2014 REVIEW OF STAFF COMPENSATION FOR THE WORLD …

1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized June 12, 2014. FOR THE WORLD bank GROUP. 2014 REVIEW OF STAFF COMPENSATION . CONFIDENTIAL. 92824. Blank Page 2 THE WORLD bank GROUP. 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 locations outside of Washington and satellite offices (country offices, shared service offices in Chennai, India, etc.). HRD Human Resources Vice Presidency Market Reference Point The point in the WORLD bank Group's salary ranges which is (MRP) broadly aligned with the 75th percentile of salaries at comparable levels in the respective local labor markets.

2 Performance Rating This is the bank Group's individual rating system based on STAFF System contribution (ranging from a rating of 1 for unsatisfactory' up to a rating of 5 for significantly meets expectations') used as basis to allocate individual salary increases. Performance-Based The sum of structure adjustment and salary progression Salary Increase adjustment. The PBSI will be combined with the supplemental (PBSI) merit increase and distributed through the total merit increase (TMI) matrix based on performance and position in range. Salary Progression A component of the PBSI that would help facilitate movement or Adjustment (SPA) 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 Structure or The set of salary ranges established for various grade levels. At the Salary Scale WORLD bank Group, the salary structure or salary scale has 11. salary ranges from GA to GK.

3 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. Supplemental Merit The salary increase pool allocated for top performers (with Increase (SMI) performance rating of 4 or 5). This is in addition to the PBSI. Total Merit Increase The amount authorized for distribution to WORLD bank Group STAFF (TMI) members, expressed as a percentage of current aggregate annual net salaries. This represents the sum of the Salary Structure Adjustment, the SPA and the SMI. TMI is distributed to STAFF through the merit increase matrix. THE WORLD bank GROUP 3. Blank Page 4 THE WORLD bank GROUP. Table of Contents EXECUTIVE SUMMARY_____ 6. I. 2014 COMPENSATION REVIEW _____ 7. Structure Adjustment and Budget Impact _____ 7. II. Additional Merit Increases _____ 9. III. Non-Salary Programs_____ 10. IV. Summary of Recommendations _____ 14.

4 List of Tables Table 1: WBG Recognition Programs _____ 10. Table 2: IFC Performance Awards Programs _____ 11. Table 3: WBG Reward and Recognition Programs _____ 12. Table 4: July 1, 2014 Washington/HQ Salary Structure_____ 15. Table 5: Market Reference Year-on-Year Comparison Washington/HQ _____ 16. Table 6: FY14-FY15 Structure Adjustments and Total Merit Increases by Location _____ 17. Table 7: FY14 WBG Budget Impact of Structure Adjustment _____ 21. Table 8: Salary Progression Adjustment _____ 22. List of Annexes Annex 1: July 1, 2014 Salary Structure for Washington-Appointed STAFF _____ 15. Annex 2: FY14 Retrospective & FY15 Recommendations-WBG Offices Outside Washington ____ 17. Annex 3: WBG Budget Impact of FY15 Structure Adjustments for Washington & Country Offices21. Annex 4: Additional COMPENSATION Elements: Calculation Methodology _____ 22. Annex 5: Salary Administration Changes_____ 24. Annex 6: COMPENSATION Programs Reforms Update _____ 28. THE WORLD bank GROUP 5.

5 Executive Summary 1. This paper (i) presents proposals for the 2014 REVIEW of WORLD bank Group (WBG) STAFF COMPENSATION , (ii) summarizes simplifications being introduced to the salary administration, and (iii) provides an update of the current ongoing COMPENSATION reforms. 2. Under the multi-year COMPENSATION REVIEW process approved by the Executive Board on February 8, 2011, this year's REVIEW is the result of the application of the indexation methodology for HQ and satellite offices, and comprehensive market reviews in most of the country offices. 3. Overall, the projected labor market movement indicates an average increase of the HQ. salary structure equal to percent. For country offices, comprehensive COMPENSATION reviews were performed for a vast majority of the locations in line with the agreed REVIEW process for country offices in 2014. In a few cases, indexation was applied in countries where labor markets are more stable and where full reviews were recently performed.

