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CONFIDENTIAL

2016 REVIEW OF STAFF COMPENSATION

FOR THE WORLD BANK GROUP

June 14, 2016

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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 locations outside of Washington and Satellite Offices (Country Offices, shared service offices in Chennai, India, etc.).

Global Environment Facility (GEF)

Global Environment Facility (GEF) program is one of the WBG's largest and longest standing trust funded programs. GEF grants directly support actions to combat major environmental issues (e.g. climate change, polluted international waters, etc.) and stimulate green growth.

FCS Fragile States and Conflict Affected Situations.

HRD Human Resources Vice Presidency.

Long Term Incentives (LTI)

A Long Term Incentive plan is a reward system designed to improve employee’s long term performance by providing rewards that are not immediately vested. In the external market, examples for LTI programs are company shares, and stock options.

Midpoint 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 Rating (PR) System

The Bank Group’s individual rating system based on staff contribution and performance (ranging from a rating of 1 for ‘unsatisfactory’ up to a rating of 5 for ‘significantly exceeds expectations’) used as the 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 midpoints to the new market values.

Supplemental Merit Increase (SMI)

The salary increase pool allocated for top performers (with performance rating of 4 or 5).


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 Salary Structure Adjustment, Salary Progression Adjustment and the SMI. TMI is distributed to staff through the merit increase matrix.

WBG Special Compensation Measure

(SCM)

Temporary response, not led by prevalent market practice, by the WBG to address sudden and severe macroeconomic disruptions in a country.


Table of Contents

EXECUTIVE SUMMARY 7

I. 2016 Compensation Review 8

II. Additional Merit Measures 9

III. Special Compensation Measures 10

IV. Non-Salary Programs 11

V. Total Rewards Strategy 15

VI. Summary of Recommendations 16

List of Tables

Table 1: Current and Proposed SCM Commencement and Cessation Triggers 10

Table 2: WBG Reward and Recognition Programs 15

Table 3: July 1, 2016 Washington/HQ Salary Structure 18

Table 4: FY16 – FY17 Structure Adjustments and Total Merit Increases by Location 19

Table 5: Salary Progression Adjustment Methodology 24

Table 6: List of countries (alphabetic order) where WBG SCM was applied in FY16 26

Table 7: Comparison of Current and Proposed Special Compensation Measure Framework 26

Table 8: List of IFIs 34

List of Charts

Chart 1: WBG Net Total Cash Competitive Position - HQ Overall and by Organizational Unit 30

Chart 2: WBG Net Total Compensation Competitive Position - HQ Overall and

by Organizational Unit 31

Chart 3: WBG Net Benefits Value Competitive Position - HQ Overall and


Chart 4: WBG Net Total Rewards Value Competitive Position - HQ Overall and


Chart 5: WBG Net Total Rewards Value Competitive Position - Investment Job Stream 33

Chart 6: Total Cash and Total Compensation 34

Chart 7: Total Benefits 35

Chart 8: Total Rewards 35

Chart 9: Headcount by Grouping 36


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Executive Summary

1. This paper presents proposals for the 2016 review of World Bank Group (WBG) staff compensation.

2. Under the refinement of the multi-year compensation review process approved by the Executive Board on June 11, 2015, this year’s review is the result of an indexation methodology for HQ and Satellite Offices, and of comprehensive market reviews for Country Offices.

3. Overall, the projected labor market movement indicates an average increase of the HQ salary structure equal to 2.5 percent.

4. A Special Compensation Measures framework was approved by the Board in 2015, and was successfully implemented in seven countries during the course of FY16. Following continued consultation with business on its effectiveness, Management requests the Board to approve the proposed refinements to the Special Compensation Measures framework, which are intended to further improve responsiveness and provide even greater procedural effectiveness.

5. As committed by Management to the Board, a review of the total rewards programs of the WBG was conducted in FY16. A U.S. Total Rewards Market Study was undertaken to review the WBG’s total package versus the market, as defined by the WBG methodology. This study also included a broad review of some key compensation principles, including total compensation elements (e.g. base salary, variable pay components) and an exploration if separate pay policies or programs would be needed for certain functional areas. One such area identified as a possible functional pay differentiation pilot would be the investment / core finance job streams at the IFC. In addition, WBG data analyses were undertaken to build up to a Total Rewards position that was compared to the International Financial Institutions (IFI) market, using a select group of IFIs as defined in the Quadrennial Benefits Survey (QBS). A summary of the findings can be found in Annexes 5 and 6.

6. The findings of the Total Rewards studies provide clear evidence that the WBG’s positioning remains largely on target with the prescribed market positioning when compared to the broad U.S. market, as defined by the Board approved methodology. Similarly, when compared to a group consisting of leading IFIs, the WBG continues to be competitive, ranking 5th out of the 10 organizations.

7. Among the key themes of the various WBG awards programs are collaboration, innovation, and “collective delivery” towards business goals. Leveraging on the WBG objective-setting, cascading, and the WBG performance management processes, the alignment of objectives to performance and rewards can drive the desired behaviors to achieve business results. Today, the demand for WBG core services from across client groups remains strong, and given the high expectations on WBG deliverables, it is important that the WBG awards programs are used to engage and motivate staff to collectively deliver towards business objectives, and provide managers with the tools to reward top performers and recognize extraordinary individual and/or team contributions. Management recommends to continue the WBG awards programs for FY17 in order to facilitate and promote greater collaboration, increased innovation, and collective delivery among staff, units, and VPUs towards the broader corporate objectives. Recognizing and celebrating outstanding individual and/or team achievements, collective delivery towards business priorities, and increasing performance differentiation are among the key features that the WBG would like to continue to enhance in its awards programs.


I. 2016 Compensation Review

8. This paper presents the results of the 2016 review of World Bank Group staff compensation. The main objective of this paper is to seek Board approval (i) for the 2016 (FY17) structure adjustments for WBG Washington-appointed staff and Country/Satellite Office staff, and (ii) approval of the proposed refinements to Special Compensation Measures for Country Office compensation.

9. This year’s (FY17) HQ compensation review is the result of an indexation review under the multi-year review process, as approved by the Board on June 11, 20151. In Country Offices, the structural adjustments are the result of comprehensive market reviews.

10. 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; and

e. Further differentiate rewards according to performance.

Structure Adjustment and Estimated Total Salaries

11. The FY17 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. The July 1, 2016 structure adjustment for Grades GA-GI is equal to 2.5 percent. This reflects the combined effect of (i) 1.3% public sector movement2, and (ii) a 3.0% private sector movement.3 Annex 1 provides the FY17 salary structure.

b. Salary ranges for grades GJ and GK are updated by the May 2015 to May 2016 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.

1 2015 Review of Staff Compensation for the World Bank Group, May 22, 2015 (R2015-0095; IDA/R2015-0144; IFC/R2015-

0153; MIGA/R2015-0034) 2 The public sector component (1/3 weight) for Washington-appointed staff is based on 1.3% movement for the U.S. Civil

Service. The WBG indexation methodology is similar to the IMF indexation formula (although with different weights). The 2016 IMF structure increase is 2.3 %.

3 The private sector component (2/3 weight) for Washington-appointed staff is based on the 2016 forecast from the annual salary budget surveys for a broad cross-section of U.S. companies. Sources: WorldatWork (3.1%), Aon Hewitt McLagan (3.0%) and Willis Towers Watson (3.0%).


12. Satellite Office staff. The structure adjustment for Satellite Offices is calculated based on the indexation market data approach.

13. Country Office-appointed staff. The structure adjustment for Country Offices is the result of comprehensive market reviews of the local labor markets. Country-by-country structure adjustments covering 137 WBG offices (including Satellite Offices), based on the respective 2016 local labor market salary movements are provided in Annex 2. For the Bank, IFC and MIGA, the budget impact from the structure adjustment will be funded within the overall nominal budget envelope.

