2013 REVIEW OF STAFF COMPENSATION FOR THE ......offices, this year, the HQ salary structure is...

CONFIDENTIAL

2013 REVIEW OF STAFF COMPENSATION FOR THE WORLD BANK GROUP

July 16, 2013

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wb20439Typewritten Text79651

2 THE WORLD BANK GROUP

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THE WORLD BANK GROUP 3

GLOSSARY

Bank Group or WBG

The World Bank Group (WBG) consists of the International Bank for Reconstruction and Development (IBRD or the Bank), International Finance Corporation (IFC), Multilateral Investment Guarantee Agency (MIGA), International Development Association (IDA) and International Center for the Settlement of Investment Disputes (ICSID).

Country Office (CO) Staff

For purposes of this paper, country office staff refers to locally-recruited staff in all locations outside of Washington (country offices, satellite offices, shared service offices in Chennai, India, etc.)

HR or HRS Human Resources Vice Presidency Market

Reference Point (MRP)

The point in the World Bank Group’s salary ranges which is broadly aligned with the 75th percentile of salaries at comparable levels in the respective local labor markets.

Performance-Based Salary

Increase (PBSI)

The sum of structure adjustment and salary progression adjustment. The PBSI will be distributed through the merit increase matrix based on performance and position in range.

Salary Progression Adjustment

(SPA)

A component of the PBSI that would help facilitate movement or progression of staff within their respective ranges and also partially address erosion of aggregate salaries relative to market, created by continuous changes in the staffing mix.

Salary Review Increase (SRI)

This is the Bank Group’s individual rating system based on staff contribution (ranging from a rating of 2.2 for unsuccessful up to a rating of 5 for outstanding) used as basis to allocate individual salary increases.

Salary Structure or Salary Scale

The set of salary ranges established for various grade levels. At the World Bank Group, the salary structure or salary scale has 11 salary ranges from GA to GK.

Structure Adjustment

Aligns the salary scales with the increases in labor market salary levels. This refers to the weighted average percentage increase resulting from aligning the market reference points to the new market values. For purposes of this paper, structure adjustment also refers to the budgeted salary increase.

Supplemental Merit Increase

(SMI)

The salary increase pool allocated for top performers (those with SRI or performance rating of 4 or 5). This is a non-budgeted salary increase pool in addition to PBSI.

Total Merit Increase (TMI)

The amount authorized for distribution to World Bank Group staff members, expressed as a percentage of current aggregate annual net salaries. This represents the sum of the PBSI and the SMI.


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TABLE OF CONTENTS

I. INTRODUCTION _________________________________________________________________ 7

II. STRATEGIC OBJECTIVES AND CONTEXT _______________________________________ 8

III. STRUCTURE ADJUSTMENT AND BUDGET IMPACT ___________________________ 11

IV. BUDGET NEUTRAL SALARY INCREASES _______________________________________ 13

V. NON-SALARY PROGRAMS_____________________________________________________ 14

VI. SUMMARY OF RECOMMENDATIONS _________________________________________ 17

TABLES Table 1: WBG Recognition Programs ____________________________________________________________ 14 Table 2: IFC Performance Awards Programs _____________________________________________________ 15 Table 3: July 1, 2013 Washington/HQ Salary Structure ___________________________________________ 18 Table 4: Market Reference Points Year-on-Year Comparison – Washington/HQ ___________________ 19 Table 5: FY13-FY14 Structure Adjustments and Total Merit Increases by Location _________________ 20 Table 6: FY14 WBG Budget Impact of Structure Adjustments _____________________________________ 24 Table 7: Salary Progression Adjustment _________________________________________________________ 25

ANNEXES Annex A: July 1, 2013 Salary Structure for Washington-Appointed Staff ___________________________ 18 Annex B: FY13 Retrospective & FY14 Recommendations-WBG Offices Outside Washington _______ 20 Annex C: WBG Budget Impact of FY14 Structure Adjustments for Washington & Country Offices __ 24 Annex D: Salary Progression Adjustment Methodology __________________________________________ 25 Annex E: Supplemental Merit Increase Methodology ____________________________________________ 26 Annex F: Planned Programs and Total Compensation Reviews ___________________________________ 27 Annex G: Distributing Increases Based on Performance and Position in Range ____________________ 28 Annex H: Scarce Skills Premium for Washington/HQ and Satellite Offices _________________________ 29 Annex I: Multidimensional Competitiveness Index _______________________________________________ 30


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I. INTRODUCTION

1. This paper presents the results of the 2013 review of World Bank Group (WBG) staff compensation. The objective of this paper is to seek Board approval (i) for the 2013 (FY14) structure adjustments for WBG Washington-appointed staff and country office staff, and (ii) to set aside funds for the FY14 non-salary programs. 2. This year’s (FY14) compensation review is the result of the application of the indexation methodology under the multi-year review process, approved by the Board on February 8, 2011. Following the 2012 comprehensive market review for HQ and country offices, this year, the HQ salary structure is adjusted using published projected market pay increases. For country offices, reviews are performed through a combination of approaches: an indexation approach for most locations, and comprehensive reviews for locations where local labor market or economic movements are dynamic or fragile.1 3. The recommendations in this paper are in line with key principles agreed during the 2011 comprehensive review of the different compensation elements. The agreed compensation guiding principles are:

a. Continue to be market competitive to attract and retain global top talent b. Maintain a rules-based framework for governing decisions on salary

adjustments c. Be simple, easy to understand and administer d. Remain fiscally prudent and consistent with medium- to long-term budgetary

requirements e. Further differentiate rewards according to performance

4. This paper is organized into the following sections: a. Section II highlights the strategic objectives and context. Section III presents the

structure adjustment results and the associated price adjustment factor that is an input to the Bank Group’s real budget. Sections IV and V present the budget neutral salary adjustments, and non-salary programs, respectively. Finally, Section VI summarizes management recommendations to the Board.

b. Additional information is provided in the annexes.

1 For fragile, volatile and very dynamic labor markets, annual comprehensive market analysis may be required or in some cases more frequent reviews may be conducted (e.g. countries where there is significant change in the local labor market due to entry or restructuring of a major industry or sector, where annual inflation has exceeded 20%, or where recent major economic changes have caused significant instability in the local market).


II. STRATEGIC OBJECTIVES AND CONTEXT 5. The World Bank Group aims to position itself as an employer of choice in labor markets where it competes for talent. As the premier development institution worldwide, it offers a positive employment value proposition (EVP) including a highly compelling mission, wide international presence and reputation, attractive compensation and benefits, a highly diverse workforce and a dynamic and intellectually challenging work environment. 6. In the recent global financial and economic crisis, the WBG has demonstrated its ability to leverage and deliver substantial financial resources, and to rapidly mobilize global knowledge and expertise to serve its client needs. The client demands were huge and the volume of work was overwhelming. The World Bank Group was able to respond by delivering swiftly and flexibly to the client countries using innovative approaches, a worldwide network, and a dedicated and skilled workforce. 7. The Bank Group now faces a historic opportunity to develop a new World Bank Group Strategy. This strategy aims to accelerate development through synergies across the organization, and position the WBG as a dynamic institution in the context of the changing development landscape and evolving client needs. The new WBG Strategy will focus on the twin goals of ending extreme poverty and boosting shared prosperity, and exercise dynamic selectivity in serving its clients’ diverse needs. The Bank Group has started communication and engagement with various stakeholders on the key elements of the strategy, with management seeking endorsement from the Governors in the fall. 8. As part of implementing the new WBG strategy, Management sees the compensation discussion in the context of broader HR reforms, including a package of additional measures to achieve greater efficiencies and better support the business. 9. To create an integrated service delivery to better serve the business, the WBG is deepening synergies across the IBRD and IFC support functions under a new World Bank Group Integrated Services (WBGIS) organization. This will leverage best practices from both organizations in the areas of Human Resources (HR), External and Corporate Relations (ECR) and Information and Technology Solutions (ITS). The effective integration date for HR is October 1, 2013. 10. Under the new WBGIS, a “one World Bank Group” HR function will support and align with the new WBG Strategy. In line with this integration is the harmonization of HR policies and practices, and among the important HR programs on the agenda are to:

