We hope you had a positive surprise when looking at your June payslip; following the intermediate update last year (after decades without them), inflation is still so high that Eurostat’s calculations lead to a small update this year. While of course every little bit of help is welcome, the update value of 1.7% is clearly not enough to deal with the (still) sky-high inflation.
Unfortunately, we here at Generation 2004 have to spoil the party a bit, because it is not yet clear how the full, yearly update will look later in the year. But let’s first go into a bit more detail of the intermediate update. To verify the need for an intermediate update, Eurostat looks first at the inflation in the second half of the previous year, i.e. July – December 2022. This inflation reached a value of 3.7% which is above the threshold value of ±3% (the threshold value is defined in Article 6 of Annex XI of the staff regulations as 6% for a period of 12 months). Therefore, a general intermediate update is required.
Next, Eurostat takes into account the forecasted change in the real net remuneration of officials in the Member States. This is the change of your purchasing power with your take-home pay, i.e. what you can really buy with the salary that is transferred to your bank account as compared to what you could buy with your pay one year ago. Eurostat finalised its report in May 2023, when the numbers for June 2023 were obviously not yet known. Therefore, the use of a forecast. For 1 July 2022 – 1 July 2023, the forecast is –3.8%, which means that national civil servants can buy substantially less with their net salary than they could buy one year ago. A situation that we all feel ourselves in our daily lives. In line with Article 5 of Annex XI, half of this negative forecast is taken into account for the intermediate update, so –1.9%. As a result, we receive:
(100% + 3.7%) * (100% – 1.9%) = 101.7%.
After a general intermediate update, all correction coefficients in the different duty stations must be updated as well; you can find the corresponding values in the Eurostat report for the intermediate update 2023, starting on page 44.
After having explained the good news, let’s now come to the bad news. If you go back again in the text, you will see that we have used only half of the loss of purchasing power: the total is –3.8% and we are still missing the other half of –1.9%. This other half will be taken into account for the full update. This update will be published at the end of the year, with a retrospective effect as of July 2023. Now, there are a couple of assumptions here:
- The forecasted change in the remuneration of officials is indeed only a forecast. And just like in our system, member states may change the remuneration of their officials retrospectively. The cut-off date for any such change is the end of September 2023 (see Annex XI, Article 1(4)(a).
- The inflation in the first half of 2023 can vary substantially from the inflation in the second half of 2022. Indeed, if you look at appendix five of the Eurostat report, you can see that, in some models, the (residual) inflation as measured by the joint index is 0% for the first half of 2023.
- We have so far spoken only about the salary update. The December update includes also a potential update of the pension contribution rate (PCR), the final value of which will be only known as of September. However, last year the calculated PCR was 10.3%. It only stayed at the previous value of 10.1%, because the applied PCR changes only if the change is greater than ±0.25% (see Article 83a(4) of the staff regulations). In an environment where inflation is much higher than interest rates for money on a bank, we must expect the pension contribution rate to increase this year.
In summary, there is a non-negligible risk that the final value of the salary update at the end of the year might be lower than the value of the intermediate update. In such a case, two things would happen:
- Our salaries as of December 2023 will be reduced.
- We would need to pay back the sums that we received too much since July 2023.
Of course, we will keep you informed. In the meantime, please get in touch if you have questions.