14. The estimated total salaries of HQ and CO staff are as follows: US$ 1,222 million for the Bank, US$ 486.6 million for IFC and US$ 19.1 million for MIGA.4

II. Additional Merit Measures

15. The compensation methodology, approved by the Board on February 8, 2011, provides for two additional merit increase components: (a) salary progression adjustment, and (b) supplemental merit increase. Both of these components are absorbed within the nominal budget envelope for the Bank, IFC and MIGA.5

16. Washington-appointed staff. The FY17 Washington/HQ additional merit increase elements are as follows: the salary progression adjustment is equal to 2.1% and the supplemental merit increase is equal to 0.3%. These merit increase elements 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.

17. Country Office-appointed staff. The total additional merit increases in Country Offices are calculated by applying the same methodology used for determining the additional merit increases for Washington-appointed staff. Annex 2 provides country-by-country additional merit increase envelopes.

18. All salary increases continue to be fully performance-based. The Washington/HQ structure adjustment will be distributed based on performance and position in the salary range of each of approximately 9,400 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 5,500 staff 137 locations based on performance and position in range. No cost of living increases or automatic increases are provided.

4 Detailed estimates, including cost of salaries and benefits are part of each organization’s budget planning and reporting

process. 5 Annex 3 summarizes the Board-approved methodology on these components.


III. Special Compensation Measures

19. Special Compensation Measures. In June 2015, the Board approved the Special Compensation Measures (SCM) Framework to address the economic conditions of local staff in Country Offices that may stem from sudden and severe CPI inflation or local currency depreciation (versus the U.S. Dollar). The purpose of this framework was to provide a temporary relief measure until salaries could be aligned again to the prevailing local market conditions, and it was not meant to override or supersede the required re-alignment of local compensation with the local market.

20. During the course of FY16, the WBG enacted the Special Compensation Measure in seven countries6, while continuing to constantly monitor the macroeconomic conditions in all countries where the WBG operates.

21. The SCM Framework provides WBG staff with a set of measures through a clear and transparent set of processes, and to ensure that the framework evolves in a manner consistent with business needs, in the course of FY16, further consultation was carried out and this led to refinements to the framework.

22. The continuing worsening global macroeconomic climate has led to persistent depreciation of many local currencies versus the US Dollar, as well as worsening inflationary conditions in many Country Offices. When large numbers of staff are negatively impacted by high inflation or depreciation, experience in FY16 showed that staff disengage, leading to real risks to the operational ability of the WBG to meet its mission requirements. To address this risk, and following extensive consultation with Management, as well as discussions with the Staff Association, refinements to the SCM framework are being proposed.

23. Proposed Approach. The refinements seek to address the issues of responsiveness by lowering the commencement trigger thresholds for Depreciation and CPI inflation. Additionally, to provide a level of symmetry in entry and exit with the proposed Depreciation commencement trigger, a new cessation trigger for Depreciation is also proposed. The current order of precedence will continue to be observed.

Table 1: Current and Proposed SCM Commencement and Cessation Triggers

Condition Trigger Current Proposed

CPI Inflation Commencement Trigger ≥20% ≥15%

Cessation Trigger <15% <15%

Depreciation of Local Currency vs. US$ Commencement Trigger ≥50% ≥30%

Cessation Trigger <35% <30%

24. Further, the following refinements have been identified and are proposed to provide greater efficiencies in process:

6 As of May 2016 - Argentina, Azerbaijan, Brazil, Ghana, Malawi, South Sudan and Zambia


a. Discontinue the conduct of a 2nd market analysis once a WBG SCM has been initiated. Experience in FY16 has shown that the 2nd market analysis has limited practical value. The timing is typically insufficient for comparators to have implemented any new change, or for the market to have developed a prevalent active response that the WBG can follow. However, the WBG will continue to conduct the 1st market analysis once the commencement trigger thresholds have been met for two months to understand how the market may have reacted as a direct response to the macroeconomic indicator, thus continuing the underlying principle of the WBG always assessing the prevalent market response.

b. Simplify the cessation criteria for a Depreciation SCM to the single criterion of meeting the cessation trigger for 3 consecutive months. Having a single cessation criterion will be make the framework clearer and increase the ease of communication.

25. Assessment timelines for any SCM implementation will continue to be based on meeting the applicable commencement trigger in any 3 months out of a 6 consecutive month assessment period.

26. However, where either of the predefined macroeconomic indicator exhibits a significant increase, whereby it is double the established threshold trigger (on a monthly average, following the year-to-year basis), there will be an accelerated implementation of the WBG SCM framework. This will mean that, rather than waiting for a country to register three months meeting the commencement trigger in an assessment period, implementation of the WBG SCM framework will occur after one month of meeting a “significant/extraordinary” increase. For countries where this is enacted, no external market study will be enacted.

27. Following the current framework, any scenarios that are not covered within the confines of the established macroeconomic indicators, such as wars and natural disasters, will continue to be managed on an ad hoc, case-by-case basis.

28. Continued Engagement with Business Stakeholders. In the course of FY17, further consultation will be carried out and potential refinements to this new framework proposed to ensure that it evolves in a manner consistent with business needs.

IV. Non-Salary Programs

29. WBG Non-Salary Awards Programs. The key themes for the WBG rewards and recognition program remain to be collaboration, innovation, collective delivery, and alignment of business objectives to performance, results, incentives and behaviors. The demand for WBG core services from across client groups remain strong and given the high expectations on WBG deliverables, it is important that awards programs are used to engage and motivate staff to collectively deliver towards business objectives, and provide managers with the tools to reward top performers, and recognize extraordinary individual and/or team contributions. Management recommends to continue the following awards programs for FY17 in order to facilitate and promote greater collaboration and collective delivery among staff, units, and VPUs towards the broader corporate objectives.

30. WBG and IBRD Awards Programs. A summary of the WBG and IBRD awards programs that have a monetary component is provided below. The FY17 proposed IBRD awards budget


will be maintained at the FY16 total amount of $3.7 million, covering the following WBG and IBRD awards programs:

a. WBG Spot Awards. Covering eligible staff across all organizational units (IBRD, IFC, and MIGA), the purpose of the Spot Awards is to recognize and express appreciation for extraordinary efforts in service of WBG goals. Awarded throughout the year, they allow recognition of both individual and team efforts.

b. IBRD/GEF VPU Team Awards.

i. The VPU Team Awards program provides meaningful recognition for outstanding team achievements demonstrating development impact and results, innovation, client focus, and collaboration across the WBG and with external partners. The VPU Team Awards criteria are broadly aligned with the WBG core competencies. In addition, this recognition program also enables each VPU to recognize a VPU-specific business priority. The vast majority of IBRD VPUs participate in the VPU Team Awards program.

ii. From the previous GP-CCSA Recognition Program under one VPU, the three (3) restructured Global Practices VPUs reverted to VPU Team Awards Program. With the July 1, 2015 reorganization of the GPs from one VPU to three VPUs, the new GP structure warranted rethinking of the GP-CCSA recognition program, and thus resulting in the GP Management Teams’ December 2015 suspension of the FY15 GP-CCSA Recognition Program. Based on additional stakeholder feedback, the program in its original design, required wider participation and broader eligibility by recognizing staff contributions across all appointment types. While the GP-CCSA Recognition program in its original form was suspended, the objective and intent to recognize and reward teams that have delivered GP-led programs and projects under the broad selection criteria of Collaboration, Knowledge-sharing, and Results (CKR) remained. The program was relaunched under the VPU Team Awards program, broadly with the same CKR criteria, and covering all appointment types. To leverage the nomination and selection processes, the GP Management Teams agreed to include the previously shortlisted teams (under the GP-CCSA Recognition Program), in addition to new nominations, and select the winning teams within the broad guidelines and timeframe of the VPU Team Awards process.

c. WBG Performance Awards for Integrated Units. As part of continuing efforts towards increasing performance-orientation and accountability for service delivery to the business, the performance awards program will continue to be adopted in the integrated areas of Human Resources (HRD) and Information and Technology Solutions (ITS). The performance awards program for these integrated units is in lieu of VPU Team Awards.