a. Introduce a variable pay program for IBRD staff. Aimed at increasing performance-orientation and accountability among staff, this program will be the foundation for measuring and rewarding short term (annual) achievement of business unit and individual objectives (see Annex F for more details);

b. Commence the implementation of narrow banding (creating sub-grades) within the current broad grades by recognizing professional growth through in-grade progression or expansion of promotional opportunities within the broad grades. The narrow banding for the new WBGIS Group (ITS, ECR and HR job families), in light of the IBRD and IFC integration, can be a template for future narrow banding initiatives in other job families. Details on the narrow banding process are still being developed.

11. As the WBG pursues a new strategy, the need for a positive EVP is even more critical in attracting, engaging and retaining diverse key global talent. Like any organization operating with a global workforce, there is also an ongoing need across the WBG to continually address competitiveness issues within key functional areas, and among senior managerial and highly


technical positions. Over the years, there have been questions within the different functional areas, senior managerial or technical roles, and across the WBG organization units, regarding the current state of the WBG’s competitiveness. Managers point to a candidate pool that is no longer as attractive as before, increased offer rejections, and the “flight” of talent to the regional development banks, other international organizations and the private sector (such as finance, oil and gas, energy). Examples of key functions where attraction and retention issues are critical are development economist jobs specifically in the research group, treasury functions, and IFC’s investment and core finance functions. 12. To address competitiveness issues related to critical global talent, it is an important business requirement for additional tools to be considered in key areas. Accordingly, the WBG will:

a. Explore the possibility of introducing functional pay within IFC. A comprehensive review of the Bank Group’s total compensation mix (base salary and variable pay components) will be undertaken to examine the alignment of pay and reward on a functional basis vis-a-vis the external market for particular functional or businesses areas within IFC; depending on the outcome of the review and if separate pay policies would be needed and deemed appropriate, then this may be initially introduced on a pilot basis for IFC’s Investment and Core Finance functions (see Annex F for more details);

b. Extend the scarce skills premium (SSP) to Washington/HQ and satellite office staff. Currently offered to individuals with critical and scarce skills in country offices, extending the SSP to Washington and satellite offices will provide the business with an individual-based compensation tool to attract and/or retain staff at key senior managerial or highly technical positions; the SSP is intended for use when business needs call for recruitment or retention of critical skills to support the mission of the organization, especially in cases where attraction of the needed skills through global recruitment efforts have proved unsuccessful (such as key senior positions in finance and treasury functions). Annex H provides a summary of the SSP.

13. To take stock of the impact of these ongoing changes, there is a need for a holistic view of the WBG’s competitiveness as an employer. Thus, a Multidimensional Competitiveness Index (MCI) is currently being developed to expand the competitiveness discussion beyond compensation and benefits. While there is a current methodology for measuring compensation competitiveness (through the annual compensation reviews), a more holistic and expanded measure is needed to assess competitiveness from candidate attraction, to staff engagement and ultimately to retention across the various components of the EVP. Today, there is no methodological approach to validating perceptions or measuring overall competitiveness across the organization consistently, and over time. The Multidimensional Competitiveness Index is envisioned to capture the experience of staff throughout the employment life cycle and will evaluate whether the employment experience of staff over time is consistent with expectations held upon joining the organization. Annex I provides a summary of the MCI study. 14. The annual compensation market reviews will continue to be conducted as a measure of competitiveness. The MCI will not replace but rather supplement this existing measure. In addition, the Quadrennial Benefits Survey (QBS), a study which is conducted jointly with the International Monetary Fund (IMF) and is scheduled in 2013, may be revisited by management in terms of its scope, role and timing, given that the WBG is still working on the multi-year benefits reforms resulting from the 2009 QBS. Management would like to defer the next QBS to FY15, after the benefits reforms have been implemented. The ongoing multi-year comprehensive compensation and benefits review and the resulting reforms, further support WBG’s goal of being an employer of choice by: (a) balancing competitiveness and financial


sustainability, (b) achieving greater alignment with changing business needs and staff demographics, and (c) modernizing and simplifying its compensation and benefits programs. 15. As the Bank Group gradually completes its comprehensive compensation and benefits review, a new total compensation deal will emerge. The new “deal” will be characterized by shared risks and opportunities in improving WBG’s organizational effectiveness. It will include simplified and modernized compensation and benefits programs, and greater diversification of rewards for segmented groups / individuals within the WBG. The new total compensation deal is expected to drive increased levels of performance, accountability, flexibility and agility in support of changing business needs.


III. STRUCTURE ADJUSTMENT AND BUDGET IMPACT 16. This paper presents the proposed FY14 structure adjustments in percentage terms and estimated U.S. dollar values. The structure adjustment impacts the total wage bill (this pertains to salary and salary-related benefits2 which is estimated at US$ 1.6 billion for the Bank Group for HQ and country offices). The details pertaining to the U.S. dollar value of the FY14 structure adjustments budget impact are presented in Annex C. 17. The proposed FY14 structure adjustment, which is the budgeted salary increase, is 2.0% for Washington-appointed staff at Grades GA-GI. Country-by-country structure adjustments covering 134 WBG offices, based on the respective 2013 local labor market salary movements, are provided in Annex B. The structure adjustments will be used as input in determining the Price Adjustment Factor3 for FY14 and will be distributed to staff based on performance and position in the salary range. 18. The FY14 structure adjustments are calculated using an indexation formula consisting of average market pay increases in the public and private sectors.

a. Washington-appointed staff. Following the established Board-approved indexation methodology, the 2.0% structure adjustment for Grades GA-GI reflects the combined effect of (i) zero public sector movement4, and (ii) a 3.0% private sector movement.5 Annex A provides the FY14 salary structure.

b. Also, in line with the established Board-approved methodology, the salary ranges for grades GJ and GK are updated by the May 2012 to May 2013 Consumer Price Index (CPI) movement for the Washington-Baltimore area. While their salary ranges are adjusted based on CPI movement, the actual individual salary increases for staff in grades GJ and GK are subject to the same merit increase matrix based on performance and position in the salary range.

c. Country office-appointed staff. The structure adjustment for each country office is determined either by: (i) indexation using the 2013 average market pay increases from a mix of public and private market sector comparators, and provided by external survey consulting firms in each respective local market, or (ii) a comprehensive market review for very dynamic or fragile markets. A summary of the results by WBG location is provided in Annex B.

