The public service in Germany

Transcription

1 The public service in Germany

2 - 1 - TABLE OF CONTENTS Preface... 2 The public service in numbers...3 Federal Republic of Germany...4 I. The structure of the state and of the public administration in Germany Tiers of state governance and administration The administration of the Federation The administration of the Länder The administration of local authorities The indirect public administration The non-public institutions The judiciary...24 II. Modernising the Public Administration Modern State - Modern Administration ( 2. Bund Online2005 ( III. The foundations of employment in the public service Employment in the public service Eligibility for the public service Foundations of the employment of civil servants The foundations of the relationship between public employer and employee General terms of employment for civil servants and public employees Occupational health and safety...81 IV. The pay systems in the public service The remuneration of civil servants The pay of public employees Special payments Salaries and wages in the new Länder Salary and wage increases The remuneration of members of the government Reform measures Developments in personnel expenditure V. The pension systems in the public service The pensions of civil servants The pensions of public employees VI. Annex Summary of the most important sources of legislation...128

3 - 2 - Preface Dear reader The public administration of the Federation, the federal states (Länder) and the local authorities with their 4.8 million staff, of which approximately 1.6 million are civil servants, is at the service of the citizens of our country. Close contact with citizens, quality and efficiency are the guiding principles of the public service in performing its diverse tasks. All reform efforts aim at constantly improving performance while at the same time reducing costs. With this second edition of the brochure about the public service in Germany, the first edition of which was published in 1999, I would like to inform the interested public about the evolution of the public service, covering, for example, the Federal, Länder and local authority administrative structure in Germany, working conditions, remuneration and pensions of civil servants and public employees. The esteemed reader may also gain insight into the Federal Government's initiatives for reforming the Public Service Law under the programme "Modern State - Modern Administration". The preparedness of our staff to take responsibility and to perform, combined with high motivation, are essential prerequisites without which the public service could not fulfil its demanding tasks on behalf of Germany's citizens so effectively. I have good reason to thank all our public service staff members - working in the schools and universities, the police and security authorities, the health sector and the general administration, as well as in other authorities and institutions - for their responsible work. Otto Schily Federal Ministry of the Interior

4 - 3 - The public service in numbers (as per 30 June 2000) Total number of persons in gainful employment in Germany 1 36,6 million Men 20,7 million Women 15,9 million Public service staff: 2 4,8 million Men 2,3 million Women 2,5 million Area of employment Federation 502,000 Indirect public service 488,000 Länder 2,273,300 Local authorities 1,572,000 Employment relationship Civil servants 1,588,600 Judges, public prosecutors 27,400 Professional and fixed-term military personnel 186,600 Salary earners in the public service 2,351,500 Wage earners in the public service 681,200 Indirect public service 10% Federation 10% Wage earners 14% Civil servants, judges 33% Local level 33% Länder 47% Salary earners 49% Professional and fixed-term military personnel 4% 1) Source: Federal Statistical Office, series 1, vol. 3, ) Source: Federal Statistical Office, series 14, vol. 6, 2000

5 - 4 - Federal Republic of Germany Schleswig-Holstein 2.8 million inhabitants Bremen 0.7 million inhabitants Hamburg 1.7 million inhabitants Mecklenburg-Western Pomerania 1 8 million inhabitants Lower Saxony 7.9 million inhabitants Berlin 3.4 million inhabitants Saxony-Anhalt 2.6 million inhabitants Brandenburg 2.6 million inhabitants North-Rhine Westphalia 18.0 million inhabitants Hesse 6.1 million inhabitants Thuringia 2.4 million inhabitants Saxony 4.4 million inhabitants Rhineland-Palatinate 4.0 million inhabitants Saarland 1.1 million inhabitants Bavaria 12.2 million inhabitants Baden-Württemberg 10.5 million inhabitants

6 - 5 - Area 357,000 km 2 Total population 82.2 million inhabitants - Men 40.1 million (48.8%) - Women 42.1 million (51.2%) of whom: foreigners 7.3 million (8.9% of the total population) of whom: EU citizens 1.9 million (2.3% of the total population) Source: Federal Statistical Office, population statistics 2000

7 - 6 - I. The structure of the state and of the public administration in Germany 1. Tiers of state governance and administration In the Federal Republic of Germany, the fundamental order of the state is governed by the constitution, the Basic Law of 23 May A fundamental principle enshrined in the Basic Law is the rule of law, which is the very basis of the order of the state. It determines the relationship between the state and its citizens. Three principles enshrined in the Basic Law are of particular significance for the structure of the state and the administration, namely: the separation of powers, the federal system of government, the self-government for local authorities. The separation of powers is at the core of the rule of law. In order to safeguard the interests of the citizens vis-à-vis the state and to prevent the state from becoming allpowerful, state power is divided into three functions - legislative, executive and judicial - which are each assigned to special bodies. The principle of the separation of powers is intended to allow these state functions to limit and control each other. Germany was constituted as a Federal Republic on the basis of the Basic Law. The Federal Republic is a federation of subnational states (Länder) in one country with a federal government (Bund). As members of this Federation, the Länder are states with sovereign rights and responsibilities which are not devolved from the Federation but are granted to them by the Basic Law. State power is divided between the Federation and the Länder according to the tasks and functions they perform. The Basic Law assigns everything that has to be regulated and managed in the general interest of the public to the Federation. The Länder have been assigned responsibility in all other matters. Accordingly, the main force of the legislative lies with the Federation, and the focus of the administrative apparatus with the Länder. In

8 - 7 - the Federation and the Länder, the vast majority of administrative tasks are carried out by the "direct state administration" (i.e. by Federal or Land authorities), but also in part by legally independent administrations, known as "indirect" public administration. The legally and organisationally independent institutions of the "indirect" administration are subject only to limited state supervision - or are completely independent, as is the case with the German Central Bank (Bundesbank). Many links between the different institutions force the decision-makers of the Federation and the Länder, which are autonomous under constitutional law, to work together in carrying out tasks. The Länder influence the legislation and administration of the Federation, as well as matters concerned with the European Union, through the Bundesrat. In a federal system, a certain degree of co-ordination both among the Länder and between the Länder and the Federation is necessary in the interest of functionality. Therefore the state and administrative apparatus are largely structured along uniform lines. The following make a major contribution to this uniformity: the legal system, which is largely uniform throughout the Federation, the public service, which is largely standardised throughout the Federation, and the economic and financial system, which is uniform throughout the Federation. Responsibility for the public administration, however, does not lie with the Federation and the Länder alone. Under the Basic Law, local matters are dealt with independently by the bodies of local self-government (local authorities). In addition, local authorities also perform state functions on commission. Three main, independent levels can be distinguished as a basic layout in the structure of the administration: the administration of the Federation, the administration of the Länder, and the administration of the local authorities.