31. IBRD Finance Performance Awards Program. In July 2015, the FY16 IBRD Finance Performance Awards was formally launched. This program rewards teams and individuals with significant achievements and contributions to the goals of respective units/departments and VPUs in alignment with overall Finance Group-wide business priorities. This program links objectives to performance and incentives, to encourage staff towards collective and collaborative delivery as they support one another across departments to achieve key Finance VPU priorities. Three (3) thematic goals (Financial Sustainability, Collaboration and Innovation) were identified for the Finance Group, for which collective and collaborative delivery will be


anchored upon and evaluated. The Finance Performance Awards program is in place of the VPU Team Awards program.

32. MIGA Awards Program. The FY17 proposed awards budget of $228,000 will remain the same as in FY16. MIGA’s Management has determined that the effectiveness of the Award Program will greatly increase by concentrating the number of awards within a smaller universe of individuals with a higher nominal amount per award, while maintaining the overall budget allocation flat on the previous year. For FY17, two recognition programs (MIGA EVP Team Awards and MIGA Director’s Awards) will be consolidated into one MIGA Management Award Program that rewards outstanding individuals who make significant contributions to MIGA’s institutional and/or operational results, across several award categories/criteria. The criteria or award categories are innovation, business origination across full spectrum of MIGA’s products and geographic activities, business origination across fragile and conflict-affected states (FCS), diversity and inclusion, training champion awards (excellence in performance as internal trainers), and ACS awards (for ACS going beyond their mandate). The higher degree of selectivity will increase the motivational effect of the awards under the new program.

33. IFC Awards Programs. As an important component of IFC’s employment value proposition, IFC’s awards and variable pay programs are drivers that continue to help support the delivery of IFC’s corporate goals, and its ability to respond to key development challenges, create maximum value addition to clients, and strengthen impact and financial sustainability. Over the past years, IFC has enhanced the alignment between the IFC’s Scorecard and the WBG Corporate Scorecard, and also strengthened the link between corporate performance and awards pay-outs through the IFC Annual Performance Awards program. For the FY16 performance cycle, IFC will continue to implement key changes introduced last year. Among these changes are increased focus on fragile states, the expansion of IFC’s scorecard awards to operations support units, more recognition for client-facing functions, greater performance differentiation, all in support of the strategic alignment of performance goals across individual, department and corporate-wide levels.

34. Last year, for the FY16 performance cycle, Management requested to augment its awards and variable pay programs with an additional $8.5 million, conditional upon meeting corporate targets (including income and development impact-related metrics). Management provides regular updates on corporate target progress through quarterly reporting to the Board. Management proposes that in FY17, IFC will once again have access to such additional funds contingent on corporate financial measures. For FY17, IFC will consider paying out awards if IFC reaches its FY17 target for realized income. Once this corporate hurdle is met, further eligibility will take into account the portfolio Risk Adjusted Return on Capital/Internal Rate of Return outcomes for those departments that have met development scorecard targets in at least two of the past three years. This approach will replace the previous Long-Term Performance Awards program. The total awards budget will be broadly allocated between Scorecard/Performance Awards and Corporate Awards, which are specifically linked to strategic priorities.

35. For FY17, IFC proposes a total performance awards budget as follows:

a. A base budget of $20 million, which represents an inflationary increase (aligned with IFC’s overall budget increase) over the FY15 base awards budget of $19.6 million;

b. Additional amount of $8.6 million that will be available to IFC, contingent on the achievement of corporate-wide financial measures, including income and development impact-related metrics to reflect both short and longer-term performance perspectives.


The additional $8.6 million contingent amount is about 40% of the base budget and will be broadly applied to all IFC rewards and recognition programs, specifically to those programs that are linked to strategic priorities. There are a few other important features on the application of the additional budget: (i) the potential recipients of the contingent budget will be only those departments that have met or exceeded their development scorecard targets; (ii) in line with building and sustaining a performance culture, performance differentiation will be further emphasized, where awards pay-outs will be more focused on the top performers and outstanding teams; and (iii) as Fragile States and Conflict Affected Situations represents an urgent development priority for IFC, incentives for work on projects in FCS will be enhanced.

36. The current portfolio of IFC rewards and recognition programs cover the following:

a. Annual Performance Awards. The IFC annual performance awards program recognizes sustained outstanding performance at the individual or team level during the performance year. The program continues to have a direct and strong linkage to corporate-wide and departmental objectives (through the IFC Scorecard), where outstanding achievements and behaviors are recognized as IFC progresses in creating development impact, financial sustainability and effective delivery to clients. New features introduced last year will continue in this year’s implementation, such as increased focus on fragile states and client-facing functions, an expansion of IFC’s scorecard awards to operations support units, greater performance differentiation, and the creation of new targeted awards for a Strategic Priorities category, where staff were recognized for their contributions to FCS activities, portfolio value enhancements, and client coverage goals.

b. Corporate Awards. This program rewards team projects and/or initiatives with significant and lasting impact for IFC and its clients. Continuing from the FY15 performance cycle, the Corporate Awards program selection will focus on the same sharpened criteria in five thematic areas upon which team achievements will be recognized: (i) exceptional achievements in FCS countries, (ii) effective WBG collaboration, (iii) value-added knowledge sharing, (iv) strong contributions to achieving WBG Diversity and Inclusion goals, and (v) activities that substantially strengthen IFC delivery to clients.

c. IFC Smart Lessons. Recognizing contributions to knowledge sharing in IFC and the wider WBG, Smart Lessons is a cash recognition program that enables development practitioners to share lessons learned in advisory services and investment and financial operations.

37. IFC strives to be a more engaged, business-driven, and performance-focused organization; accordingly, it will continue to investigate ways to improve its awards programs. Any redesign would be aligned with any new initiatives such as functional pay differentiation initiatives or proposals, e.g. using awards or variable pay as a vehicle to further enhance functional differentiation. Over the medium term, IFC seeks to simplify and clarify its awards/incentive plans and better aligning them to IFC’s business strategy.

38. A summary of the rewards and recognition awards programs across the WBG is provided in Table 2.


Table 2: WBG Reward and Recognition Programs

* IFC will only have access to additional funds if corporate-wide financial measures (including income and development impact-related metrics) are met.

V. Total Rewards Strategy

39. Total Rewards Strategy. In 2015, the Board requested Management to present an overview of the competitive positioning of the WBG HQ staff Total Rewards package. Following the WBG’s combined strategies of: (a) broad US market-competitive salaries, together with (b) IFI-competitive benefits programs, analyses were undertaken to build up to a competitive Total Rewards position against each of these two defined markets. Comparative analysis of the Total Rewards positioning of the WBG was undertaken against these two different cohorts: (i) the U.S. market, using the Board-approved methodology for the annual compensation reviews, and (ii) a selection of International Financial Institutions, as defined in the Quadrennial Benefits Survey (QBS).

40. U.S. Market Review. The overall results of the U.S. Market review indicated the WBG positioning as follows:

a. Positioned within range of the targeted market positioning for Total Cash (base salaries plus annual bonuses / incentives);


b. Compared to the market Total Compensation (base salaries plus annual bonuses / incentives plus long term incentives), there is a decline in positioning due to the impact of Long Term Incentives, which although prevalent in the market at more senior grades (GG, GH and GI), are absent from the WBG;

c. On a Total Rewards perspective (base salaries, annual bonuses / incentives, long-term incentives plus benefits), the WBG benefit values offset the decline in Total Compensation position, bringing the WBG Total Rewards values to be at an improved position but still slightly lower than the target market positioning.