2 Salary-related benefits cover such benefits as staff retirement plan, insurance benefits, leaves, mobility premium, education grant. Benefits which are not impacted include extended assignment benefits and some country office-specific benefits, among others. 3 As the budget funds both salary and non-salary costs, the price adjustment is comprised of four parts: (1) the salary costs of the Washington-appointed staff, (2) other Washington costs, (3) the salary costs of country office (non-Washington) staff and (4) other country office (non-Washington) costs. The composite adjustment is derived by weighting each part in proportion to the relative size of the total costs in the budget. The overall “price factor”, and the resulting nominal FY14 net administrative expenditure budget, will be presented in the FY14 budget documents for IBRD/IDA, IFC and MIGA. The price adjustment for salary-related components (salary costs for Washington-appointed staff and salary costs for country office/Non-Washington appointed staff) is based on external labor market compensation increases, as captured by the structure adjustment. 4 The public sector component (1/3 weight) for Washington-appointed staff is based on zero movement for the U.S. Civil Service. This follows a two-year freeze in civil service pay (other than step increases and promotion increases) started in 2011.The 2013 approved salary scale is published at www.opm.gov. The WBG indexation methodology is similar to the IMF indexation formula (although with different weights). The FY14 IMF structure increase (budgeted salary increase) is 1.5 % plus an additional allocation for skills upgrade. 5 The private sector component (2/3 weight) for Washington-appointed staff is based on the 2013 forecast from the annual salary budget surveys for a broad cross section of U.S. companies. Sources: WorldatWork (3.0%), AonHewitt-McLagan (3.0%) and Towers Watson (3.0%).

http://www.opm.gov/


19. All salary increases continue to be totally performance-based. The Washington/HQ structure adjustment will be distributed based on performance and position in the salary range to each of approximately 8,400 staff. Similar to Washington/HQ, the structure adjustments for offices outside Washington (country offices, satellite offices and shared service centers) will be distributed to approximately 5,300 staff in 134 locations (details are provided in Annex B) based on performance and position in range. 20. While the next compensation review cycle (FY15) is scheduled for another application of the indexation methodology for Washington/HQ, the Bank Group may need to conduct a comprehensive and holistic view of the market in order to consider any possible changes resulting from the ongoing tax policy review. The Bank Group is currently reviewing its tax policies across the various compensation and benefits programs (netting down of gross salaries to arrive at net salaries, dependency allowance, taxes on individual salaries for US citizens, tax supplement on pension, disability tax allowance and estate tax protection program). In view of the tax policy review, management may consider a comprehensive compensation survey for next year, instead of the scheduled indexation approach for FY15.


IV. BUDGET NEUTRAL SALARY INCREASES 21. The compensation system approved by the Board on February 8, 2011 provides for two budget-neutral salary increase components: (a) salary progression adjustment, and (b) supplemental merit increase. Both are non-budgeted salary increase envelopes and absorbed within the real flat budget envelope. Annexes D and E summarize the Board-approved methodology on these components. 22. Washington-appointed staff. The total Washington/HQ budget neutral salary adjustment is 1.4%. The non-budgeted salary increases can be compared with step increases (typically tenure-based) provided by the public sector in most countries, with the difference that the WBG increases are fully performance-related. 23. Country office-appointed staff. The total budget-neutral salary increases in country offices are calculated by applying the same methodology used for determining non-budgeted salary increases for Washington-appointed staff. Annex B provides country-by-country non-budgeted salary increase envelopes. 24. All staff salary increases are merit-based. No cost of living increases or automatic increases are provided. Individual pay increases will continue to be based on individual performance and position in their salary range (see Annex G for Distributing Increases Based on Performance and Position in Range).


V. NON-SALARY PROGRAMS 25. Funds for Non-Salary Awards Programs. In line with previous years, management recommends setting aside funds for non-salary awards programs (as non-budgeted component). The Non-Salary Awards Programs can be categorized into (a) Recognition Programs; and (b) Performance Awards.

26. WBG Recognition Programs. Table 1 shows the cost breakdown for recognition programs by organization.

Table 1: WBG Recognition Programs

IBRD/IDA IFC MIGA Total Type of Program (a) (b) (c) (a+b+c)

Spot Awards (US$ '000)

610.0

160.0

4.4

774.4

VPU Team / Director's Awards (US$ '000)

1,740.0 N/A

228.0*

1,968.0

Total Recognition Programs

2,350.0

160.0

232.4

2,742.4

Note: * For MIGA, the US$228,000 total amount is the sum of US$180,000 Director's Award plus US$48,000 MIGA annual performance awards budget.

A summary of the WBG recognition programs is provided below. Additional description is summarized in Box 1 under paragraph 30. a. WBG Spot Awards. Across the three organizational units, the proposed spot

awards budgets for 2013 (FY14) will remain the same as in 2012 (Table 1). b. IBRD VPU Team Awards. The proposed 2013 IBRD VPU Team Awards will be

maintained at 2012 budget amount of US$ 1.74 million. c. MIGA EVP Team Awards and Directors’ Awards. MIGA proposes to refine the

implementation of its recognition programs as follows: (i) to continue the MIGA Executive Vice President (EVP) Team Awards program to recognize the importance of teamwork and the quality of both guarantee and non-guarantee projects, with no monetary component (the awarded teams would receive a commemorative plaque at a reception to be hosted by the Executive Vice President); (ii) to complement the MIGA EVP Team Awards, a Director’s Awards program would be introduced to recognize: innovative work, working across boundaries, exemplary teamwork, and sustained efforts exceeding expectations (see Box 1 for MIGA Director’s Awards). At the same time, MIGA proposes to discontinue its annual performance award program (with last year’s budget of US$48,000) and fold the amount into the MIGA Director’s Award. Therefore, for 2013 (FY14), MIGA proposes to allocate a total Director’s Award of US$228,000 (last year’s EVP Team Awards budget of US$180,000 plus last year’s annual performance award budget of US$48,000).


d. IFC Smart Lessons. Smart Lessons is a cash recognition program for contributions to knowledge sharing in advisory services and investment operations.6

27. IBRD Annual Performance Awards Program. The Bank provides annual performance awards to certain staff groups based on defined guidelines and eligibility requirements. The Bank’s Finance Complex proposes to continue its annual performance award program. For 2013 (FY14), management proposes a budget of US$ 1.178 million. 28. IFC Annual and Long-Term Performance Awards Programs. IFC proposes a total performance awards budget of US$ 15.8 million for FY14 covering its annual and long-term performance awards. 7 The table below provides the FY11 to FY14 IFC award budgets as a percentage of IFC wage bill to provide historical context for these programs.

Table 2: IFC Performance Awards Programs

FY11 FY11

Item FY14 FY13 FY12

(Revised with 30%

Cut*) (Original)

Performance Awards (US$ '000) 15,800 12,198 10,904 11,180 14,982 Awards as a % of IFC Wage Bill 2.6% 2.1% 2.0% 2.3% 3.0%

Note: * IFC award programs were suspended in FY09 due to the financial crisis and had a 30% reduction in FY11. Additionally, in FY11, 0.2% of IFC Wage Bill was allocated to the awards budget in lieu of the market premium program which was eliminated in FY10.

29. IFC has a portfolio of integrated non-salary monetary award programs, which serves as a pillar of a performance-based culture. The IFC portfolio of awards programs serves the following purposes: (i) reinforce the link between the achievement of goals and rewards; (ii) provide the necessary tools to reward for various types of performance, whether at the individual, team and/or specific project level; (iii) differentiate for top performers (iv) incentivize, recognize and reward performance over multiple time periods (these time periods include short-term of less than 1 year, annual, and long-term ranging from 3-8 years); (v) partially close the gap between the market pay levels and staff pay levels, specifically for investment and core finance staff. IFC’s monetary award programs include:

a. Annual Performance Awards. This program recognizes sustained outstanding performance at the individual or team level during the performance review year. These awards are directly linked to the annual performance rating (SRI rating) and include a Scorecard Award component for Investment Departments that meet their Scorecard targets. Consistently, 36% of IFC’s population receives a performance award annually.

b. Corporate Awards: Granted by the IFC Management Team, this program rewards team projects and/or initiatives with significant and lasting impact for IFC and its clients, and includes targeted awards that emphasize key priorities such as projects in Fragile and Conflict Affected Countries and South-South Transactions.