9 - 8 - In principle, each of these administrative tiers has its defined group of functions. There is no hierarchical pyramid of agencies from local authority through a Land to the Federation. In total, the direct state administration, the administration of the local authorities and the indirect public administration employ a staff of almost 4.8 million. Of these, 502,000 (of whom 187,000 are military personnel) work in the Federal administration, 2.3 million in the Länder administrations, 1.6 million in the local authorities' administrations, and 488,000 in the indirect public administration. In Germany the proportion of public service staff in the total population is in line with the international average. in % Australia Proportion of public service staff as a percentage of the entire population by countries as of 1998 Source: OECD, publication by PUMA/Human Resources Management (2000) Austria Canada Czech Republic Denmark Finland France Germany Hungary Italy Korea New Zealand Portugal Spain Sweden UK USA

10 The administration of the Federation The - numerically rather small - direct federal administration with approx. 315,000 public service staff members (excluding the military) performs those public tasks which need to be carried out specifically by the Federation and which are necessary or expedient in the interest of the state as a whole. The federal administration includes the Federal Government in its policy-making role, and authorities which carry out administrative functions of the Federation. Accordingly, we distinguish between the highest federal authorities and the subordinate federal authorities. Highest federal authorities The Federal Government consists of the Federal Chancellor and the federal ministers. Three independent federal authorities report directly to the Federal Chancellor: the Federal Chancellery, the Press and Information Office of the Federal Government, and the Federal Government Commissioner for Cultural Affairs and the Media. Each federal minister is in charge of one federal ministry. According to the organisational provisions contained in the Basic Law (Art. 65), three principles guide the work of the Federal Government: The general policy principle: The Federal Chancellor determines and is responsible for general policy. The ministerial principle: Within the general policy determined by the Federal Chancellor, each federal minister conducts the business of his/her department autonomously and on his/her own responsibility. The collegiate principle: The Federal Government decides as a collegiate body on important matters, particularly concerning differences of opinion between the federal ministers. The Federal Chancellor plays a key role in organizing the government and assigning government posts. It is at his/her proposal that the Federal President appoints and dismisses federal ministers. The Federal Chancellor is hence entitled to form a Cabinet. He/she also has the power to determine the basic portfolios of the individual federal ministers on the basis of the entitlement to determine general policy. This organisational power of the Federal Chancellor may also not be restricted by the parliament.

11 The number of federal ministries has varied between 13 and 21 since the founding of the Federal Republic of Germany. The Federal Government has a total of approx. 23,000 staff members. The federal ministers decide whether a task is to be performed in the Ministry itself or assigned to subordinate federal authorities. As a rule, only matters of political significance, in particular preparing statutes, ordinances and other general regulations, are carried out in the Ministry. One task of the federal ministries is also to supervise subordinate federal authorities. Generally the federal ministries have no supervisory powers over Land authorities, the only exception being the (few) cases of federal administration by delegation of authority (e.g. in the area of civil use of atomic energy). Here the Federation retains its responsibility for the matter. The Federation has possibilities for supervision and intervention in order to ensure that tasks are performed in compliance with the law and the principle of usefulness. Example of the organisation of a federal ministry: Organisation of a federal ministry 1) Minister's Office Federal Minister Parliamentary State Secretary State Secretary State Secretary Directorate- General Central Tasks specialized Directorate- General specialized Directorate- General specialized Directorate- General Division Division Division Division Division Division Division Division Division Division Division Division Officer for Gender Equity Staff Council 1) Other forms of organisation are possible (Directorates-General may be divided into Directorates; working units may take the form of a division, a working group or a project group).

12 In addition to the Federal Government, the other constitutional bodies - the Federal President, the German Bundestag (Lower House of Parliament), the Bundesrat (Upper House of Parliament) and the Federal Constitutional Court - have their own administrative apparatus. The largest of these belongs to the German Bundestag, with a staff each of approx. 2,100. The administrations of the other constitutional bodies, on the other hand, are made up of more than 200 staff each. The Federal Court of Audit is also one of the highest federal bodies. It is independent of the Federal Government. The Federal Court of Audit, with a staff of approx. 600, examines the economic viability and proper financing of the federal administrative budget as a body of financial control. Areas of federal administration The Federation possesses administrative authority only to the extent that the Basic Law expressly invests it with such authority by virtue of a specific context or of the nature of a matter. The scope of the Federation's own administration, known as direct federal administration, is hence strictly controlled. These are matters which are closely linked to the ability of the state as a whole to take action. Under the Basic Law, of the administrative areas dealt with by the federal administration, the following matters fall within the responsibility of the Federation: Foreign Service: The Foreign Service employs a staff of 8,700, incl. local staff, at home and in the 200 diplomatic missions abroad (embassies, consulates and permanent representations at international organisations). Federal financial administration: The areas of fiscal and customs administration, amongst others, fall within the remit of the federal financial administration. The customs system has a three-tier structure of authorities with intermediate authorities (regional finance offices) and local authorities (customs offices). At the same time, the regional finance offices head the financial administration of the Federation and the Länder in their district. All in all, the financial administration oversees a complicated division of tasks between the Federation and the Länder, including local authority administration. The obligation to work together is

13 intended to contribute to involving all levels of the federal state structure in the collection of state revenues. The Federal administration has a staff of 48,000 in this area. Federal armed forces (Bundeswehr) and the defence administration: The armed forces are not counted as part of the administrative apparatus because of their military functions; the administration of the Bundeswehr, however, whose functions include personnel and resource management, is included. The armed forces are made up of 186,600 professional and fixed-term military personnel (not including conscripts). The number of civilian staff in the federal armed forces is about 135,000. Federal waterways and shipping: The Waterways and Shipping Administration, with a staff of 17,000, constitutes a separate federal administration with intermediate authorities (Waterways and Shipping Directorates) and subauthorities (Local Offices for Waterways and Shipping). Federal Border Police Authorities, Federal Criminal Police Office: The Federal Border Police (BGS) and the Federal Criminal Police (BKA) are federal police forces. The Federation assumes police tasks as far as needed on the federal level. The main tasks of the 38,000 staff of the Federal Border Police include border management and surveillance, railway police tasks and the protection of air transport at larger airports as well as providing assistance to the Länder at their request. The Federal Criminal Police Office is a higher federal authority and as such responsible for the co-operation with the Länder and for certain criminal police tasks. It has a total staff of 4,500. The intelligence services of the Federation are the Federal Intelligence Service (BND), the Federal Office for the Protection of the Constitution (BfV) and the Military Counterintelligence Service (MAD).