41. Additionally, this study was used to explore if separate pay policies or programs may be needed for certain functional areas. One such area identified as a possible functional pay differentiation pilot would be the investment / core finance job streams at the IFC (see Annex 6 for Functional Pay Differentiation Pilot at IFC).

42. IFI Market Review. When assessing the WBG’s compensation and benefits program against the select IFIs, the results of the review showed that:

a. From a Total Cash perspective, the WBG ranks 4th out of the 10 IFIs;

b. As Long-Term Incentives are not prevalent in the IFIs, the Total Compensation position remains the same as the Total Cash position; and

c. On the Total Rewards perspective, the WBG ranks 5th out of the 10 IFIs.

43. The findings of the 2 Total Rewards market studies provide clear evidence: (a) that the WBG’s positioning remains largely on target with the prescribed market positioning when compared to the broad U.S. market, as defined by the Board approved compensation methodology; and (b) when compared to a group consisting of leading International Financial Institutions (IFIs), the WBG continues to be competitive, ranking 5th out of the 10 organizations. Further details of the analyses can be found in Annex 5.

VI. Summary of Recommendations

44. Management requests that the Executive Directors approve the results of the rules-based Board approved methodology.7 For Washington, the results were arrived at using the indexation review methodology, whereas results for Country Offices were determined under comprehensive market reviews. This year’s results continue to align with the objectives set by the new methodology introduced in 2011.

45. The Executive Directors are requested to approve the proposed structure adjustment of 2.5% for Washington-appointed staff and the country-by-country structure adjustments covering 137 WBG office locations (including Satellite Offices) as provided in Annex 2.

46. The remaining components of the total merit increase envelope (salary progression and supplemental merit increase) will be absorbed within the nominal budget envelope for the

7 Please refer to 2015 Review of Staff Compensation for the World Bank Group, Annex 1, May 22, 2015 (R2015-0095; IDA/R2015-0144; IFC/R2015-0153; MIGA/R2015-0034)


Bank, IFC and MIGA. The Total Merit Increase (TMI) 8 envelope will be distributed to staff based on individual performance and position in range.

47. Management also presents the FY17 non-salary programs and recommends allocating, from within its net administrative budget, the following:

a. US$ 3.7 million for the WBG/IBRD rewards and recognition programs;

b. US$ 0.228 million for the MIGA recognition programs; and

c. US$ 20.0 million base budget and an additional amount of US$ 8.6 million (contingent on IFC’s achievement of corporate-wide financial measures, including income and development impact-related metrics) for IFC rewards and recognition programs.

48. Management also requests the approval of the refinements to the Special Compensation Measures framework, as described in par. 23-27, to be made effective as of FY17.

8 TMI is the sum of three elements: Structure Adjustment, Salary Progression Adjustment, and Supplemental Merit Increase.


Annex 1: July 1, 2016 Washington/HQ Salary Structure

49. The proposed July 1, 2016 annual net salary structure for Washington-appointed staff is shown in Table 3 below.

50. Grades GA to GI salary ranges and midpoints are adjusted based on the structure adjustment of 2.5%.

51. For grades GJ and GK, the Board-approved methodology is to adjust the midpoints for these grades by the May-to-May Washington-Baltimore Consumer Price Index (CPI) movement.9 On June 16, 2016, the United States Bureau of Labor Statistics reported that the May 2015 to May 2016 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, 2016 Washington/HQ Salary Structure

WBG

Grade

Staff

Count

(#)

Minimum

(US$)

Midpoint

(US$)

Maximum

(US$)

Salary

Range

Width*

Midpoint

Progression**

GA 1 26,300 37,600 48,900 86%

GB 20 32,200 46,000 59,800 86% 22%

GC 675 39,300 56,100 72,900 85% 22%

GD 590 46,500 66,400 86,300 86% 18%

GE 714 63,000 90,000 117,000 86% 35%

GF 1629 83,200 118,900 154,600 86% 32%

GG 2991 110,700 158,200 205,700 86% 33%

GH 1814 151,200 216,000 280,800 86% 37%

GI 227 229,900 287,400 344,900 50% 33%

GJ 29 276,900 325,800 374,700 35% 13%

GK 8 307,900 362,200 416,500 35% 11%

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

** Midpoint progression is the percent difference in midpoints from one grade to the next.

9 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 (now referred to as the midpoint) 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 the 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.


Annex 2: FY16 Retrospective & FY17 Recommendations - WBG Offices outside Washington

52. This section provides a summary of the structure adjustments and additional merit increases for locations outside of Washington in FY16 and FY17.

53. The FY16 and FY17 individual Country Office structure adjustments and additional merit increases are presented by WBG Office location in alphabetical order. The summary in Table 4 includes information for Satellite Offices (such as those in Western Europe, Japan and United States - New York City), all of which are based on the indexation methodology.

54. 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 2016.

Table 4: FY16-FY17 Structure Adjustments and Total Merit Increases by Location

Country Region

FY16

Structure

FY17

Structure

FY16

Additional

Merit

Increase

FY17

Additional

Merit

Increase

FY16

Total

Merit

Increase

FY17

Total

Merit

Increase

FY17

Inflation

(Reference

Only)

Afghanistan SAR 6.4% 6.3% 1.6% 3.5% 8.0% 9.8% 3.0%

Albania ECA 2.7% 2.3% 2.6% 3.4% 5.3% 5.7% 1.5%

Algeria MNA 0.0% 8.6% 2.0% 0.1% 2.0% 8.7% 6.2%

Angola AFR 7.3% 34.7% 1.4% 0.7% 8.7% 35.4% 16.9%

Argentina LCR 22.7% 15.4% 1.5% 2.1% 24.2% 17.5% 35.0%

Armenia ECA 0.0% 3.5% 3.7% 0.3% 3.7% 3.8% -1.5%

Australia EAP 3.0% 5.2% 2.3% 0.5% 5.3% 5.7% 1.8%

Austria HQ 0.4% 3.0% 3.3% 0.9% 3.7% 3.9% 0.7%

Azerbaijan ECA 9.7% 5.3% 1.5% 0.1% 11.2% 5.4% 11.5%

Bangladesh SAR 11.8% 10.1% 1.9% 2.6% 13.7% 12.7% 5.6%

Belarus ECA 0.0% 0.9% 3.7% 2.6% 3.7% 3.5% 14.0%

Belgium HQ 1.2% 2.5% 4.0% 2.8% 5.2% 5.3% 2.2%

Benin AFR 2.8% 10.9% 1.3% 2.9% 4.1% 13.8% 2.8%

Bhutan SAR 11.9% 19.2% 1.4% 0.2% 13.3% 19.4% 6.1%

Bolivia LCR 3.1% 5.5% 0.1% 0.9% 3.2% 6.4% 3.2%

Bosnia-Herzegovina ECA 1.2% 0.0% 1.0% 3.3% 2.2% 3.3% -0.8%

Botswana AFR 5.9% 2.8% 0.1% 9.3% 6.0% 12.1% 3.6%

Brazil LCR 13.4% 7.8% 2.9% 4.6% 16.3% 12.4% 8.9%

Bulgaria ECA 0.0% 3.9% 2.2% 0.4% 2.2% 4.3% -0.9%

Burkina Faso AFR 0.0% 2.9% 2.3% 1.3% 2.3% 4.2% 1.3%

Burundi* AFR 0.0% 0.0% 2.5% 5.0% 2.5% 5.0% 5.8%


Country Region

FY16

Structure

FY17

Structure

FY16

Additional

Merit

Increase

FY17

Additional

Merit

Increase

FY16

Total

Merit

Increase

FY17

Total

Merit

Increase

FY17

Inflation

(Reference

Only)