6 Budget for the Smart Lessons award program is insignificant, and has not been included in Table 1. 7 For details of IFC’s Variable Pay Programs, please refer to the Board paper on Review of Compensation Elements of the

World Bank Group, Annex F, IFC’s Variable Pay Program Overview, December 1, 2010 (HRC2010-0018).


c. Long-Term Performance Awards. This program provides rewards at both the individual and team level. The New Business Award (performance of 5 to 8 years ago) and Portfolio Supervision Award (3 to 5 years ago) reward sustained performance over several years.

30. A summary of the WBG recognition awards programs across the organizational units is provided in Box 1 below.

Box 1: Description of WBG Recognition Programs

WBG Spot Awards (IBRD/IDA, IFC and MIGA). The Bank Group grants spot awards as a means of recognizing and expressing appreciation for the special efforts of staff. The awards may be up to US$400 and may be granted at any time during the year. Staff members may receive multiple awards, awards may be given to teams as well as individuals and they may cross organizational boundaries within the WBG. The number of awards is limited by the size of the individual awards, the available budget and the number of staff meeting the criteria.

IBRD/IDA VPU Team Awards. The VPU Team Awards enable each vice presidency to recognize and reward a limited number of teams, based on criteria that reflect business priorities. The awards vary in amount from US$400 to US$2,000 per recipient, subject to a cap of 5% of the MRP of the recipient’s grade. A nomination and review process is used to select the teams to be recognized.

MIGA EVP Awards. MIGA’s EVP Awards will acknowledge – in a non-monetary way – outstanding teams that have contributed to institutional or operational results, with criteria such as responsiveness, innovation, client orientation and development impact. Nominations to the EVP and VP awards will be guided by a detailed set of criteria. The awarded teams would receive a commemorative plaque at a reception to be hosted by the Executive Vice President.

MIGA Director’s Awards. In order to recognize extraordinary work and special contributions during the year, Management has complemented the EVP/VP Awards with the Director’s Awards. Departmental Directors will award and acknowledge outstanding, beyond-the-call-of-duty, operational, work across-boundaries, exemplary teamwork, departmental or institutional contributions.

IFC Smart Lessons. IFC’s Smart Lessons Award Program forms part of several integrated components: annual performance programs, Corporate Awards, recognition programs (Smart Lessons and Spot Awards), and long-term performance awards programs. The IFC Smart Lessons recognizes contributions to knowledge sharing in advisory services and investment operations.


VI. SUMMARY OF RECOMMENDATIONS 31. Management requests that the Executive Directors approve the results of the rules-based methodology, with the understanding that future interaction around compensation will occur in the context of the ongoing reforms, the new HR initiatives, and the broader discussion around workforce architecture and strategic staffing. 32. The Executive Directors are requested to approve the proposed structure adjustment and budgeted salary increase of 2.0% for Washington-appointed staff and the country-by-country structure adjustments covering 134 WBG office locations as provided in Annex B. The total estimated World Bank Group budget impact of the structure increase(s) in Washington/ HQ and offices outside Washington is presented in Annex C. 33. The remaining components of the total merit increase envelope (salary progression and supplemental merit increase) will be absorbed within the real budget envelope. The Total Merit Increase envelope will be distributed based on performance. 34. Management also recommends allocating, from within its net administrative budget, the following funds for non-salary programs:

a. US$ 2.742 million for the WBG FY14 recognition programs (includes the WBG spot awards, the IBRD VPU Team Awards, and MIGA Directors’ Awards);

b. US$ 1.178 million for the IBRD annual performance awards program; and c. US$ 15.8 million for IFC’s annual performance and long-term performance

awards programs.


Annex A: July 1, 2013 Salary Structure for Washington-Appointed Staff

35. The proposed July 1, 2013 annual net salary structure for Washington-appointed staff is shown in the table 3 below.

a. Grades GA to GI salary ranges and market reference points (MRP) are adjusted based on the structure adjustment of 2.0%.

b. For grades GJ and GK, the Board-approved methodology is to adjust the minimum, market reference point (MRP) and maximum levels for these grades by the May-to-May Washington-Baltimore Consumer Price Index (CPI) movement. 8 On June 18, 2013, the United States Bureau of Labor Statistics reported that the May 2012 to May 2013 Washington-Baltimore CPI was 1.2%. However, individual salary increases of GJ and GK staff are not adjusted by the CPI movement but rather are based on individual performance and position in the new range using the same merit increase matrix as for all other staff.

Table 3: July 1, 2013 Washington/HQ Salary Structure

WBG Grade

Staff Count

(#) Minimum

(US$)

Market Reference

Point (US$) Maximum

(US$)

Salary Range

Width* MRP

Progression** GA 1 25,600 33,300 43,200 69% GB 30 32,300 42,000 58,900 82% 26% GC 791 39,900 51,900 72,700 82% 24% GD 669 47,100 61,300 85,900 82% 18% GE 749 63,300 82,300 115,300 82% 34% GF 1,491 84,200 109,400 153,200 82% 33% GG 2,757 113,500 147,600 206,600 82% 35% GH 1,643 154,700 201,100 260,000 68% 36% GI 256 206,200 269,800 309,400 50% 34% GJ 34 280,000 313,700 351,300 25% 16% GK 8 307,600 348,800 383,600 25% 11%

* The salary range width is the percentage by which the maximum exceeds the minimum.

** MRP progression is the MRP percent difference from one grade to the next.

36. Applying the indexation formula to grades GA to GI, Table 4 on the following page shows market movement and structure adjustment of 2.0%.

8 Historically, the salary structures of grades GJ and GK had been positioned between the market reference point of grade GI and the President’s salary (by process of extrapolating upward from the market reference point of grade GI to the point below the President's salary). In line with Executive Board approval, the approach was changed from extrapolation to CPI-based approach in 2006 for GK and in 2008 for GJ. Per 2006 Review of Staff Compensation for the World Bank Group, dated May 24, 2006, R2006-0085; and 2008 Review of Staff Compensation for the World Bank Group, dated May 15, 2008, R2008-0106, the shift to a CPI-based approach to adjusting the GJ and GK salary structures was made in order to address compression at the top grade levels of the salary scale.


Table 4: Market Reference Points Year-on-Year Comparison – Washington/HQ

Staff Count (#)

FY13 Market

Reference Points (US$)

FY14 Market

Reference Points (US$)

Market Movement

WBG Grade

GA 1

32,600

33,300

2.0% GB 30

41,200

42,000

2.0%

GC 791

50,900

51,900

2.0% GD 669

60,100

61,300

2.0%

GE 749

80,700

82,300

2.0% GF 1,491

107,300

109,400

2.0%

GG 2,757

144,700

147,600

2.0% GH 1,643

197,200

201,100

2.0%

GI 256

264,500

269,800

2.0% Total 8,387

Staff-Weighted Average

2.0%


Annex B: FY13 Retrospective & FY14 Recommendations-WBG Offices Outside Washington

37. This section provides a summary of the budgeted structure adjustments and budget neutral salary increases for locations outside of Washington in FY13 and FY14 on a US$ salary-weighted basis, based on currency exchange rates as of March 31, 2013. 38. The FY13 and FY14 individual country office budgeted structure adjustments and budget neutral salary increases are presented by WBG Office location in alphabetical order. The summary table (Table 5) includes information for satellite offices (such as those in Western Europe, Japan and United States - New York City), all of which are based on market movements in the respective locations. 39. Inflation numbers are included as reference information to provide context for country office salary increases. WBG salary increases are not CPI-based but inflation is one of the many drivers of labor costs in the respective local markets. The inflation data presented in the following tables are largely taken from the International Monetary Fund (IMF) World Economic Outlook as of April 2013.