14 The railways, postal and telecommunications services, as well as air traffic control, which used to be part of the Federal administrative apparatus, have been privatised, with the exception of regulatory and supervisory functions. The German railways have been transferred to Deutsche Bahn AG. Postal and telecommunications services are also provided under private law by Deutsche Post AG, Deutsche Telekom AG and Deutsche Postbank AG. Air traffic control has been assigned to Deutsche Flugsicherung GmbH. A total of 1 million staff were employed in these areas in 1993, before privatisation started. The privatised enterprises still employ civil servants on the basis of interim provisions. The latter have however not been included in the statistical information on overall employment in the public service. 3. The administration of the Länder In addition to the local authorities, the Länder are the major administration level in Germany with a total of 2.3 million staff in the public service of the Länder. In Germany, the 16 Länder can be divided into two categories: territorial states (Baden-Württemberg, Bavaria, Brandenburg, Hesse, Mecklenburg Western-Pomerania, Lower Saxony, North-Rhine/Westphalia, Rhineland-Palatinate, Saxony, Saxony-Anhalt, the Saarland, Schleswig-Holstein, Thuringia) and city-states (Berlin, Bremen and Hamburg). There is also a fundamental distinction for the Land administration between political activities which are exercised by the Land government and the exercise of administrative tasks. In contrast to the federal administration, however, the focus is on administrative tasks. The Land Ministries, as the highest Land authorities, are hence much more involved than the Federal Ministries in the actual implementation of policies. The actual organisation of the Land administration is up to each individual Land. In spite of this autonomy, the Land administrations have developed along similar lines as a result of a two-hundred-year tradition. Most Länder with a large surface area have a three-tiered structure of authorities with the highest Land authorities (Land Ministries) at the top,

15 government commissioners or regional governments as an intermediate instance and the lower administrative authorities, some of which are also attached to the local administration (county district commissions and/or local authority offices), as state interfaces. Some of the smaller territorial states, as well as the city-states, do not have the intermediate levels. The city-states combine state and local administration. The Land governments (or Senates) carry out Land and local authority tasks at the same time. In addition to the general administrative authorities, the Land administration also has special Land authorities (higher Land authorities, higher and lower special authorities). These special authorities have been established as tasks have been removed from the Ministries and the general administrative authorities. Special authorities have been primarily formed at central and lower levels. Without having their own sub-structure of authorities, the higher Land authorities carry out specific administrative tasks from one location for the whole Land (examples: the Land statistical offices, the Land criminal police offices, the Land offices for the protection of the constitution, the Land offices for remuneration and pensions). Higher special authorities have the function of an intermediate authority between the Ministries and the lower special authorities (examples: regional finance offices, regional education offices and forestry directorates). The lower special authorities at local level, which may be part of local authorities, are numerous and varied. They include the tax offices, forestry offices, mining offices, factory and trade supervision offices, school offices, health offices, state offices for university building, road construction offices, local offices for waterways and shipping, Land survey offices and agriculture offices. State environmental offices have been established as special authorities in some of the Länder. In all the Länder, the largest number of staff is employed in the educational sector with schools and universities, the police and the financial administration.

16 In the academic year 2000/2001 a total of 785,000 teachers was employed at public schools (general and technical schools). The Ministries of Culture and Education of the Länder are responsible for the internal administration of the schools, i.e. for training and appointing teachers, as well as for curricula and designing lessons, and for supervising schools. The Länder's responsibility extends to all types of school, including vocational schools, and the supervision of private schools. The Länder coordinate the mutual recognition of school qualifications, amongst other matters, via the permanent institution of the Conferences of Ministers of Culture and Education. The local authorities are generally responsible for external school matters, i.e. for building and furnishing schools and providing teaching materials and administrative staff. Source: Federal Statistical Office, series 11, vol. 1, 2000 Higher education institutions combine research, teaching and training for the new generation of academics. A system of different kinds of higher education institutions (e.g. universities, polytechnics (Fachhochschulen), vocational academies) offers people various possibilities of qualifying for a profession and gaining a degree. Within that system, education at universities is more theoretical, whereas technical college education is more practically oriented. Vocational academies combine practical training in a company with classroom studies. The higher education institutions are assigned to the academic administration of the individual Länder. Germany has 350 higher education institutions with a total of 1.8 million students (2000). About 488,700 persons are employed at universities, Fachhochschulen and vocational academies, of whom 219,300 work in the arts and sciences, including 38,000 professors (who enjoy special academic freedoms anchored in the Basic Law) and 269,400 are administrative, technical or other personnel. The university hospitals employ about 189,200 staff. Source: Federal Statistical Office, series 11, vol. 4.4, 2000 In the area of law enforcement, the Länder employ approximately 273,600 staff, of whom 228,000 are police officers. In the Länder with a large surface area (territorial states), the authorities of the three levels of the general administrative apparatus are also responsible for fulfilling the duties of general police

17 authorities; in some cases there is a fourth level of mayors who are also responsible for fulfilling the duties of local police authorities.. With more than 153,600 public service staff, the financial administrative apparatus of the Länder collects taxes, as well as a large proportion of other levies. The financial administrative apparatus also manages state assets and the state's commercial holdings. Public service staff in the direct Land service as per Portfolio Staff in % Schools and pre-school institutions Higher education institutions Fiscal and financial administration 817, , , Judicial institutions 189, Police 273, Others 601, Total 2,273, Source: Federal Statistical Office, series 14, vol. 6, The administration of local authorities The local authorities - municipalities/towns and rural districts (local authority associations) - are parts of the Länder which have exclusive responsibility for regulating the structure of local administration and the territorial borders of the local authorities and districts in accordance with Land legislation. There are 440 rural districts and towns not belonging to a county and approx. 13,800 municipalities in Germany. The municipalities, local authorities and local joint authorities employ 1.57 million people. Enterprises organised under private law employ approx. 300,000 persons.