Cambodia EAP 8.4% 8.9% 0.9% 0.9% 9.3% 9.8% 3.3%

Cameroon* AFR 0.0% 0.0% 2.5% 4.6% 2.5% 4.6% 2.3%

Central African

Republic* AFR 5.6% 0.0% 0.1% 3.3% 5.7% 3.3% 5.3%

Chad AFR 0.0% 0.0% 2.0% 2.7% 2.0% 2.7% 3.8%

China EAP 9.2% 8.7% 0.5% 5.0% 9.7% 13.7% 1.4%

Colombia LCR 4.4% 4.2% 2.2% 3.3% 6.6% 7.5% 8.0%

Congo AFR 0.0% 0.0% 2.0% 2.5% 2.0% 2.5% 2.4%

Costa Rica LCR 5.8% 1.5% 7.3% -1.1%

Cote d'Ivoire* AFR 0.0% 0.0% 2.0% 2.8% 2.0% 2.8% 1.5%

Croatia ECA 3.0% 6.9% 0.7% 0.1% 3.7% 7.0% -1.0%

Democratic Republic

of Congo AFR 0.0% 0.0% 2.2% 4.0% 2.2% 4.0% 1.1%

Djibouti MNA 5.8% 7.9% 9.8% 0.1% 15.6% 8.0% 3.6%

Dominican Republic LCR 3.4% 12.5% 0.3% 4.0% 3.7% 16.5% 1.6%

Ecuador LCR 0.0% 5.5% 4.8% 0.1% 4.8% 5.6% 2.2%

Egypt* MNA 0.0% 0.0% 2.3% 7.4% 2.3% 7.4% 7.5%

El Salvador LCR 0.0% 4.6% 4.0% 3.9% 4.0% 8.5% 1.3%

Equatorial Guinea AFR 0.0% 2.0% 2.0% 2.8%

Ethiopia* AFR 2.5% 0.0% 1.4% 8.9% 3.9% 8.9% 9.0%

France - Marseille HQ 0.1% 1.5% 5.8% 1.0% 5.9% 2.5% -0.1%

France – Paris HQ 0.3% 1.5% 3.1% 1.0% 3.4% 2.5% -0.1%

FYR Macedonia ECA 1.8% 3.6% 2.2% 4.3% 4.0% 7.9% 0.5%

Gabon AFR 0.0% 3.3% 2.0% 0.1% 2.0% 3.4% 1.6%

Gambia* AFR 5.3% 0.0% 0.1% 3.5% 5.4% 3.5% 7.2%

Georgia ECA 6.7% 2.8% 0.8% 0.4% 7.5% 3.2% 4.7%

Germany HQ 0.0% 0.5% 2.0% 1.5% 2.0% 2.0% 0.3%

Ghana AFR 8.5% 23.8% 2.5% 1.7% 11.0% 25.5% 17.3%

Guatemala LCR 1.1% 7.2% 1.0% 2.8% 2.1% 10.0% 4.4%

Guinea AFR 18.1% 21.8% 2.1% 0.1% 20.2% 21.9% 8.5%

Guinea-Bissau AFR 0.0% 0.0% 2.0% 2.0% 2.0% 2.0% 1.5%

Guyana LCR 0.0% 0.1% 2.0% 1.9% 2.0% 2.0% 0.8%

Haiti LCR 0.0% 12.5% 5.4% 2.0% 5.4% 14.5% 14.8%

Honduras LCR 8.3% 8.5% 8.5% 2.3% 16.8% 10.8% 3.0%

Hong Kong SAR,

China EAP 7.0% 6.2% 0.4% 1.2% 7.4% 7.4% 3.4%


Country Region

FY16

Structure

FY17

Structure

FY16

Additional

Merit

Increase

FY17

Additional

Merit

Increase

FY16

Total

Merit

Increase

FY17

Total

Merit

Increase

FY17

Inflation

(Reference

Only)

India - Chennai SAR 3.2% 4.0% 5.4% 7.7% 8.6% 11.7% 5.3%

India – New Delhi SAR 2.7% 8.2% 2.9% 3.4% 5.6% 11.6% 5.3%

Indonesia EAP 5.0% 9.5% 2.5% 2.8% 7.5% 12.3% 4.3%

Iraq MNA 12.9% 15.6% 2.7% 0.8% 15.6% 16.4% 2.4%

Italy HQ 0.0% 0.0% 2.0% 2.0% 2.0% 2.0% -0.2%

Jamaica LCR 0.0% 6.2% 2.9% 9.3% 2.9% 15.5% 2.7%

Japan HQ 0.0% 2.0% 4.2% 0.9% 4.2% 2.9% 0.3%

Jordan MNA 2.7% 7.0% 2.4% 1.8% 5.1% 8.8% -1.6%

Kazakhstan ECA 0.0% 0.0% 2.5% 5.6% 2.5% 5.6% 13.6%

Kenya* AFR 6.1% 0.0% 3.6% 5.3% 9.7% 5.3% 5.6%

Kosovo ECA 1.0% 3.3% 3.9% 2.7% 4.9% 6.0% 0.5%

Kuwait MNA 2.5% 0.0% 3.9% 4.4% 6.4% 4.4% 4.3%

Kyrgyz Republic ECA 6.0% 8.1% 1.6% 4.4% 7.6% 12.5% 1.6%

Lao EAP 10.0% 7.2% 3.2% 4.6% 13.2% 11.8% 1.0%

Lebanon MNA 2.8% 1.7% 2.3% 1.9% 5.1% 3.6% -2.8%

Lesotho* AFR 2.5% 0.0% 2.0% 3.3% 4.5% 3.3% 4.6%

Liberia AFR 6.5% 0.0% 2.4% 2.8% 8.9% 2.8% 6.3%

Libya MNA 0.0% 0.0% 2.0% 2.0% 2.0% 2.0% 13.0%

Madagascar AFR 0.0% 17.1% 3.2% 5.4% 3.2% 22.5% 8.9%

Malawi AFR 5.4% 14.2% 2.3% 3.3% 7.7% 17.5% 25.1%

Malaysia EAP 0.0% 2.0% 2.0% 4.2%

Maldives SAR 1.9% 0.0% 0.1% 2.0% 2.0% 2.0% 2.1%

Mali* AFR 1.9% 0.0% 1.0% 4.3% 2.9% 4.3% -1.5%

Mauritania* AFR 7.6% 2.4% 2.1% 1.0% 9.7% 3.4% 3.5%

Mauritius* AFR 0.0% 2.0% 2.0% 2.3% 2.0% 4.3% 2.0%

Mexico LCR 0.0% 0.0% 2.1% 3.6% 2.1% 3.6% 2.5%

Moldova ECA 8.9% 0.0% 1.3% 3.1% 10.2% 3.1% 9.7%

Mongolia EAP 10.7% 7.9% 0.2% 0.2% 10.9% 8.1% 0.8%

Montenegro ECA 2.8% 0.0% 0.1% 7.0% 2.9% 7.0% 1.6%

Morocco MNA 3.6% 1.5% 0.2% 2.7% 3.8% 4.2% 1.6%

Mozambique AFR 0.0% 0.0% 4.9% 2.1% 4.9% 2.1% 12.9%

Myanmar EAP 13.1% 12.7% 1.1% 0.9% 14.2% 13.6% 7.2%

Nepal SAR 6.8% 10.9% 1.5% 1.7% 8.3% 12.6% 10.2%

Nicaragua LCR 2.3% 9.0% 3.8% 1.0% 6.1% 10.0% 4.4%

Niger AFR 0.0% 0.0% 2.3% 2.0% 2.3% 2.0% 1.1%

Nigeria AFR 3.8% 23.2% 4.8% 1.6% 8.6% 24.8% 12.7%


Country Region

FY16

Structure

FY17

Structure

FY16

Additional

Merit

Increase

FY17

Additional

Merit

Increase

FY16

Total

Merit

Increase

FY17

Total

Merit

Increase

FY17

Inflation

(Reference

Only)