Table 5: FY13-FY14 Structure Adjustments and Total Merit Increases by Location

Budgeted Structure

Adjustment Budget Neutral Salary Increase

Total Merit Increase

Reference Only

Country Region FY13 FY14 FY13 FY14 FY13 FY14 FY14

Inflation Afghanistan SAR 5.2% 7.1% 3.4% 0.7% 8.6% 7.8% 5.9% Albania ECA 0.6% 2.1% 3.4% 1.1% 4.0% 3.2% 2.5% Algeria MNA 2.2% 0.2% 1.6% 1.9% 3.8% 2.1% 9.0% Angola AFR 0.0% 6.1% 2.4% 0.1% 2.4% 6.2% 8.9% Argentina LCR 20.6% 24.0% 1.3% 2.4% 21.9% 26.4% 10.8% Armenia ECA 0.0% 12.7% 2.0% 0.6% 2.0% 13.3% 4.2% Australia EAP 0.7% 3.0% 2.4% 1.4% 3.1% 4.4% 2.5% Austria HQ 2.1% 2.0% 0.0% 0.6% 2.0% 2.6% 2.5% Azerbaijan ECA 8.6% 4.4% 2.2% 2.3% 10.7% 6.7% 2.8% Bangladesh SAR 7.8% 12.3% 5.2% 2.4% 12.9% 14.7% 7.4% Belarus ECA 14.4% 4.6% 0.0% 4.2% 12.0% 8.8% 23.0% Belgium HQ 1.4% 3.1% 2.9% 1.5% 4.3% 4.6% 1.2% Benin AFR 1.1% 8.4% 2.8% 4.9% 3.9% 13.3% 6.7% Bhutan SAR 4.9% 0.0% 2.0% 2.1% 6.9% 2.1% 10.3% Bolivia LCR 3.7% 5.9% 4.4% 1.5% 8.1% 7.4% 5.3% Bosnia-Herzegovina ECA 1.8% 2.2% 2.8% 0.6% 4.7% 2.8% 2.1% Botswana AFR 17.1% 4.5% 0.0% 2.0% 2.0% 6.5% 7.5% Brazil LCR 10.2% 10.7% 1.9% 3.2% 12.2% 13.9% 6.3% Bulgaria ECA 5.7% 5.7% 4.7% 1.4% 10.3% 7.1% 3.6% Burkina Faso AFR 3.8% 9.3% 1.0% 1.8% 4.8% 11.1% 4.2% Burundi AFR 10.5% 10.2% 2.8% 3.2% 13.3% 13.4% 11.8% Cambodia EAP 2.9% 5.6% 4.5% 2.1% 7.3% 7.7% 3.1% Cameroon AFR 2.8% 8.6% 5.6% 1.0% 8.5% 9.6% 3.0% Central African Republic AFR 0.0% 5.7% 3.9% 0.5% 3.9% 6.2% 5.6% Chad AFR 2.3% 17.6% 0.0% 0.2% 2.1% 17.8% 18.8%


Budgeted Structure



Reference Only


Inflation China - Beijing EAP 7.1% 8.9% 4.8% 2.5% 11.9% 11.4% 3.0% China - Chengdu EAP 6.8% 9.0% 3.4% 2.8% 10.2% 11.8% 3.0% Colombia LCR 2.3% 3.0% 2.9% 2.3% 5.2% 5.3% 1.9% Congo AFR 9.4% 8.5% 0.9% 0.9% 10.4% 9.4% 9.5% Congo, DR AFR 0.0% 5.1% 2.0% 0.1% 2.0% 5.2% 3.0% Cote D'Ivoire AFR 7.2% 5.8% 0.8% 1.1% 8.0% 6.9% 3.6% Croatia ECA 2.0% 3.1% 1.6% 2.1% 3.6% 5.2% 5.3% Djibouti MNA 0.0% 2.1% 2.1% 4.4% Dominican Republic LCR 8.2% 1.3% 2.9% 5.4% 11.1% 6.7% 4.7% Ecuador LCR 0.6% 4.7% 5.6% 0.1% 6.1% 4.8% 4.3% Egypt MNA 2.2% 8.8% 5.0% 2.1% 7.1% 10.9% 8.2% El Salvador LCR 4.7% 4.6% 2.0% 0.1% 6.7% 4.7% 1.0% Ethiopia AFR 14.7% 12.6% 3.2% 2.8% 18.0% 15.4% 10.9% France - Paris HQ 2.7% 1.4% 0.0% 1.1% 2.2% 2.5% 1.0% France - Marseille HQ 0.0% 0.0% 2.0% 2.1% 2.0% 2.1% 1.0% Gabon AFR 0.0% 4.9% 5.0% 0.3% 5.0% 5.2% 3.7% Gambia AFR 8.5% 4.8% 0.0% 3.4% 6.7% 8.2% 4.2% Georgia ECA 4.2% 3.9% 2.0% 2.6% 6.2% 6.5% 1.0% Germany HQ 0.6% 0.0% 1.4% 2.1% 2.0% 2.1% 1.5% Ghana AFR 9.5% 12.6% 2.5% 0.7% 12.0% 13.3% 8.8% Guatemala LCR 1.0% 2.6% 5.7% 1.1% 6.8% 3.7% 3.9% Guinea AFR 14.6% 10.4% 1.4% 1.7% 16.0% 12.1% 12.8% Guinea-Bissau AFR 2.6% 3.5% 0.3% 2.7% 2.9% 6.2% 1.7% Guyana LCR 6.5% 0.0% 0.0% 2.1% 2.0% 2.1% 1.9% Haiti LCR 4.1% 9.8% 0.0% 2.6% 2.0% 12.4% 7.4% Honduras LCR 3.5% 6.7% 0.0% 3.5% 2.0% 10.2% 5.7% Hong Kong SAR, China EAP 1.8% 4.7% 5.1% 1.7% 6.9% 6.4% 3.5% India - Chennai SAR 3.2% 0.0% 8.4% 3.9% 11.7% 3.9% 11.1% India - New Delhi SAR 6.2% 3.4% 3.2% 4.3% 9.4% 7.7% 11.1% Indonesia EAP 0.0% 2.4% 9.4% 6.4% 9.4% 8.8% 5.6% Iraq MNA 0.6% 5.4% 3.9% 1.3% 4.5% 6.7% 6.1% Italy HQ 0.7% 0.7% 1.3% 1.4% 2.0% 2.1% 1.9% Jamaica LCR 10.1% 8.2% 0.0% 0.1% 4.1% 8.3% 8.2% Japan HQ 0.0% 0.0% 3.7% 3.1% 3.7% 3.1% 0.1% Jordan MNA 0.3% 9.0% 5.4% 5.2% 5.7% 14.2% 7.7% Kazakhstan ECA 3.6% 8.9% 2.8% 4.2% 6.4% 13.1% 7.0% Kenya AFR 13.0% 4.2% 2.3% 2.2% 15.3% 6.4% 4.1% Kosovo ECA 1.3% 3.5% 1.4% 0.9% 2.6% 4.4% 0.6% Kuwait MNA 0.0% 5.5% 6.7% 14.5% 6.7% 20.0% 2.6% Kyrgyz Republic ECA 8.4% 1.8% 2.4% 3.3% 10.7% 5.1% 7.4% Lao EAP 5.1% 8.0% 3.7% 1.3% 8.8% 9.3% 7.3% Lebanon MNA 5.6% 5.2% 4.5% 3.5% 10.1% 8.7% 10.1% Lesotho AFR 3.0% 4.3% 0.0% 0.1% 2.0% 4.4% 5.1%