18 The local authorities are subject to the supervision and - where they carry out state tasks - to the instructions of the Land authorities. The municipalities deal with local matters on their own responsibility. This self-government for local authorities is protected by Art. 28 of the Basic Law. Self-government for local authorities is a major element of the political order in Germany. The local authority constitutions of the individual Länder provide for a variety of models for organising the administrative apparatus. Municipality/district administrations are led by fulltime civil servants. Depending on the type of the local authority constitution and the nature of the local authority, the official titles of these permanent civil servants differ (e.g. in municipalities: mayor or lord mayor, municipal councillor, city councillor or chief executive of a city; in rural counties: councillor or chief executive of a county). They are elected either by the local authority parliament or - increasingly - by direct vote. In addition, local authorities also perform state functions as charged. Most administrative matters that affect citizens are dealt with on the local level. Local authority administrations make up the third pillar of administration in Germany. Their tasks include above all the administration of construction in the broadest meaning of the word (incl. town planning, road building and housing), social and health services, as well as public facilities (e.g. swimming pools, kindergartens and sports facilities). The local authorities are also responsible for providing local public transport and refuse disposal and supplying the population with water, gas, electricity and district heating. These utilities are largely operated as enterprises organised under public law.

19 Staff employed by municipalities, associations of municipalities and local joint authorities as per Portfolio Staff in % General administration 249, Public safety, law and order 115, Schools 128, Science, research and culture 86, Social security 281, Health, sport and leisure 84, Construction and housing, transport 138, Public institutions, promotion of economic 155, development Hospitals 278, Others 58, Total 1,572, Source: Federal Statistical Office, series 14, vol. 6, The indirect public administration Institutions with special tasks constituted under public law which are not incorporated into the direct state or local authority administration are part of the indirect public administration. These are largely the social insurance institutions. They are part of the public service because they are bodies and institutions under public law and provide their services in accordance with federal statutes. They are however self-governing, autonomous institutions in which the honorary governing boards are in most cases equally composed of representatives of employers and insured parties - in almost all cases, the group of the insured parties is represented by the trade and labour unions. Specifically, these are: the agencies responsible for the statutory pension insurance (i.e. of the general system of pension, disability and surviving dependants insurance in Germany), namely the Federal Insurance Institute for Salaried Employees

20 (Bundesversicherungsanstal für Angestellte) and 17 Land Insurance Institute for Salaried Employees (Landesversicherungsanstalten) responsible for the pensions insurance of wage-earners, with a total staff of 73,000, the employment administration, carried out by the Federal Institute for Employment (Bundesanstalt für Arbeit) with a main office, ten Land Offices of Employment and 181 employment offices, as well as a total staff of 92,000, the agencies responsible for the statutory health insurance and old-age nursinghome insurance (local health insurance funds, substitute health insurance funds, guild's health insurance funds, company insurance funds, etc.) with a total staff of 139,000, the statutory accident insurance institutions (93 Berufsgenossenschaften and in the public sector accident insurance funds (Unfallkassen) or the like) with a total staff of 30,000, and the federal miners' insurance fund (Bundesknappschaft), with a staff of 14,000. Additionally, the German Central Bank (Deutsche Bundesbank) and other legally independent institutions are part of the indirect public administration. The indirect public service employs a total staff of 488,000. The Deutsche Bundesbank, which has its headquarters in Frankfurt am Main and employs a total staff of 16,500, is an integral part of the European System of Central Banks (ESCB) within the Economic and Monetary Union. 6. The non-public institutions Particularly in social and health services, the number of staff employed by the public agencies (i.e. by the Länder and the local authorities or local authority associations) does not represent the total number of staff providing these services for citizens. To a considerable extent, non-public institutions are also highly active here, in particular church or other non-profit organisations, and to a lesser extent also commercial service providers.

21 In 1998 a total of 573,000 staff was employed in the area of child and youth services (nursery schools, children's homes, youth centres, facilities for children and young people with disabilities, etc.). Public agencies employ 228,000 staff, followed by church agencies with a staff of 200,000. If institutions are operated by independent child and youth welfare agencies, public child and youth welfare agencies (run by counties and towns not belonging to a county, under Land law also municipalities) should not establish their own institutions. In 1998, about 67% of kindergartens were operated by independent child and youth welfare agencies on the territory of the former West-Germany, whereas this figure was about 31% in the new Länder. Approx million staff were working in hospitals in 2000, 1.05 million of them in general hospitals. Public hospitals employed 630,000 of these, the others were employed by hospitals operated by non-profit organisations or commercial enterprises. Approx. 45,000 teachers were working at a total of 2,326 independent private schools in the 2000/2001 academic year, teaching more than 560,000 pupils. The right to establish private schools is expressly provided by the Basic Law, and to some extent by corresponding provisions in the Land constitutions. The right to establish private schools rules out a state monopoly on schools. Private secondary schools, known as alternative schools, also fulfil the requirement of compulsory school attendance. Alternative schools may have a special focus or function, for instance as confessional schools, reform schools, boarding schools or international schools. Alternative schools require approval from the school authorities. The number of higher education institutions operating as independent agencies remains limited. The higher education system in Germany consists primarily of public higher education institutions of the Länder. Of the 350 higher education institutions approx. one-third is operated by independent agencies.

22 The judiciary Judges are entrusted with judicial authority in accordance with Art. 92 of the Basic Law; this authority is exercised by the Federal Constitutional Court, by the Federal Courts provided for in the Basic Law and by the courts of the Länder. Judicial power covers five separate branches of the court system: ordinary (civil and criminal) jurisdiction, administrative, financial, labour and social jurisdiction (Art. 95 (1) of the Basic Law). Added to these are the Constitutional Courts and special courts for certain professions (e.g. disciplinary tribunals for civil servants, judges and soldiers and those for lawyers and doctors). Courts-martial are only used for the armed forces abroad or on board ships of war and in wartime. Jurisdictional sovereignty is distributed between the Federation and the Länder in such a way that in each branch of the court system the highest courts are federal courts, and all other courts (with few exceptions) are Land courts. The structure varies within the branches of the court system, in most cases it is a three-tier structure. Justice is administered by professional and honorary judges. The judges are independent in the exercise of their judicial office, and are subject only to the law (personal and factual independence, Art. 97 of the Basic Law). Professional judges are appointed for life. Their appointment ends on retirement (apart from judges at the constitutional courts who are appointed for a specific term of office; at the Federal Constitutional Court the term of office is 12 years, ending upon mandatory retirement at the age of 68.