Pakistan SAR 0.0% 17.4% 3.5% 3.8% 3.5% 21.2% 4.0%

Panama LCR 0.0% 8.0% 2.4% 2.1% 2.4% 10.1% 1.0%

Papua New Guinea EAP 7.1% 9.9% 4.5% 2.3% 11.6% 12.2% 6.5%

Paraguay LCR 3.2% 10.5% 11.6% 5.5% 14.8% 16.0% 5.0%

Peru LCR 0.0% 4.3% 2.0% 0.3% 2.0% 4.6% 3.7%

Philippines EAP 4.6% 7.7% 0.9% 0.9% 5.5% 8.6% 1.4%

Poland ECA 2.7% 0.6% 0.1% 2.1% 2.8% 2.7% -0.5%

Romania ECA 4.5% 4.5% 0.8% 2.1% 5.3% 6.6% -1.4%

Russian Federation ECA 0.0% 0.0% 2.4% 2.6% 2.4% 2.6% 7.4%

Rwanda* AFR 0.0% 0.0% 2.3% 3.5% 2.3% 3.5% 3.5%

Samoa EAP 0.0% 0.0% 2.0% 2.0% 2.0% 2.0% -3.0%

Saudi Arabia MNA 0.3% 4.1% 1.7% 1.9% 2.0% 6.0% 4.6%

Senegal* AFR 0.0% 0.0% 2.5% 3.9% 2.5% 3.9% 1.2%

Serbia ECA 1.4% 3.3% 0.6% 0.9% 2.0% 4.2% 1.4%

Sierra Leone* AFR 7.0% 3.0% 5.9% 3.9% 12.9% 6.9% 6.8%

Singapore EAP 5.9% 5.0% 0.1% 2.8% 6.0% 7.8% -0.7%

Solomon Islands EAP 10.3% 2.6% 1.6% 1.7% 11.9% 4.3% 2.1%

South Africa* AFR 0.0% 3.6% 2.2% 2.8% 2.2% 6.4% 5.8%

South Korea EAP 0.0% 0.0% 5.8% 6.6% 5.8% 6.6% 0.8%

South Sudan* AFR 0.0% 0.0% 2.0% 5.4% 2.0% 5.4% 245.2%

Sri Lanka SAR 11.8% 8.8% 1.6% 1.6% 13.4% 10.4% 2.7%

Sudan* AFR 0.0% 3.5% 11.9% 5.1% 11.9% 8.6% 18.7%

Switzerland HQ 1.9% 2.0% 3.1% 3.8% 5.0% 5.8% -0.9%

Tajikistan ECA 5.0% 4.2% 1.2% 3.2% 6.2% 7.4% 10.5%

Tanzania AFR 0.0% 12.6% 2.2% 3.7% 2.2% 16.3% 5.4%

Thailand EAP 4.0% 3.5% 2.4% 1.5% 6.4% 5.0% -0.7%

Timor-Leste EAP 0.2% 3.9% 1.8% 0.1% 2.0% 4.0% -0.8%

Togo AFR 0.0% 0.0% 4.9% 7.7% 4.9% 7.7% 2.4%

Tonga EAP 0.0% 2.0% 2.0% -1.3%

Trinidad and Tobago LCR 0.0% 7.8% 4.8% 1.8% 4.8% 9.6% 5.9%

Tunisia MNA 15.0% 9.0% 1.0% 4.1% 16.0% 13.1% 3.3%

Turkey - Ankara ECA 6.1% 9.1% 5.9% 0.7% 12.0% 9.8% 7.5%

Turkey - Istanbul ECA 9.5% 9.4% 2.5% 0.6% 12.0% 10.0% 7.5%

Turkmenistan ECA 5.6% 3.8% 8.2% 0.4% 13.8% 4.2% 5.5%

Uganda* AFR 5.0% 0.0% 2.6% 4.8% 7.6% 4.8% 7.1%

Ukraine ECA 0.0% 0.0% 2.3% 2.7% 2.3% 2.7% 19.8%


Country Region

FY16

Structure

FY17

Structure

FY16

Additional

Merit

Increase

FY17

Additional

Merit

Increase

FY16

Total

Merit

Increase

FY17

Total

Merit

Increase

FY17

Inflation

(Reference

Only)

United Arab

Emirates MNA 3.3% 7.6% 4.2% 4.1% 7.5% 11.7% 4.0%

United Kingdom HQ 6.8% 2.1% 0.9% 1.4% 7.7% 3.5% 0.5%

United States – New

York City HQ 2.7% 2.5% 1.9% 2.4% 4.6% 4.9% 1.0%

Uruguay LCR 2.9% 9.2% 3.5% 4.1% 6.4% 13.3% 9.9%

Uzbekistan ECA 1.4% 9.3% 0.6% 0.7% 2.0% 10.0% 11.5%

Vanuatu EAP 0.8% 6.8% 3.3% 0.1% 4.1% 6.9% 3.0%

Vietnam EAP 10.0% 6.8% 1.7% 4.2% 11.7% 11.0% 0.8%

West Bank and Gaza MNA 2.8% 3.5% 3.8% 2.6% 6.6% 6.1% 0.0%

Yemen MNA 4.4% 3.4% 3.1% 0.5% 7.5% 3.9% 20.6%

Zambia* AFR 0.0% 0.0% 2.0% 5.5% 2.0% 5.5% 20.8%

Zimbabwe* AFR 0.0% 4.6% 2.0% 1.6% 2.0% 6.2% 3.5%

*Due to local market dynamics and conditions in these locations, Management has submitted higher progression adjustment

figures in these countries to target positioning of salaries slightly above the salary scale and provide additional compensation

support to staff this year. The higher salary should produce lower total merit increase figures in FY18 in order to bring salaries

back into alignment with the salary scale.


Annex 3: Additional Compensation Elements: Calculation Methodology

Salary Progression Adjustment Methodology

55. The salary progression adjustment (SPA) represents the difference between the weighted average salaries versus the aggregate midpoints. The table below shows the 5-year trend 2011-2015 (FY12-FY16) of the weighted average salary gap versus the aggregate Midpoints, which is the basis for the FY17 SPA for Washington-appointed staff.

56. Based on the Board-approved methodology, a five-year rolling average (determined based on confirmed staff with greater than one year time in grade) serves as input for the salary progression adjustments. The rolling average approach helps to address competitiveness gaps between WBG salaries and the market that may occur over time as a result of "payroll not being equal to pay line". In addition, the use of a five-year average on a rolling basis has a "smoothing" effect that will gradually address salary erosion against market.

57. The SPA (or a similar element) is 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. For FY17 (2016), the salary progression adjustment for Washington-appointed staff is 2.1%, based on the 5-year average aggregate salaries (of confirmed staff with more than one year of service in the same grade) relative to market reference points over the same period, as established by the Board-approved methodology.

58. 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 distributed solely based on performance.

Table 5: Salary Progression Adjustment

Year Salary Gap with the

Midpoint (Full Actual)

Salary Gap with the Midpoint

(Using staff with greater than one year time-in-grade)

Percentage Point Difference

2011 2.4% 1.1% 1.3%

2012 3.3% 1.8% 1.5%

2013 3.9% 2.4% 1.5%

2014 4.0% 2.7% 1.3%

2015 3.9% 2.7% 1.2%

5-year Average 3.5% 2.1% 1.4%


Supplemental Merit Increase Methodology

59. The Supplemental Merit Increase (SMI) envelope is determined using a rules-based measurable methodology.

60. The SMI envelope is determined based on the salary gap of staff with performance rating of 4 or 5 relative to the midpoints of their grade salary range (performance rating or PR is based on relative contribution against peers). This approach differs from the pre-FY12 methodology that 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.

