making payment on request in a currency other than the currency of entitlement. There were arguments both for and against using the exchange rate of the statutory or recognized date of entitlement and the rate of the date of payment; here the practice lay within the discretion of individual organizations, which should however make their position clear in the appropriate administrative texts (ACC/1982/6, paras. 34 and 35).
(28) At the 57th session (September 1982) the Committee agreed that as a matter of procedure in future, the recommendations formulated by UNDP field offices were to take account of the views of the local representatives of other organizations (ACC/1982/25, paras. 26 and 27).
(29) It was confirmed at the same session that payments of third currencies (see para. 12 above) were made only on a voluntary basis, on the request of the staff member concerned, and that information on salary payments could be divulged to third parties only with the express authorization of the staff member (ACC/1982/25, paras. 28 and 29).
(30) Also at the 57th session, the Committee reviewed differences in practices with respect to salary payments in local currency. In this context, and given the measures taken by ICSC to accelerate the adaptation of post adjustments to changing exchange rates and actual and projected changes in price levels, it was agreed to abolish all salary payments at the commercial rate of exchange prevailing on the date of payment (see para. 10 above) as from 1 October 1982. The Committee also reaffirmed that the agreed standard formula for the currency of salary payments was intended to apply to all Professional staff. It was noted that the difficulties experienced by the regional office for the Americas of one of the organizations in adopting the standard formula were likely to be gradually overcome (ACC/1982/25, paras. 30-33).
(31) At the 58th session (March 1983) CCAQ agreed that all further decisions on changes in country-wide exceptions would specify an effective date (ibid. para. 24).
(32) Also at the 58th session, at the request of FICSA, the Committee reviewed the effect of the abolition of local-currency salary payments at the best prevailing market rate of exchange (see paras. 11 and 34 above) in Peru, where this measure had resulted in financial losses for staff. It was determined that the problem had stemmed from deficiencies in the functioning of the mechanism designed to ensure timely adaptation of post adjustment levels to the changing exchange rate. These deficiencies had now been remedied, and the exchange rate applied to salary payments in local currency in Peru was now in line with the rate used in determining post adjustments. A survey under way would show whether a country-wide exception to the standard formula for the currency of salary payments would be justified (ACC/1983/11, paras. 20-24).
(33) At the 59th session (September 1983) the Committee considered a proposal that the existing arrangements for the currency of salary payments should be reviewed. It accepted the proposal on the understanding that the personnel policy aspects of any change would need to be borne in mind. The CCAQ secretariat was requested to prepare, in consultation with some of the organizations, proposed terms of reference and background material for a working party that might be convened to study the matter in detail, taking account of issues raised during the Committee's discussion (ACC/1983/21, paras. 27-29).
(34) At the 60th session (March 1984), following up on the proposal referred to in paragraph 33 above, CCAQ(FB) approved terms of reference, based on those agreed by CCAQ(PER), for a CCAQ(FB) Working Party on the Currency of Salary Payments, which was to meet following the 1984 session of the UNDP Governing Council. Background documentation for the Working Party was noted. In order that the Working Party might ascertain the impact of salary-payment arrangements for international staff on holdings of local currency in the system, UNDP was requested to draw up a list of currencies for consideration and to suggest organizations to be asked to report on their 1983 receipts and expenditures in the currencies selected after the list had been cleared by correspondence. On the basis of the data supplied by organizations, the secretariat was to constitute and circulate the financial data (ACC/1984/10, paras. 23-26).
(35) At the 61st session (September 1984) the Committee approved the recommendation of the Working Party that the present salary-payment arrangements for Professional staff, providing for four categories of duty stations (those where minimum obligatory local-currency payments amounted respectively to 30, 20, 10 or zero per cent of total emoluments) should be maintained, but that the use of the zero per cent category should be extended to cover all duty stations where the local currency was regarded as fully convertible. It was understood that staff assigned to zero per cent (convertible currency) locations would be entitled to payments of a percentage of their emoluments in local currency if they so desired, subject to existing rules on the frequency of changes in payment instructions, and that no facility for the conversions of local currency balances would be offered to staff on their departure from such locations. These arrangements would be implemented as from 1 January 1985. For the purpose of the arrangements, a list of currencies regarded as fully convertible would have to be kept under continuing review. UNDP was to assume responsibility for this review in consultation with the Treasurers of other organizations, CCAQ being asked to decide in cases of serious disagreement. Additions to or deletions from the list were to be communicated to members of CCAQ through its secretariat. The Committee was to keep itself informed of experience under the revised arrangements starting at its first regular session of 1985 (ACC/1984/17, paras. 35-40).