23 Judges and public prosecutors at federal and local level as per judges public prosecutors Federation Länder 21,500 5,350 Total 22,000 5,400 Source: Federal Statistical Office, series 14, vol. 6, 2000 Honorary judges act in criminal matters (as "lay judges") and at labour and social courts, as well as administrative courts of first instance; in civil jurisdiction only in the specific chambers for commercial matters. They have the same rights and duties in discussions and deliberations as professional judges. They are appointed for a specific term and may only be removed from office prematurely by judicial decision.

24 II. Modernising the Public Administration The State and its administrative apparatus do not exist as ends in themselves. They exist to serve the citizens, who rightly demand that their tax money be spent wisely. That means: better services geared to the changed requirements of citizens and industry. 1. Modern State - Modern Administration ( In December 1999 the Federal Government launched the "Modern State - Modern Administration" programme. Business administration tools such as target agreements, cost-output accounting, controlling, budgeting, creativity management have helped increase the capacity, efficiency and transparency of the federal administration's activities, as the statistics clearly prove. By now 306 federal agencies are using cost-output accounting, which provides the necessary transparency of outputs and costs. To be fully effective cost-output accounting must be used in conjunction with controlling in order to gain relevant management information. While in 1998 only 25 agencies had set out to implement controlling concepts, today the number has risen to 215 agencies. Another particularly effective means to enhance the public administration's operational efficiency is competition through benchmarking. Benchmarking is an appropriate tool to encourage competition and promote continuous improvement. Therefore, several interand intra-ministerial benchmarking rings have been established since summer Benchmarking has been applied to areas such as personnel management, information technology and bonus procedures. Experience gathered from projects carried out so far shows that benchmarking is the appropriate tool to increase the quality and efficiency of the public administration.

25 By 2002 more than 100 federal agencies were restructured. The number of agencies was reduced significantly, by a total of 90. In 1998 there were still as many as 654 federal authorities, while in early 2002 this number had fallen to 562. At the same time the federal administration trimmed a significant number of jobs. On 1 January 2002 the federal administration employed 291,000 staff, compared to 310,000 on 1 January Hence there were 6,000 fewer jobs within the federal administration than before German reunification in In this way, the federal administration is making a significant contribution to the necessary budget consolidation. With the "Modern State - Modern Administration" programme the Federal Government wants to extend the scope of action of the Länder and strengthen local self-government. In this context a project to transfer more responsibilities to the Länder has been launched. In a first step, federal framework legislation has been revoked in 26 cases, giving the Länder greater discretion in enforcing federal laws in certain areas. In a second step, an additional 183 proposals of the Conference of Minister-Presidents for changes in the rules regarding the discharge of state tasks were examined. Of these the Federal Government approved 107 proposals, in some cases under specific conditions; another 49 proposals have been or are now being taken into account in the framework of other projects. By early 2002, already 53 proposals had been implemented. The 183 proposals affected all key policy areas, such as financial, economic, environmental, social, agricultural, domestic, transport and housing policy. Now a Land can, for example, transfer local responsibility for the granting of social allowances to the municipalities, whereas the old federal framework legislation allowed such responsibility to be transferred only to counties and towns not belonging to a county. The same applies to setting up examiners' commissions for master craftmen's qualifying examinations; under the new framework legislation, responsibility no longer lies exclusively with the higher Land authorities. Where possible the Federation has not designated a specific Land authority at all, thus leaving it to the discretion of the Länder to assign responsibilities and to organise their administration. Human resources are the key to boosting efficiency and effectiveness in the public sector. The effectiveness of an organisation in the public sector directly depends upon the effectiveness of its workforce. This requires targeted measures to enhance employees' ability and preparedness to carry out their tasks. The modernisation programme of the Federal Government has dedicated a specific and separate area of reforms just to "highly motivated staff".

26 So the reform process aims above all at providing effective staff development targeted at making the most of the performance and creativity potentials of public service staff. Today all federal ministries have developed their own concepts to this end. They all use a jointly agreed framework based on key elements such as an institutionalised dialogue between superiors and staff, appraisals of senior staff, and plans involving the allocation of staff to a post or role. A modern administrative apparatus requires modern service regulations which encourage employees to take on responsibility and to render good performance. To this end the existing legal instruments must be constantly reviewed and adjusted, where necessary. Therefore the Federal Government's modernisation programme gives utmost priority to continuing the service regulations reform. 2. BundOnline 2005 ( Efficient and effective administration is no longer conceivable without the use of information technologies. In the past, hardware acquisition was the primary concern; with e-government the use of the new media has taken on a new quality and significance. With the "BundOnline 2005" e-government initiative, the Federal Government has pledged to provide online all services of the federal administration that can be placed on the Internet by The BundOnline 2005 programme is an important building block in the Federal Government's policy to turn Germany into an information society. BundOnline 2005 will provide citizens, the business community, the science and research sector and other administrative authorities with a simpler, faster and more economical means of using the federal administration's services. Following a comprehensive review, the Federal Government adopted an interministerial implementation plan on 14 November 2001, covering the whole range of federal administrative services. Today, 21 services are fully available on the Internet already. Here are a few examples: Already today it is possible to repay via the Internet grants received under the Federal Education Assistance Act. The 500,000 people who are

