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How has the Bank supported downsizing?. Erika Jorgensen, OPCCE May 3, 2004 “ Public Administration Retrenchment: Challenges and Options ” PREM Knowledge and Learning Week 2004. Overview. History of Severance Policy Current Policy Processing Operations with Severance Pay

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How has the bank supported downsizing

How has the Bank supported downsizing?

Erika Jorgensen, OPCCE

May 3, 2004

“Public Administration Retrenchment: Challenges and Options”

PREM Knowledge and Learning Week 2004


Overview
Overview

  • History of Severance Policy

  • Current Policy

  • Processing Operations with Severance Pay

  • Emerging Questions and Issues

  • Recent Operations Financing Severance Pay


History of severance policy
History of Severance Policy

  • Since mid-1980s, Bank supported retrenchment and severance payments through Adjustment Lending, but severance in Investment Lending was less uniform

  • The 1996 OpMemo allowed funding under Investment Lending for severance to make public enterprises or sectors more productive

  • April 2002 OpMemo extended scope to other categories of public employment


Current policy
Current Policy

  • OpMemo (April 5, 2002)

    • Guidance to Staff “Financing Severance Pay in Public Sector Reform Operations”

    • Replaced OpMemo (March 5, 1996) on Public Enterprise Reform Operations

    • To be rolled into new OP/BP 6.00 on Expenditure Eligibility but MDO retains oversight


Current policy1
Current Policy

  • 8 Key Considerations

    • Basic Facts (Size of severance component compared to loan/credit)

    • Description of Severance Packages (formula, voluntary, average payment size, pensions and other benefits separate, regional/international comparisons)


Current policy2
Current Policy

  • 8 Key Considerations (cont.)

    • Impact and Sustainability of Public Sector Reform (link to operation’s objectives, broader institutional reform, impact on productivity, competitive environment, contribution to poverty reduction)

    • Sector Policy Framework (adequate, redeployment of resources)

    • Economic Analysis (costs: pay + other compensation + lost production, versus benefits: savings + efficiency gains)


Current policy3
Current Policy

  • 8 Key Considerations (cont.)

    • Sustainability of Retrenchment Component (adverse selection, overpayment, moral hazard)

    • Legal Aspects and Political Economy Considerations (legal minimum and augmentations, labor laws, labor market, precedents and the future)

    • Social Impact (beneficiaries: all versus target groups, age, gender, social costs assessment, mitigating measures)


Emerging questions and issues
Emerging Questions and Issues

  • Can severance packages be measured in a standard way to allow cross-country and inter-regional comparisons?

  • What are the correct comparators to judge the size of packages?

  • Are redundancy packages preferable to voluntary retirement schemes?

  • How should fairness to retrenched employees be weighed against general poverty reduction and income distribution concerns?


Emerging questions and issues cont
Emerging Questions and Issues (cont.)

  • Does calculation of an economic rate of return contribute to assessment of a severance component?

  • Is sizable retroactive financing a desirable feature of operations supporting severance?

  • Why have adjustment operations not supported severance in recent years?


Processing operations with severance pay
Processing Operations with Severance Pay

  • Summarize assessment in PAD/PD

  • Keep MDO/PRMPS/OPCS informed

    • Project Documentation

    • Memo to MDO on severance covering 8 Key Considerations

      • Early version to OPCS with PCN

      • Issue generally with PAD/PD

    • MDO Review completed before appraisal

  • OPCS Website: http://opcs/PS/pas-sp.html


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