61. For 2016, the supplemental merit increase pool for Washington-appointed staff is 0.3%. Each Country Office's supplemental merit increase pool is determined following a formula that is similar to Washington’s SMI pool calculation. Annex 2 shows the country-by-country results, applying the SMI approach to each Country Office (as reflected in the Additional Merit Increase data).

62. The SMI will be put together with the structure adjustment and the salary progression adjustment to form one single merit pool, or Total Merit Increase, to be distributed to all eligible staff based on performance and position in salary range.


Annex 4: Special Compensation Measures

63. The table below lists the countries where WBG SCM were applied in FY16 (as of May 2016).

Table 6: List of countries (alphabetical order) where WBG SCM was applied in FY16

Region Country SCM Type

LCR Argentina Depreciation

ECA Azerbaijan Depreciation

LCR Brazil Depreciation

AFR Ghana Depreciation

AFR Malawi Inflation

AFR South Sudan Inflation

AFR Zambia Depreciation

64. Comparison of Special Compensation Measures Framework. Table 7 provides a comparison of the current and proposed Special Compensation Measures framework.

Table 7: Comparison of Current and Proposed Special Compensation Measure Framework

Current SCM Proposed SCM Action

Eligibility

Regular, Open, Term Staff Yes Yes No Change

STT/STC VP discretion VP discretion No Change

Macroeconomic Indicators

Depreciation Official Official No Change

Depreciation – Source CDS CDS No Change

Inflation Country CPI Country CPI No Change

Inflation – Source IMF IMF No Change

Thresholds – Commencement

Depreciation of local currency vs.

US Dollar ≥50% ≥30% Revised

Depreciation of local currency vs.

US Dollar (Sig./Extraordinary) n/a ≥60% New

CPI Inflation ≥20% ≥15% Revised

CPI Inflation (Sig./Extraordinary) n/a ≥30% New

Commencement Assessment

Assessment (Standard) Any 3 months out of 6

consecutive months

Any 3 months out of 6

consecutive months No Change

Assessment (Sig./Extraordinary) n/a 1 month New

Thresholds – Cessation

Cessation – Depreciation 1 <35% <30% Revised


Cessation – Depreciation 2 6 months implementation N/A Removed

Cessation – Depreciation 3 Inflation SCM N/A Removed

Cessation – Inflation <15% <15% No Change

Cessation Assessment

Depreciation 3 consecutive months 3 consecutive months No Change

Inflation 3 consecutive months 3 consecutive months No Change

WBG SCM Payments

Depreciation Virtual Indexation Virtual Indexation No Change

Inflation – Measure 1 Lump Sum Lump Sum No Change

Inflation – Measure 2 Off cycle salary review Off cycle salary review No Change

Retroactive Nature of Payments

when Threshold criteria met None None No Change

Market Analysis

1st Market Analysis Yes

Yes (except in the case of

“Sig./Extraordinary”

conditions)

No Change

2nd Market Analysis (once SCM

implemented) Yes N/A Removed

Depreciation SCM Payments

Indexation rate

Average of 12 month,

monthly average

immediately preceding SCM

implementation

Average of 12 month,

monthly average

immediately preceding first

month where SCM

commencement trigger is

met

Revised

Spot Rate

Most recently available spot

rate as of date of payroll

processing

Most recently available spot

rate as of date of payroll

processing

No Change

Definition of salary where SCM

implementation continues post

July 1

Retroactively calculated to

new July 1 salary

Calculation based on current

salary at SCM

implementation (i.e., not

retroactively calculated for

new July 1 salary)

Revised

Inflation SCM Payments

Lump Sum Calculation [Most Recent CPI]-[Previous

TMI]

[Most Recent CPI]-[Previous

TMI] No Change

65. Where the 1st Inflation WBG Special Compensation Measure lump sum calculation is negative (i.e., where the TMI is greater than the CPI), no lump sum will be provided.

66. Process for Governance and Application. HRDCB will notify HR VP, Regional Management, BPS, and other stakeholders of planned activation of Special Measures.


67. Budget Impact. Cost pressures, if any, arising out of the Special Compensation Measures, would be absorbed within the Bank and IFC’s nominal budget envelope.


Annex 5: WBG Total Rewards Study

68. Background. In FY16, a U.S. Total Rewards Market Study was undertaken and this study reviewed WBG’s total package versus the market, as defined by the WBG methodology. This study also included a broad review of the Bank Group’s Total Rewards strategy, which looked at some key compensation principles, including total compensation elements (base salary and variable pay components) and an exploration if separate pay policies or programs may be needed for certain functional areas. One such area identified as a possible functional pay differentiation pilot would be the investment / core finance job streams at the IFC. In addition, WBG data analyses were undertaken to build up to a Total Rewards position that was compared to the International Financial Institutions (IFI) market, using a select group of IFIs as defined in the Quadrennial Benefits Survey (QBS).

69. Two Market Studies10. This section presents two types of report analysis: (a) U.S. private/public market analysis showing the three sectors of private financial, private general, and public as per the WBG compensation methodology; and (b) IFI market analysis showing IFI community data, as per the QBS surveyed organizations.

70. Parameters of the Market Studies. The following summarizes the key parameters describing the study:

a. Analysis included all HQ US employees in grades GA to GI; comparisons were made on a grade-by-grade basis;

b. Report /data reference date is July 1, 2015;

c. The analysis included exhibits on (i) Total Cash (base pay plus annual bonuses / incentives); (ii)Total Compensation (Total Cash plus long-term incentives); (iii) Total Benefits (e.g. welfare benefits such as retirement, life insurance, health care, retiree welfare); and (iv) Total Rewards (Total Compensation plus Total Benefits);

d. U.S. Market Study – Market data were drawn from three sectors: private financial, private general, and public sector; the sectors were weighted equally (or 2/3 total private sectors, and 1/3 public sector) when calculating the overall market data as per the current WBG compensation methodology;

e. IFI Market Study – Market data were collected from 10 IFIs (including WBG) with HQ locations around the world. Market data was adjusted by using the purchasing power parity (PPP) conversion factor;11

f. Market data comparisons were made against the market’s 75th percentile as per the WBG compensation methodology; in addition, where relevant and applicable, some comparisons vs. medians/averages were made;

g. Market data was estimated and netted down to compare with the WBG’s net values; and

10 The two market studies were conducted by external international consulting firms, with expertise in the areas of global total compensation/total rewards: Aon Hewitt and McLagan. 11 Purchasing power parity (PPP) conversion factor used (http://data.worldbank.org/indicator/PA.NUS.PPP).


h. Total employer provided benefits value for each WBG grade, as well as a total employer provided benefits 50th percentile value for the market using normative valuation methods and assumptions.

71. U.S. Private/Public Market Study. The following charts present the overall summary of findings on the U.S. Market Study across the various compensation and benefits elements.

Chart 1: WBG Net Total Cash Competitive Position – HQ Overall and by Organizational Unit

WBG Total Cash (Chart 1) on aggregate is broadly aligned with market 75th percentile.


Chart 2: WBG Net Total Compensation Competitive Position – HQ Overall and by Organizational Unit

Chart 2 shows that the WBG position declines on Total Compensation specifically at grades GG, GH and GI when market long term incentives are factored.

Chart 3: WBG Net Benefits Value Competitive Position – HQ Overall and by Organizational Unit

WBG’s Total Benefits programs (Chart 3) are positioned above the market across all grades.


Chart 4: WBG Net Total Rewards Value Competitive Position – HQ Overall and by Organizational Unit

Chart 4 indicates that, with WBG’s benefits, WBG’s competitive position improves on Total Rewards except at GH and GI levels, where WBG falls behind market.


72. Functional Analysis. Across the major functional areas, the WBG functions are within competitive range vs. the relevant functional market data. The only exception is the investment job stream, which is significantly below the market.

Chart 5: WBG Net Total Rewards Value Competitive Position – Investment Job Stream

As indicated in Chart 5, the investment job stream falls below investment market across the grades (GE-GI), starting at the investment analyst level up the lead investment jobs.