27 currently required to repay their scholarship grants can use the Internet to communicate with the responsible clerk, file applications for early repayment, partial or total waiver of payment or deferment of payment. Involving an overall repayment volume of 0.6 billion annually, the Internet thus provides enormous potential savings of time and cost. Since 1 November 2000, approx. 12,000 online applications have been filed. The electronic tax return form "ELSTER" was introduced by the Federation and the Länder to make the submitting and processing of tax returns more user-friendly and less time consuming through the use of modern communications technology. By early 2002 a total of 490,000 tax returns had been sent in electronically and more than 5.6 million applications for tax statements had been filed electronically. Since February 2001, the tax offices have offered official, interactive tax forms that can be filled out and sent online, supported by a tax filing program to guide taxpayers through the process. This marks a further step on the way to fully electronic, paperless tax returns and paperless taxassessment notices. The services offered by the federal administration can be accessed centrally via the service portal of the Federal Government at The Federal Minister of the Interior, Otto Schily, launched the portal at the CeBIT computer fair in March The service portal now includes more than 2,000 pages and more than 1,300 institutions and agencies of the Federation. A powerful search engine and a permanently updated catalogue facilitate the systematic search for authorities' web sites, addresses, contacts, and special information. In the second development stage, the portal's focus will move beyond more information-oriented content towards genuine electronic administration services. Modernisation is a major concern of both public and the federal administration, public service staff as well as elected officials and citizens. Progress in implementing the government programme "Modern State - Modern Administration" is being documented at Up-to-date information about the e-government initiative "BundOnline2005" is available at Visitors can send s directly to experts working on individual projects or discuss issues on the reform agenda in forums or chat rooms. More than 10 million hits on these two pages since December 1999 offer proof that people are making use of this opportunity for dialogue.

28 III. The foundations of employment in the public service Art. 33 Basic Law (Civic rights) (1) Every German shall have in every Land the same civic rights and duties. (2) Every German shall be equally eligible for any public office according to his aptitude, qualifications, and professional achievements. (3) Neither the enjoyment of civil and political rights, nor eligibility for public office, nor rights acquired in the public service shall be dependent upon religious affiliation. No one may be disadvantaged by reason of adherence or non-adherence to a particular religious denomination or philosophical creed. (4) The exercise of sovereign authority on a regular basis shall, as a rule, be entrusted to members of the public service who stand in a relationship of service and loyalty defined by public law. (5) The law governing the public service shall be regulated with due regard to the traditional principles of the professional public service. Public service staff (as per June 30, 2000) civil servants, judges 1,616,000 ( 33%) Professional and fixed-term military personnel 186,600 ( 4%) salary earners 2,351,500 ( 49%) wage earners 681,200 ( 14%) Total 4,835,300 (100%) Source: Federal Statistical Office, series 14, vol. 6, 2000

29 1. Employment in the public service In the Federal Republic of Germany, civil servants, judges and military personnel, as well as public employees (salary earners and wage earners in the public service) are employed to perform state tasks. In accordance with Art. 33 (2) Basic Law every German shall be eligible for any public office according to his aptitude, qualifications, and professional achievements. The exercise of State authority on a regular basis shall, as a rule, be entrusted to members of the public service who stand in a relationship of service and loyalty governed by public law (Art. 33 (4) of the Basic Law), that is to civil servants. The rights and duties of civil servants are governed by federal law, which means that the parliament determines the rights and duties as well as the remuneration and pensions of civil servants. The service of judges and military personnel, like that of civil servants, is governed by public law. In contrast, public employees are employed on the basis of a contract under private law. General labour law applies to them - as to all employees in Germany. Specific working conditions, however, are set out in collective agreements negotiated between the public employers (Federation/the Länder/local authorities) and the responsible trade and labour unions.

30 Members of the Federal Government, i.e. the Federal Chancellor and the federal ministers are not civil servants; their office is governed by public law and aimed at exercising governmental functions. Having said that, this office under public law has developed from the basis of employment as a civil servant and is governed by law, specifically the Act governing Federal Ministers. As office-holders who directly report to the parliament the federal ministers manage their departments independently and on their own responsibility in the framework of the general policy determined by the Federal Chancellor. They are not bound by instructions in individual cases and are not subject to any disciplinary power. Similar arrangements exist in the Länder for members of the Land governments. Depending on the size of their departments, the Cabinet members are assigned one or two parliamentary state secretaries who hold the title "Minister of State" at the Federal Chancellory and the Federal Foreign Office. Generally they must be members of parliament. Only direct assistants to the Federal Chancellor may assume this function even if they are not members of parliament. They represent and support the federal minister in fulfilling political and technical tasks, in particular in the plenary and in the committees of the German Bundestag, in the Federal Cabinet and in public. The office of Parliamentary State Secretary is also governed by public law. For information about remuneration and pensions of parliamentary state secretaries and of members of the Federal Government see: Distinction between civil servants and public employees According to Art. 33 (4) of the Basic Law the exercise of state authority as a permanent function shall as a rule be entrusted to civil servants (reservation of function).today this is generally no longer understood as being limited to what was known in the past as authoritarian administration. The public service is intended to guarantee sound administration based on expertise, professional ability and the loyal fulfilment of duties, and to ensure that essential tasks are continuously carried out in the public's interest. Therefore it is mainly civil servants who are employed in core areas of traditional administration, above all in supervisory positions and in areas involving the exercise of state authority. But civil servants are also employed in many areas of benefits administration, and most teachers are civil servants, too. In contrast, public employees are employed in health and social services and in technical professions. Since the relation between rule and exception is defined in the Basic Law, the domains of civil servants and public employees are delimited in general terms, which leave some

31 room to manoeuvre in individual cases. Accordingly, the functional distinction between civil servants and public employees may be less clearly marked. The position of public employees is both secure and of equal status with that of civil servants. This is reflected by the fact that the legal status of civil servants on the one hand and public employees on the other have converged in many aspects. At the same time, substantial differences remain between the two status groups, in addition to the reservation of function defined by Art. 33 (4) of the Basic Law: notably, the fact that the duties of civil servants which are at the core of their special relationship of loyalty apply to all civil servants in the same way, whereas the duties of public employees are dependent upon their function. In addition to the ban on strikes for civil servants, this regulation is to ensure that core tasks of public administration are fulfilled reliably and in the interest of citizens. Staffing trends The number of public service staff on the territory of the former West Germany grew significantly until the beginning of the 1990s. The reunification of Germany naturally resulted in a considerable increase from 3 October 1990 onwards. Since 1991, however, the number of staff has declined continuously. The following figures refer to the public service at federal, Länder, and local level and to the indirect public service. The staff employed by the German railways and the postal services are not included because privatisation of these areas makes comparison impossible. Until 1990, the figures refer to the territory of the former West Germany. The increase in the numbers of staff up to 1990 was due in particular to the expansion in the area of schools and higher education, but also in the social services and the police. In the ensuing period - after the increase in the number of staff caused by incorporating the public service of the former GDR - tight budgets and the modernisation of the federal and local administrations led to a decrease in staff numbers. This reduction particularly affected the new Länder, which had to adapt the administrative structures. The privatisation of local authority services had a similar effect; in addition the federal public service was affected by job cuts in the armed forces (military and civilian personnel). This development includes a greater reduction in the number of public service jobs, while the number of part-time staff has increased.