(36) As regards subsidiary questions relating to the revised arrangements, it was agreed that:
(a) Organizations should make more extensive use of UNDP holdings of local currencies;
(b) For the success of the arrangements, operational exchange rates would have to follow market rates as closely as possible;
(c) UNDP would be as responsive as possible to urgent requests for more liberal country-wide exceptions. CCAQ would no longer approve, but would simply note, action taken under the between-session authority delegated to UN and UNDP to increase proportions of payments in convertible currencies (see para. 18 above);
(d) UNDP, in consultation with UN, was to study the practical and potential implications of payments in convertible form where dual local currencies existed;
(e) All organizations, including UNDP, should benefit from any savings which would result from simplified salary-payment procedures and reduced handling of local currencies (ACC/1984/17, para. 41).
(37) The position as regards implementation of the revised arrangements was reviewed at the 62nd session (March 1985). As the standard circular through which staff were to be advised of the arrangements had become available only in mid-February, it was agreed that the implementation date, originally set at 1 January 1985 and subsequently changed to 1 April, should now be fixed at 1 June 1985. It was noted, however, that one organization had already arranged for implementation on 1 April (ACC/1985/7, para. 36). The Committee also noted observations put forward by UNDP, as requested (see para. 36(d) above) on the practical and potential implications of payments, where feasible, in convertible form where dual currencies existed. These observations, which centred upon problems relating to the receipt, deposit and utilization of contributions to UNDP, supported the current practice of making payments in dual currencies in the non-convertible form (ibid., paras. 37-39).
(38) At the 63rd session (September 1985) the Committee noted information provided by its members on the implementation of the revised arrangements. It reaffirmed the importance of observance of agreed salary-payment arrangements by all organizations (ACC/1985/17, paras. 27-29).
(39) At the Committee's 67th session (September 1987) it was noted that UNDP had deleted Suriname from the list of countries whose currencies were regarded as fully convertible for the purpose of payments of salaries and allowances (see para. 35 above) (ACC/1987/12, para. 22).
(40) In March 1988 a joint meeting of CCAQ(PER) and CCAQ(FB) discussed the access of locally-recruited staff to foreign currency, and concluded that exceptions to the normal procedure (whereby such staff are paid in the currency of the duty station) (i) could be authorized under the existing special measures provided for in the non-headquarters salary survey methodology, whereby local staff could be paid in hard currency or allowed access to purchases in hard currency (ii) might be authorized in individual cases by an agency, either for official travel of at least one week outside the country or for medical expenses incurred in hard currency outside the duty station. The full text of these decisions is in the report of the joint meeting (ACC/1988/6, paras. 7-11).
(41) At the 70th session (March 1989), on the question of arrangements for converting currency holdings of international staff leaving field duty stations, the Committee confirmed its agreement of 1984 (see para. (35) above) that such facilities should not be provided in countries whose currencies were considered fully convertible for the purpose of salary payments; they could, however, be provided in countries with currencies not regarded as fully convertible but where, in the light of prevailing economic conditions, 100 per cent of emoluments was paid in convertible currency (ACC/1989/7, paras. 39-41).
(42) At the 71st session (September 1989), following representations by UNDP and in consultation with the Executive Secretary of ICSC, the Committee agreed that from 1 October 1989 use of the operational (as opposed to the tourist) exchange rate to calculate post adjustment multipliers for Brazil would be resumed, along with the normal currency distribution of salary payments. It also recommended a review of DSA rates in all countries with tourist rates of exchange. The Committee agreed that the level of accumulated currency holdings in the system should have no bearing on the currency distribution of salary payments (ACC/1989/15, paras. 47-50).
(43) As part of arrangements for implementing the new mobility and hardship package approved for the Professional and higher categories in General Assembly resolution 44/198, CCAQ(PER) at its 72nd session (February-March 1990: ACC/1990/4, para. 52) expressed the view that the DSA portion of the assignment grant should normally be payable in local currency and the lump sum in convertible currency. At the same time the Committee agreed to invite CCAQ(FB), in consultation with it, to reconsider existing currency-of-payment arrangements as a whole. CCAQ(FB) agreed to the suggestion on the assignment grant, subject to some exceptions consistent with the present published arrangements; it considered the possibility of a broader review of currency-of-payment arrangements, but decided that such action was not essential at the present time (72nd session, March 1990: ACC/1990/5, paras. 28-30).