Budgeted Structure



Reference Only


Inflation Liberia AFR 0.0% 7.1% 2.0% 0.8% 2.0% 7.9% 7.7% Macedonia ECA 2.1% 3.6% 0.9% 2.3% 3.0% 5.9% 3.4% Madagascar AFR 6.0% 10.9% 4.1% 0.1% 10.1% 11.0% 7.0% Malawi AFR 16.8% 30.4% 1.9% 0.1% 18.7% 30.5% 36.4% Maldives SAR 5.9% 0.0% 6.1% 11.0% 12.0% 11.0% 4.8% Mali AFR 8.8% 9.4% 1.9% 2.1% 10.7% 11.5% 6.2% Mauritania AFR 13.2% 4.7% 0.0% 0.9% 11.7% 5.6% 4.6% Mauritius AFR 4.0% 1.2% 2.6% 3.1% 6.6% 4.3% 2.9% Mexico LCR 8.4% 6.6% 5.6% 3.9% 14.0% 10.5% 3.6% Moldova ECA 4.2% 9.2% 0.8% 3.7% 4.9% 12.9% 4.5% Mongolia EAP 18.4% 13.7% 2.5% 1.4% 20.9% 15.1% 11.1% Montenegro ECA 8.8% 1.3% 0.0% 7.0% 4.8% 8.3% 2.6% Morocco MNA 0.0% 7.1% 4.0% 0.6% 4.0% 7.7% 2.4% Mozambique AFR 3.0% 8.1% 1.2% 1.1% 4.2% 9.2% 8.6% Myanmar EAP 1.3% 0.8% 2.1% 6.5% Nepal SAR 2.0% 6.9% 2.5% 1.1% 4.4% 8.0% 8.0% New Zealand EAP 2.6% 0.0% 0.0% 2.1% 2.0% 2.1% 1.4% Nicaragua LCR 7.3% 9.6% 2.1% 1.9% 9.4% 11.5% 7.1% Niger AFR 4.3% 2.5% 2.4% 2.6% 6.7% 5.1% 1.0% Nigeria AFR 4.4% 4.9% 4.7% 1.7% 9.1% 6.6% 8.6% Pakistan SAR 3.7% 8.1% 3.3% 2.0% 6.9% 10.1% 7.4% Panama LCR 8.6% 1.5% 0.0% 0.6% 7.9% 2.1% 4.6% Papua New Guinea EAP 5.4% 11.8% 2.7% 0.1% 8.1% 11.9% 7.9% Paraguay LCR 1.1% 1.2% 1.7% 1.8% 2.8% 3.0% 1.7% Peru LCR 5.0% 5.3% 2.6% 2.1% 7.6% 7.4% 2.5% Philippines EAP 0.0% 2.4% 7.6% 4.4% 7.6% 6.8% 3.1% Poland ECA 0.8% 5.1% 8.4% 1.4% 9.2% 6.5% 1.6% Romania ECA 7.2% 7.6% 0.7% 1.6% 7.9% 9.2% 5.6% Russian Federation ECA 3.1% 8.2% 4.7% 3.9% 7.8% 12.1% 7.1% Rwanda AFR 8.0% 4.5% 0.9% 0.1% 9.0% 4.6% 5.6% Samoa EAP 0.0% 2.1% 2.1% -0.3% Saudi Arabia MNA 0.0% 2.1% 6.9% 4.5% 6.9% 6.6% 4.2% Senegal AFR 0.5% 5.0% 3.4% 3.2% 3.9% 8.2% 2.1% Serbia ECA 6.1% 10.8% 1.9% 2.0% 7.9% 12.8% 7.6% Sierra Leone AFR 12.7% 11.2% 0.0% 2.1% 9.1% 13.3% 11.4% Singapore EAP 0.8% 1.2% 4.7% 2.9% 5.5% 4.1% 4.0% Solomon Islands EAP 13.7% 4.1% 0.0% 3.1% 12.7% 7.2% 5.4% South Africa AFR 6.0% 6.8% 1.8% 2.4% 7.8% 9.2% 5.4% South Korea EAP 3.0% 3.4% 6.4% 2.4% South Sudan AFR 22.7% 17.5% 2.8% 0.1% 25.6% 17.6% 24.1% Sri Lanka SAR 0.4% 7.9% 6.9% 1.8% 7.2% 9.7% 9.8% Sudan AFR 19.3% 31.1% 0.8% 0.4% 20.1% 31.5% 46.0% Switzerland HQ 1.2% 0.0% 0.8% 2.1% 2.0% 2.1% -0.2%


Budgeted Structure



Reference Only


Inflation Tajikistan ECA 6.4% 9.6% 1.2% 1.1% 7.6% 10.7% 7.0% Tanzania AFR 21.2% 11.6% 0.8% 0.5% 22.0% 12.1% 10.9% Thailand EAP 0.0% 1.2% 4.4% 3.0% 4.4% 4.2% 3.0% Timor-Leste EAP 11.6% 8.2% 3.8% 0.8% 15.4% 9.0% 8.0% Togo AFR 0.0% 4.1% 4.5% 0.9% 4.5% 5.0% 3.4% Trinidad and Tobago LCR 0.0% 0.0% 2.0% 2.1% 2.0% 2.1% 7.2% Tunisia MNA 10.0% 10.2% 2.5% 1.4% 12.5% 11.6% 5.8% Turkey - Ankara ECA 5.1% 8.6% 0.9% 0.7% 6.0% 9.3% 7.0% Turkey - Istanbul ECA 7.0% 8.4% 3.6% 6.2% 10.6% 14.6% 7.0% Turkmenistan ECA 4.3% 4.7% 0.0% 5.1% 2.0% 9.8% 0.0% Uganda AFR 16.8% 12.9% 2.6% 2.7% 19.4% 15.6% 5.5% Ukraine ECA 6.7% 11.6% 1.9% 0.8% 8.6% 12.4% 7.5% United Arab Emirates MNA 3.0% 5.2% 1.6% 1.1% 4.5% 6.3% 1.1% United Kingdom HQ 1.8% 3.0% 1.2% 0.7% 3.0% 3.7% 2.8% United States - New York HQ 0.0% 2.0% 3.2% 1.4% 3.2% 3.4% 2.0% Uruguay LCR 14.3% 11.8% 0.0% 0.9% 13.3% 12.7% 8.9% Uzbekistan ECA 11.4% 5.3% 2.6% 0.6% 14.0% 5.9% 6.0% Vanuatu EAP 4.0% 3.6% 7.6% 1.7% Vietnam EAP 9.5% 12.2% 3.6% 1.8% 13.1% 14.0% 8.8% West Bank and Gaza MNA 2.4% 2.4% 0.0% 3.4% 2.0% 5.8% 1.5% Yemen MNA 4.2% 10.1% 5.4% 0.4% 9.6% 10.5% 17.1% Zambia AFR 8.1% 8.8% 3.0% 0.3% 11.2% 9.1% 6.2% Zimbabwe AFR 11.0% 11.5% 0.0% 0.1% 10.5% 11.6% 5.7%


Annex C: WBG Budget Impact of FY14 Structure Adjustments for Washington & Country Offices

40. The table below provides the World Bank Group budget impact of the structure increase(s) in Washington/HQ and offices outside Washington.