32 Year Staff number in 1,000s Federal Republic of Germany 5,600 5,582 5,448 5,361 5,251 5,165 5,062 4,977 4,891 4,835 of whom: women 2,788 2,813 2,749 2,714 2,670 2,632 2,576 2,539 2,501 2,487 of whom: on the territory of the former West Germany 2,252 3,008 3,814 4,133 4,171 4,197 4,195 4,174 4,113 4,064 4,010 3,956 3,902 3,865 on the territory of the former East Germany 1,429 1,385 1,253 1,187 1,139 1,101 1,052 1, of whom: civil servants, judges ,277 1,382 1,390 1,458 1,511 1,556 1,587 1,607 1,624 1,619 1,619 1,616 salary earners 772 1,113 1,527 1,728 2,822 2,774 2,708 2,647 2,585 2,535 2,470 2,425 2,374 2,352 wage earners ,131 1, professional and fixedterm military staff of whom: full-time staff 2,108 2,691 3,275 3,362 4,677 4,635 4,450 4,304 4,185 4,098 3,985 3,863 3,729 3,626 part-time staff ,057 1,066 1,067 1,077 1,114 1,162 1,209 Source: Federal Statistical Office, series 14, vol. 6, 2000 Total public service staff in Germany (in 1000) (figures for refer to former West Germany) number in 1000 Staffing trends since year total staff full-time staff women part-time staff

33 Equal treatment of women and men in the public service "Gender Mainstreaming" ( Germany has well-developed institutional and legal instruments to guarantee the equal treatment of women and men. Art. 3 (2) of the Basic Law stipulates that the state shall promote the actual implementation of equal rights of women and men and take steps to eliminate existing disadvantages. The following diagrams illustrate the proportion of women in the public service in Germany. In order to achieve the socio-political aim to increase women's participation in decisionmaking, there is need for further action, particularly to increase the number of women in supervisory positions. The public service employed a total of 4,835,300 staff in 2000 (4,648,700 excluding military personnel), of whom 2,486,700, or 51.4%, were women. The proportion of women in the different groups of public service staff differs; in the group of civil servants and judges they make up 39%, in the group of salary earners 68%, in the group of wage earners 37%, and in the case of professional and fixed-term military personnel 2.1%. Proportion of women in % Total Military personnel Wage earners Salary earners Civil servants, judges Source: Federal Statistical Office, series 14, vol. 6, 2000

34 With its Cabinet decision of June 1999, the Federal Government acknowledged the equal treatment of women and men as an overall guiding principle and agreed to promote this effort known as "Gender Mainstreaming" in all federal ministries and agencies. Therefore, the Joint Rules of Procedure of the Federal Ministries contain the obligation for all federal ministries to comply with this principle in all political, legislative and administrative activities. Gender Mainstreaming is an internationally recognised term for taking into account the gender perspective in all decision-making processes. According to the principle of gender mainstreaming, men's and women's different cultural-historical positions in society and the resulting consequences must be recognised and taken into account. Just as the cost factor, for example, has to be considered when deciding upon publicly funded measures, the impacts of socio-cultural gender roles must be taken into account. It is crucial to note that apparently neutral measures affect women and men in different ways. Gender mainstreaming reveals socially conditioned gender roles and the different realities of the lives of women and men. The degree to which the gender perspective is taken account of is a major criterion for assessing the appropriateness and quality of a specific measure. But gender mainstreaming is more than just a political appeal. When the Amsterdam Treaty went into force on 1 May 1999, it made the implementation of gender mainstreaming legally binding upon the member states of the European Union. Art. 2 and Art. 3 of the Treaty establishing the European Community (TEC) oblige all member states to pursue an active and integrated policy aimed at achieving equality between men and women in the sense of gender mainstreaming. Gender mainstreaming does not replace the advancement of women. It should rather be seen as a means that adds to specific measures for achieving equal rights and treatment of men and women. The Law on the Enforcement of Equality between Men and Women of 30 November 2001, aims at actually implementing equality in all public service areas. This law, which also applies to the federal courts, replaces the Law on the Advancement of Women which was adopted in the framework of the Second Law Ensuring Equal Rights for Women of It contains the obligation to appoint a commissioner on women's affairs who is to be elected by secret vote by the female staff. She has the task of promoting and monitoring the implementation of the Law on Equality between Men and Women and all relevant related measures taken by the employer.

35 In order to actually enforce equality between men and women the law provides that women who are equally suitable, qualified and capable as men shall be given preferential treatment in areas where they are underrepresented. This applies to training, recruitment, employment and promotion. With regard to indirect discrimination, the law expressly prohibits conducting selection processes or application interviews in a way that puts women at a competitive disadvantage. The Länder have adopted similar rules for their administrations. These measures have substantially increased equality between men and women, and the state in its capacity as employer is fulfilling its obligation to act as a role model in this respect. 2. Eligibility for the public service Eligibility for the German public service is governed by the Basic Law: In accordance with the criteria of aptitude, qualifications and professional achievements, every German is equally eligible for the public service. This applies in the same way to permanent employment of civil servants or public employees. The principle of merit as defined by constitutional law means that: in order to become a civil servant, the applicant must possess the necessary qualification for his/her desired career path. in order to become a public employee, the applicant must possess the qualification required for the specific function. This also applies to job applicants from other Member States of the EU. In accordance with the Community rules on the freedom of movement, if applicants are suitable and qualified, they are equally eligible for the German public service, with the exception of those positions which are reserved for German nationals.