(44) At the 74th session of the Committee (March 1991) UNDP, which had been studying the potential impact on its currency holdings of 100 per cent payments in convertible currency to international staff at all duty stations (ACC/1990/12, para. 34), confirmed that its findings would not permit it to support such a change (ACC/1991/6, para. 38).
(45) At its 74th session (March 1991) CCAQ(PER) agreed to revert at a later session to the question of whether some staff entitlements should continue to be denominated in US dollars (ACC/1991/5, paras. 160-162; see also section 4.4).
(46) At the 75th session of the Committee (September 1991) UN and UNDP reported that with effect from 1 September 1991 Turkey had been added to the list of developing countries whose currencies were regarded as fully convertible (ACC/1991/18 and Corr.1, paras. 44-46).
(47) At CCAQ(FB)'s 80th session (February - March 1994), UN and UNDP reported that Costa Rica had been added to the list of developing countries whose currencies were regarded as fully convertible (ACC/1994/5, para. 39).
(48) At CCAQ(FB)'s 81st session (August - September 1994), UN and UNDP reported that Zambia had been added to the list of developing countries whose currencies were regarded as fully convertible (ACC/1994/15, para. 27). At the same session, a number of participants were of the opinion that the reasons for which the standard formula were set up might no longer exist. CCAQ(FB) accordingly requested its secretariat to look into the implications of abolishing the standard formula and to report at its next session (ibid., para. 29).
(49) CCAQ(FB), at its 82nd session (February 1995), was informed that the ICSC had indicated that abolishing the standard formula would have no impact on the post adjustment and that CCAQ(PER) had no objections to the action from a personnel policy point of view. It accordingly decided to abolish the standard formula with effect from 1 April 1995. Realizing that the standard formula was closely linked to the issue of convertibility of local currency upon departure of staff member from a duty station, CCAQ(FB) decided to review this matter at its next session (ACC/1995/6, paras. 5 - 8). Further consideration of this issue is to be found in Section 18.4E.
(50) At its first meeting in June 2001 (ACC/2001/HLCM/7, para. 16) the Human Resources (HR) Network noted that the introduction of the Euro raised concerns for comprehension in respect of the converted Euro rates. With the move out of different currency rates in the countries of the European Union, it was anticipated that staff members who were not familiar with the methodologies and rationale for setting these rates could have difficulty understanding why – for example – the children's allowance for those serving in one country had become 1730 Euros, in another neighbouring country it would be 2321 Euros. It was therefore important that adequate information be made available to staff members and the Network suggested that the two secretariats work together to produce explanatory texts. The Commission decided to recommend to the General Assembly and organizations as of 1 January 2002: (a) that the euro should be used as the official currency for those emoluments which were currently set in the national currencies of the 12 euro-zone countries, the national currency amounts being converted by applying the respective fixed conversion rates and then rounded up or down to the nearest euro; (b) converted euro values for the education grant for 9 currency areas and for the children's and secondary dependants allowance at nine locations; and (c) that the respective General Service salary scales and allowances should be converted on the same basis as in (a) above (A/56/30, para. 86). The Assembly approved the recommendation (resolution 56/244 I B).
(51) At its February 2005 meeting (CEB/2005/HLCM/8, para. 20) the HR Network expressed its appreciation to UNICEF for its initiative in raising the question of access to hard currency by locally recruited staff for education of dependent children abroad and recalled that access to hard currency was currently provided for local staff for the purposes of official travel and medical expenses. It further recalled that in 1988, CCAQ(PER) and CCAQ(FB) had taken the decision not to provide similar access for the purpose of educating children abroad. It agreed to establish an informal open-ended working group, to be convened by UNICEF, to study the matter further and provide additional information about the purpose and the implications of the proposal. The working group would work virtually. It was emphasized that any proposal on the matter would also need to be submitted to the FB Network
(52) In response to the ILO Administrative Tribunal judgement, which had established the ‘last income’ method as the only acceptable method for calculating US tax reimbursement, CEB/2006/HLCM/29 had been prepared. At its sixth session in August 2006 (CEB/2006/HLCM/34, paras.93-97), the FB Network took note of its analysis and recommendations and agreed that those organisations which had ‘first income’ Tax Reimbursements Agreements (TRA) would appoint the IAEA as the lead organisation to negotiate with the US on, inter alia, the following issues:
o A new, uniform, system-wide Tax Reimbursement Agreement based on the ‘last income’ method.
o Reimbursement of the taxes paid on contributions to a Provident Fund.
o Reimbursement of taxes paid by staff members funded by voluntary contributions.