Table 6: FY14 WBG Budget Impact of Structure Adjustments

Notes: The table above does not present budget data for MIGA CO staff, as MIGA has very few staff stationed in offices outside Washington. For IBRD, 15% of the price increase will be funded by reimbursables.

Item IBRD IFC MIGA TOTAL

aHQ Salary and Salary Related Benefits (US$ millions)

$ 1,037.0 $ 307.8 $ 15.2 $ 1,360.0

b HQ Structure Increase (%) 2.0% 2.0% 2.0% 2.0%c HQ Structure Increase (US$ millions) (a x b) $ 20.7 $ 6.2 $ 0.3 $ 27.2

d CO Salary and Salary Related Benefits (US$ millions)

$ 158.70 $ 75.4 $ 234.1

eCO Structure Increase (US$ millions) before local currency depreciation*

$ 10.1 $ 4.8 $ 14.9

fCO local currency depreciation (US$ millions)

$ 8.7 $ 3.7 $ 12.4

gCO Structure Increase (US$ millions) after local currency depreciation

(e - f); (h x d)

$ 1.4 $ 1.1 $ 2.5

hCO Structure Increase (%) after adjustment for local currency depreciation

(g / d) 0.86% 1.50% 1.07%

i Total Salary and Salary Related Benefits (US$ millions)

(a + d) $ 1,195.7 $ 383.2 $ 15.2 $ 1,594.1

jTotal Structure Increase (US$ millions) before adjustment for local currency depreciation

(c + e) $ 30.8 $ 11.0 $ 0.3 $ 42.1

kTotal Structure Increase (US$ millions) after adjustment for local currency depreciation

(c + g) $ 22.1 $ 7.3 $ 0.3 $ 29.7

lTotal Structure Increase (%) HQ and COs before local currency depreciation

(j / i) 2.6% 2.9% 2.0% 2.6%

mTotal Structure Increase (%) HQ and COs after local currency depreciation (k / i) 1.8% 1.9% 2.0% 1.9%

( e / d) 6.4% 6.4% 6.4%* Average Structure Adjustment for Country Offices


Annex D: Salary Progression Adjustment Methodology

41. The table below shows the 5-year trend 2008-2012 (FY09-FY13) of the weighted average salary gap versus the aggregate market reference points, which is the basis for the FY14 salary progression adjustment (SPA) for Washington-appointed staff. 42. For FY14 (2013), the salary progression adjustment is 1.0% which is based on an analysis of 5-year average aggregate salaries (of confirmed staff with more than one year in the same grade) relative to market reference points over the same period. Similar to the step increases in the public sector, the SPA provides for progression within the salary ranges, with the difference that the Bank Group’s SPA is totally performance-based. The SPA (or a similar element) is also common among IFIs to allow progression of staff salaries within their salary ranges and to help address salary erosion that reflects the ongoing changes in the staffing skills and mix. The actual average adjustment over this period is 2.3% (for all confirmed staff including staff with less than one year of service in the same grade). 43. Based on the Board-approved methodology, a five-year rolling average (determined based on confirmed staff with greater than one year time in grade) will serve as input for the salary progression adjustments. The rolling average approach will help address competitiveness gaps between WBG salaries and the market that may occur over time as a result of "payroll not being equal to payline". In addition, the use of a five-year average on a rolling basis has a "smoothing" mechanism that will gradually address salary erosion against market.

Table 7: Salary Progression Adjustment

Year Salary Gap with the MRP (Full Actual)

Salary Gap with the MRP (Using staff with greater than one year

time-in-grade)

Percentage Point Difference

July 1, 2008 1.7% 0.8% 0.9% July 1, 2009 2.2% 0.8% 1.4% July 1, 2010 1.9% 0.7% 1.2% July 1, 2011 2.4% 1.1% 1.3% July 1, 2012 3.3% 1.8% 1.5%

5-year Average 2.3% 1.0% 1.3%

44. Similarly, for each country office, the 2013 salary progression adjustment is estimated at 45% (1.0% divided by 2.3%) of the full salary gap with the aggregate current market reference points. Annex B shows the country by country results, applying the estimated SPA approach to each country office (as reflected in the Budget Neutral Salary Increase data).


Annex E: Supplemental Merit Increase Methodology

45. The Supplemental Merit Increase (SMI) envelope is determined using a rules-based measurable methodology (subject to this year’s calculated maximum of 1.3%, as per previously established Board-approved methodology). 46. The SMI envelope is determined based on the salary gap of staff with performance rating of 4 or 5, relative to the market reference points of their grade salary range (performance rating refers to SRI or Salary Review Increase rating which is based on relative contribution against peers). This approach differs from the pre-FY12 methodology which measured the salary gap for all staff, regardless of performance. The SMI envelope is determined using ratings based on the previous year’s performance and aggregate salaries of high performing staff. The SMI pool will continue to be distributed to high performing staff across all grades. 47. For 2013, the supplemental merit increase pool for Washington-appointed staff is 0.4%. Each country office's supplemental merit increase pool is determined following a formula that is similar to Washington’s SMI pool calculation. This is estimated at 35% (0.444% divided by 1.3%) of the respective country office salary gap with the aggregate market reference points. Annex B shows the country by country results, applying the SMI approach to each country office (as reflected in the Budget Neutral Salary Increase data).


Annex F: Planned Programs and Total Compensation Reviews

48. As part of ongoing efforts to create a more performance-oriented culture, where there will be greater diversification of rewards for segmented groups / individuals based on functions within the WBG, new programs will be explored and studied to further support business needs.

IBRD and MIGA Variable Pay Plan 49. To further strengthen the World Bank Group’s Employment Value Proposition, as well as better harmonize and integrate IBRD and IFC compensation programs, a comprehensive study will be undertaken for the introduction of a variable pay program for IBRD/MIGA staff. The key objectives would be:

a. Encourage greater accountability and transparency b. Create a culture of shared risk and opportunity c. Recognize and reward performance and achievements based on pre-established

goals d. Provide potential for greater reward opportunities for top performers

50. A proposed IBRD/MIGA variable pay program will be designed and presented to the Board for approval no earlier than July 1, 2014. Among the important conditions that need to be considered for the successful implementation of a variable pay program are: (a) clear and measureable objectives set by senior management at the start of the fiscal year; (b) a performance management system that allows for objectives to be cascaded down throughout the organization; the cascading of objectives will need to be introduced for IBRD and MIGA for the first time (within FY14); (c) a transparent and robust measurement and evaluation system to determine whether the goals were achieved at the end of the fiscal year. 51. The annual funding formula for the planned IBRD/MIGA variable pay program will be rules-based, simple and transparent. A common formula would be based on a percentage of the total wage bill as of March 31, for the subsequent year’s budget request. This method allows for the program to keep pace with headcount for eligible staff and market movements.