73. Key Areas where WBG Principles may be reviewed. With the review of the WBG’s Total Rewards, 2 key areas emerged for further consideration. These 2 areas are determined to be important elements in order to continue to (i) support the WBG Employment Value Proposition, (ii) be sustainable, and (iii) achieve the desired results regarding attraction, retention, and engagement of the key talent that the WBG needs to be successful in its work program delivery to the clients.

a. Shift of the reward mix from a reliance on base salary to a mix of base salary and variable pay. Over time, the WBG may consider supporting the evolution of a reward mix at WBG from a guaranteed/fixed pay perspective to one that provides some contingent pay/pay at risk. This would more closely align the WBG reward strategy and design with external market norms. Furthermore, it would align with principles related to sustainability and pay for performance.

b. Explore functional segmentation. Based on business need, and to help improve attraction, retention, and engagement of key talent, functional pay differentiation vehicles / tools may be introduced for key and select functions - See following annex for additional information on the exploratory study of Functional Pay Differentiation pilot at IFC.


74. IFI Market Study. To complement the Total Rewards Study on U.S. private/public sector, another review was conducted where analysis were undertaken to build up to a competitive Total Rewards position using the IFI comparators data as defined in the QBS.

75. Table 8 indicates the ten IFIs included in the IFI market study.

Table 8: List of IFIs

African Development Bank Inter-American Development Bank

Asian Development Bank International Monetary Fund

Bank for International Settlements Organization for Economic Cooperation and Development

European Bank for Reconstruction and Development

World Trade Organization

European Central bank World Bank Group

76. IFI Market Study: Summary of Results - Overall Analysis – Overall, the WBG was on an aggregate level market competitive versus the defined IFI group. On each reward element, the ranking is as follows:

a. Total Cash / Total Compensation - WBG ranked 4th out of 10

b. Total Benefits – WBG ranked 4th out of 10

c. Total Rewards – WBG ranked 5th out of 10

Chart 6: Total Cash and Total Compensation (Net US$ Value)

Note: As shown in Chart 6, there is no distinct difference between total cash and total compensation for the IFIs given that IFIs do typically not provide long term incentive programs.

Additionally, to observe confidentiality agreements with the organizations, each IFI has been coded as A to I. However, use of this coding is interchanged in all charts – i.e. organization ‘A’ in Chart 6 may not be the same organization represented as ‘A’ in Chart 7-8.


Chart 7: Total Benefits (Net US$ Value)

Chart 8: Total Rewards (Net US$ Value)


77. Headcount Analysis. In addition to the Total Rewards analysis, comparative analysis was also made on staff weightings of the various WBG grades versus the IFI market. This was conducted by segmenting the staff in 3 categories: Management (WBG equivalent grades of GI-GK), Professional (GE-GH) and ACS (GA-GD), as well as by the individual WBG grade bands.

Chart 9: Headcount by Grouping

Per Chart 9, the headcount analysis shows that the WBG proportion or ratio of staff is generally aligned with the practices of the IFI community. One point of note is that there is a slight deviation at grades GA and GB due to the small population of staff and positions in these grades at the WBG.


Annex 6: Functional Pay Differentiation Pilot at IFC

78. Background. The WBG 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. While this is the case for the WBG, external market compensation levels behave differently, specifically 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, where such key functions are compensated 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 business-related talent and skills concerns including recruiting and retention challenges, and staff engagement in various labor markets.

79. In FY16, a U.S. Total Rewards Market Study was undertaken and this study reviewed WBG’s total cash (base salary plus annual bonuses/incentives), and total rewards value (total cash plus long term incentives plus benefits values), versus the market, as defined by the WBG methodology. This study also included a broad review of the Bank Group’s Total Rewards strategy, which looked at some key compensation principles including total compensation elements (such as base salary and variable pay components), to explore if separate pay policies or programs may be needed for certain functional areas. One such area identified as a possible functional pay differentiation pilot would be the investment / core finance job streams at the IFC.

80. The functional pay differentiation study is a direct corollary to the U.S. Total Rewards Market Study. The outcome of the Total Rewards study informs any design concepts/ideas related to the feasibility of any functional pay differentiation pilot for IFC, and any options or recommendations on the type of functional pay approach that may find application at IFC.

81. Functional Pay Differentiation Definition. Largely driven by both business-related reasons and external market forces, functional pay differentiation is a vehicle or tool that would differentiate or set apart the total rewards package for certain key jobs or functions, compared to other staff groups/functions. These vehicles or tools cover a range of options, such as: (a) base salary-related approaches (e.g. adopting a different / separate salary scale for the investment job stream, or administering the relevant jobs in a higher salary zone within the same broad salary scale), (b) variable-pay/incentive type of approaches where total pay for these functions will be better differentiated through additional bonuses and/or incentives, or (c) a combination of approaches.

82. Guiding Principles. Today, given IFC’s more private-sector driven nature of business, and more private-sector staff and talent profile, it has implemented various reward and recognition programs that have evolved over time. These programs help reinforce the link between the achievement of business goals and rewards, and promote greater performance differentiation. The continued exploration and possible introduction of any functional pay differentiation approaches in the future, would need to complement IFC’s suite of awards programs. As the exploratory study ensues, a few key guiding principles need to be articulated:

a. Functional pay differentiation is a tool that would attempt to focus and engage staff (may be a combination of individuals and teams) that may be identified as ‘game changers’ (high impact, mission-focused staff) in delivering IFC’s mission and business results. While recruitment and retention continue to be issues that may need to be addressed, engagement and motivation of staff should be a focus – “how do we nurture staff to be ‘game changers’ in delivering our mission?”


b. Functional pay differentiation and IFC awards programs would need to be implemented in an optimal, integrated and complementary manner. With the positive experience on IFC’s awards programs, there are opportunities to build on the current proposition, and enhance it. Any new functional pay differentiation elements are not intended to be a top-up or an add-on to IFC’s portfolio of rewards and recognition programs. Any new design or redesign should have an eye for simplifying the programs, clarifying the program objectives, and better aligning these programs to IFC’s business strategy.

c. Although functional pay differentiation may partially address the gap between the market pay levels and staff pay levels for key job streams, there is no intent to fully match comparators’ pay levels; it is recognized that total rewards is only one of the elements in the WBG’s total employment value proposition.

83. Design Options / Approaches. Based on inputs from senior leaders at IFC, and external reward trends and market practices, findings of the exploratory study provide below a few design parameter options. These are initial thinking and ideas, and would require further review. Any future action or implementation plan, would need a good understanding of how “functional pay differentiation” may realistically find application at IFC.

Approach Pros Cons Market Practice

A. Salary Increase* Staff in identified areas receive a salary increase

Inherent nature and content of job when awarded through salary increase, may generally be seen by staff as more objective and fair

Higher cost, as salary-related benefits are impacted

Less targeted in areas with larger market gap

The market would most closely resemble the “hybrid approach”, with somewhat higher base rates for key job streams, but also greater incentive opportunities for outstanding individuals in those selected job streams

B. Functional Incentive Awards Staff in identified areas are eligible for a functional incentive award**

Can vary year-on-year based on outcomes, performance or results; these awards are targeted and adjustable over time, should market trends shift

Staff may raise issues related to salary-linked benefits

C. Hybrid Combination of salary increase and incentive award approaches

Balances approaches A and B

* This approach may lead to such options as a separate salary scale, or higher salary zone (but administered within the same salary scale) for jobs in the identified areas (e.g. investment and core finance job streams).

**For example: Small incentive award opportunity for teams in key functions, and larger incentive opportunity for individual outstanding performance in key functions

84. Next Steps. Based on stakeholder feedback, further work would need to be undertaken on the above approaches. If any of the design options move forward to becoming more firm proposals, then they can be shared with the Board in due course.

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