6 4. The paper is organized as follows: a. Section I presents the market driven structure adjustment. b. Section II presents the additional salary adjustments and non-salary programs respectively. c. Section III summarizes Management recommendations to the Board. d. In addition, changes introduced to simplify the salary increase administration are described in Annex 5, while Annex 6 provides an update of the work done by the various WBG-wide working groups and defines next steps. 6 THE WORLD bank GROUP. I. 2014 COMPENSATION REVIEW 5. This paper presents the results of the 2014 REVIEW of WORLD bank Group STAFF COMPENSATION . The main objective of this paper is to seek Board approval (i) for the 2014. (FY15) structure adjustments for WBG Washington-appointed STAFF and country/satellite office STAFF , and (ii) to set aside funds for the FY15 non-salary programs. 6. This year's (FY15) HQ COMPENSATION REVIEW is the result of the application of the indexation methodology under the multi-year REVIEW process, as approved by the Board on February 8, 2011.

7 As in 2013 (FY14), this year the HQ salary structure will be adjusted using published projected market pay increases. In country offices, comprehensive COMPENSATION reviews have been performed for the majority of 7. 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 and 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 Structure Adjustment and Budget Impact 8. This section presents the proposed FY15 structure adjustments in percentage terms and estimated dollar values. The structure adjustment impacts the total wage bill (this pertains to salary and salary-related benefits2 which are estimated at US$ billion for the bank Group for HQ and country offices).

8 9. The FY15 structure adjustment for HQ is calculated using an indexation formula consisting of average market pay increases in the public and private sectors. a. Washington-appointed STAFF . Based on the established Board-approved indexation methodology, the July 1, 2014 structure adjustment for Grades GA-GI is equal to 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 ( 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). 2 Salary-related benefits cover such benefits as STAFF Retirement Plan, insurance benefits, leaves and mobility premium. Benefits which are not impacted include extended assignment benefits and some country office-specific benefits, among others.

9 THE WORLD bank GROUP 7. percent. This reflects the combined effect of (i) public sector movement3, and (ii) a private sector Annex 1 provides the FY15 salary structure. b. Salary ranges for grades GJ and GK are updated by the May 2013 to May 2014. Consumer Price Index (CPI) movement for the Washington-Baltimore area in line with established Board approved methodology. The salary ranges for grades GJ. and GK are adjusted based on CPI movement. However, actual individual salary increases for STAFF in grades GJ and GK are subject to the same merit increase matrix applicable to STAFF at grades GA to GI and distributed based on performance and position in the salary range. 10. Satellite Office STAFF . The structure adjustment for Satellite Offices is calculated using an indexation formula consisting of average pay increases in the local labor market. The details pertaining to the dollar value of the FY15 structure adjustments budget impact are presented in Annex 3. 11. Country office-appointed STAFF .

10 The structure adjustment for most country offices is determined by a comprehensive market REVIEW of the local labor market. In a few locations, indexation using the 2014 average market pay increases provided by external survey consulting firms in the respective local market was applied to determine the structure adjustment. Country-by-country structure adjustments covering 135 WBG offices (including Satellite Offices), based on the respective 2014 local labor market salary movements are provided in Annex 2. The structure adjustments will be used as input in determining the Price Adjustment Factor5 for FY15 for IFC and MIGA, while in the case of the bank the budget impact from the structure adjustment will be funded within the overall nominal budget envelope. The details pertaining to the dollar value of the FY15 structure adjustments budget impact are also presented in Annex 3. 12. Structure increase percentage after adjustment for local currency depreciation. The structure increase for IBRD country and satellite offices is after adjustment for local currency depreciation.