Functional Pay Lines for Investment Staff 52. The Washington/HQ and Country Office salary scales are designed to reflect the local labor market to accommodate a broad range of skill sets and functional areas. However, market compensation levels for certain functional areas such as those for Investment and Core Finance positions at the IFC, both in the U.S. and other emerging markets are significantly higher than the market pay levels for other functions or positions. As a result, the WBG salary scales may be higher for non-Investment and non-Core Finance positions, and may be low for Investment and Core Finance jobs. This situation has led to recruiting and retention challenges in various labor markets. 53. In FY14, management will initiate a comprehensive review of the Bank Group’s total compensation mix (base salary and variable pay components) to determine if separate pay policies or programs would be needed for certain functional areas. Depending on the results of the study, a functional pay program may be initially introduced on a pilot basis at the IFC for Investment and Core Finance functions.


Annex G: Distributing Increases Based on Performance and Position in Range

54. Each year, a Merit Increase Matrix is developed based on the new salary scale and the approved salary increase envelope. All increases are performance-based. 55. The merit matrix indicates increases according to performance rating and the position of the current salary within the new salary range. 56. For the 2013 Salary Review Increase (SRI) process (recognizing staff for their performance during the FY13 performance cycle), the current performance management system will continue to be used. Planned changes for a simplified (single) performance rating system using a 5-point rating scale will take effect in the FY14 performance cycle and apply to the SRI process in 2014. 57. The annual merit increase is the only regular salary increase available to most staff; other increases may be provided upon confirmation of appointment or promotion. 58. Salary budgets are distributed by Vice Presidency or country office. The method of allocating and controlling the salary increase budgets uses an assumed distribution of performance ratings that provides for 11% of staff to receive the top rating and 25% to receive the second highest rating. Thus, top ratings are reserved for a select number of high performing staff members. 59. Annually, performance is differentiated under the merit review process. Over the last six years, 60% of staff received increases below the Total Merit Increase envelope, and only 40% received higher. Staff members do not automatically receive the structure adjustment, nor do they receive step increases.


Annex H: Scarce Skills Premium for Washington/HQ and Satellite Offices

Background and Objective 60. Currently, the Bank Group provides the Scarce Skills Premium (SSP) in country offices for critical professional jobs or higher (GF+) when required skills are demonstrably in short supply in the local or regional market.9 The SSP is provided beginning at professional grades given the difficulty of sourcing such talent in underdeveloped markets, and more so in fragile and conflict-affected states. While Washington and Satellite Office locations (U.S., Western Europe and Japan) are highly developed, industrialized and progressive markets (where robust talent is generally available across the different levels), attracting or retaining critical skills for the WBG at senior managerial or highly technical positions in key functional areas can be a challenge. Thus, at these levels, the use of the SSP compensation tool would be needed to fill or keep mission-critical roles and deliver specific, strategic business results and key business priorities. 61. The objective of extending the scarce skills premium (SSP) to Washington/HQ and Satellite Offices is to provide the business with a compensation tool to attract and/or retain key senior managerial or highly technical positions in Washington/HQ and satellite offices. The provision is intended for use when business needs call for recruitment or retention of critical skills to support the mission of the organization, especially in cases where identification of the needed skills through global recruitment efforts has proved unsuccessful.

SSP Provision Highlights 62. The SSP would apply to planned or current open-ended and term appointments at key senior managerial or highly technical positions. The target for key individuals that may potentially receive the SSP is estimated not to exceed 5% of the eligible population. 63. The Scarce Skills Premium will be provided as a percentage of the individual’s annual net salary, subject to a maximum of 30% per annum. The premium is a non-pensionable payment for a defined period and subject to annual review. SSP payment is to be disbursed on a quarterly basis, and is a non-budgeted element. Provision for SSP will be approved jointly by the HR VP and the relevant VP. 64. The Scarce Skills Premium may be offered in addition to recruitment bonuses (1 to 3 months net salary, as non-pensionable lump sum). Together with the recruitment bonus, the SSP is expected to help narrow the “competitiveness gap” in pay for required skills that are in short supply in the labor market across geographies and/or industries.

9 The Scarce Skill Premium (SSP) is currently designed for use in Country Offices only. It is an individual-based non-pensionable premium that could be paid when the required skills are demonstrably in short supply in the local or regional market and non-national staff must be recruited from within or outside the duty station country. The Scarce Skills Premium may be defined as follows: (a) a percentage of the Market Reference Point (MRP) of a selected grade prevailing as of the start of eligibility; or (b) a percentage of the staff member's net salary as of the start of the eligibility. They are paid for a defined period, and subject to periodic review. These guidelines generally apply to locally-recruited staff in country offices that hold Local Regular, Open-Ended and Term appointments at Grade F and above. Under exceptional circumstances and with the approval of the relevant IBRD Regional Vice President or IFC Regional Director, these guidelines may apply for scarce positions in Grade E.


Annex I: Multidimensional Competitiveness Index

65. The Multidimensional Competitiveness Index (MCI) is an innovative methodology that puts the WBG at the forefront in assessing organizational competitiveness for top talent. The MCI is expected to provide a thorough and robust assessment of competitiveness and attractiveness of the WBG’s employment value proposition throughout the staff member’s life cycle – from attracting candidates, to engaging staff, and finally to retaining high performing staff. The MCI will track and measure the experience of staff throughout the employment life cycle, evaluating whether the employment experience over time is consistent with expectations upon joining the organization. 66. The index will help WBG senior management assess the level of competitiveness of the WBG employment deal and help direct the future HR agenda. The MCI will help focus limited resources in the right programs, thereby increasing the return on investment and overall competitiveness. The outcome of the MCI will inform management of the strengths that can be leveraged in attracting talent and engaging staff, and any gaps that must be bridged by addressing competitiveness issues. 67. While the MCI will provide an overall organizational perspective, assuming sufficiency of data, the MCI could be determined at the business unit level. This would allow business units to have a direct and clear indication of their competitiveness. This information would enable leaders to engage with their respective teams in determining ways to improve the employment deal and overall work experience in the Bank Group. 68. The MCI is not intended to replace but rather expand the discussion around competitiveness beyond compensation and benefits.10 A recent survey conducted by an international HR consulting firm indicates that while total compensation remains a major driver for attraction and commitment, it is not the most important and neither is it the only reason for joining an organization.11 69. The index will utilize multiple data sources from internal and external labor market measurements. Among the sources are: (a) perceptual and attitudinal (for example, staff surveys); and (b) quantitative / metric-based (for example, HR metrics, and turnover rates). Data will be drawn from internal institutional sources and from external benchmark databases. In so doing, the index will provide a more systematic and consistent approach to assessing the drivers for attraction, engagement and retention, and components of which can be compared with external best practice and internal targets. 70. Establishing the MCI brings a number of benefits for the WBG: (a) it will allow measurement of WBG’s competitiveness based on facts or evidence; (b) it will help identify strengths and weaknesses of the Bank Group’s value proposition and adjust as necessary; and in the end, (c) it will help improve overall organizational performance. 71. Still in its development phase, the output of the MCI index will be defined and shared with various stakeholders as data is collected, analyzed and validated. Baseline data is expected to be collected within FY15.

10 Currently, the Bank Group annually conducts an assessment of competitiveness through a broad comparison of its salary scale Market Reference Points (MRPs) with the 75th percentile of pay levels of comparator organizations. Other current measures include the Quadrennial Benefits Survey (which is being re-scoped in FY15) and the compensation competitiveness test versus the French and German labor markets every 4 years. 11 Talent Management and Rewards Survey, Towers Watson, 2011

WBG FY14 (2013) Compensation Paper FOR PUBLICATION.pdfI. IntroductionII. Strategic Objectives and ContextIII. Structure Adjustment and Budget ImpactIV. Budget Neutral Salary IncreasesV. Non-Salary ProgramsVI. Summary of Recommendations

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