36 For appointment as civil servants nationals of Member States of the European Union are considered to have the same status as Germans within the meaning of Art. 116 of the Basic Law. As an exception to this basic rule, only Germans are eligible for positions requiring the exercise of public functions which, because of their specific content, must be performed by Germans only. In individual cases, i.e. in relation to the function in question, a decision must be taken as to whether it is necessary for the function to be performed by German nationals. The Federation and the Länder have agreed on recommendations for the application of the law in relation to functions reserved for Germans permitting employment of nationals of other Member States of the EU reaching far into areas which, in accordance with rulings of the European Court of Justice, could be reserved for Germans. The eligibility requirements to be adhered to in hiring civil servants are largely the same for all areas of the administration. In addition to the general requirements, such as loyalty to the Basic Law and personal integrity, civil servants must also have the necessary training and educational qualifications for the individual classes of service and subject areas. Such a system of service classes or formal preconditions for eligibility do not exist in the law on public service employees. Applicants are generally employed on the basis of their individual knowledge and abilities alone. Suitability for the specific job is decisive. Recruitment to the public service is also generally conditional on a vacancy announcement so that the right of equal access to public offices is guaranteed. Suitable candidates for the announced vacancy are chosen by means of a selection process. The German public service has no central recruitment competitions, however. Each authority is responsible for conducting its own recruitment and hiring, i.e. there are no generally binding rules for the form of the selection procedure. Added to this is the fact that, in the federal administration, each federal ministry is itself responsible for staffing. Each ministry is therefore responsible for selecting and hiring new staff and may establish independently how applicants are to be selected. This responsibility for human resource matters derives from the ministerial principle, according to which each federal minister manages the business of his/her department independently and on his/her own responsibility. Recruitment to the public service is on principle conditional on the existence of a vacancy. The parliaments at federal, local and regional level have the right to decide, within the

37 framework of their budgetary authority, on the number and distribution of public service posts. In accordance with budgetary law, human resources are not managed according to the available funds, but according to established posts. On principle, the budgetary authority must approve each post before someone can be hired into that post. This highly specific budgetary procedure in the personnel area arose from the special status enjoyed by civil servants under German public service law. The basic impossibility of dismissal and the public employers' duty to provide maintenance, through to pensions for civil servants and their dependants, give rise to payment obligations which typically last for decades. The recruitment of a civil servant therefore has a considerable financial impact. Establishing a post creates the necessary authorization to spend money over the entire period of employment. This procedure applies to salary earners accordingly, since they are, as a rule, also permanent employees, and the parliament is able to control staff numbers and their composition by managing the number and distribution of posts. This rather inflexible system has been improved in the course of modernising the federal budget law. Starting with the budget for the fiscal year 2001, exceptions may be made in the case of pilot projects. Known as the experimentation clause, this measure is intended to establish the budget principle as a priority also in human resource management. According to this principle, the law will only define a staffing framework within which the individual authority can pursue a flexible human resource policy in its own responsibility and according to its financial means. 3. Foundations of the employment of civil servants History The roots of the German public service date back to the 18 th century when the servants of the princes became servants of the state. Although the personal attachment to the monarch or ruler was not dissolved, such service was now directly linked with the wellbeing of the state. This expanded obligation to serve the common good and the idea of an objective legal order as regards the monarch, and also later as regards the political parties, the parliament and the government, contributed at an early date to the public service's particular self-image and professional role model. The accompanying process of

38 professionalising the administration in the early 19 th century provided the foundation for the modern public service. After the end of the monarchy, the Weimar Constitution of 1919 ensured the non-partisan public service and the civil rights of civil servants in its Art. 130: "Civil servants shall be servants of society, not of a party. All civil servants shall be guaranteed the freedom of political opinion and freedom of association". It was these rights and freedoms in particular which were disregarded by the Nazi regime between 1933 and The Basic Law of 1949 re-established the foundations of the professional public service, particularly by reserving for civil servants the right to exercise sovereign authority (Art. 33 (4)) and by observing the traditional principles of the professional public service (Art. 33 ( 5)). Legal basis The power to legislate for the public service lies primarily with the Federation. The Federation is responsible for regulating the legal status of civil servants, judges and military personnel in the service of the Federation and the direct federal bodies under public law. In addition it may also issue framework regulations governing the legal status of all other civil servants and judges. These framework regulations contain guidelines for legislation by the Länder, and must be specified and implemented by the respective Land parliaments in order to have the force of law for civil servants and judges in the service of legal entities under public law under their supervision (in particular the local authorities). Not least because of these framework provisions, civil servants' employment is largely the same in the Federation and in all Länder, although there are some 16 statutes relating to civil servants and Land judges, in addition to the Act on Federal Civil Servants (Bundesbeamtengesetz), the Act Defining the Scope of Civil Servants' Rights and Duties (Beamtenrechtsrahmengesetz) and the German Judiciary Act (Deutsches Richtergesetz). Most importantly, the Federation has the power to legislate on matters regarding remuneration and pensions. This is why the Civil Servants' Remuneration Act (Bundesbesoldungsgesetz) and the Act Governing Civil Servants' Pensions and Allowances (Beamtenversorgungsgesetz) also apply directly (not only as framework regulations) to civil servants employed by the Länder and local authorities. Provisions which apply nation-wide generally require approval by the Bundesrat (upper house of parliament).

39 The Federal Government has to consult with the umbrella organisations of the trade and labour unions and professional associations of civil servants and judges when preparing provisions relating to civil servants and judges. As a certain compensation for the lack of power to negotiate collective agreements, this right of participation of these organisations goes beyond a mere right to be heard. It gives the trade and labour unions the opportunity to take an active part in the preparatory phase of statutes, ordinances, administrative regulations and directives by means of comments and proposals of their own. If the proposals are not taken into consideration, in the case of statutes and ordinances the umbrella organisations' counterproposals are listed in a supplement to the draft regulation, and thus brought to the attention of the legislator. The decision as to the final content of the regulation however is always the prerogative of the legislator. The umbrella organisations at the federal level are the German Civil Servants Association (DBB), the German Trade and Labour Unions Federation (DGB), the German Judges Association (Deutscher Richterbund e.v.), the Federation of German Administrative Judges (BDVR) and the Christian Trade and Labour Unions Association (CGB); for regulations relating to military personnel the German Federal Armed Forces Association (Deutscher Bundeswehr Verband). In some cases, other trade unions of civil servants, in particular the police unions, are involved as umbrella organisations in the Länder. Types of public service employment Civil servants have a special relationship of service and loyalty governed by public law. Because of Germany's federal structure, the local and regional authorities, i.e. the Federation, the Länder and the municipalities, are the public employers. In addition, civil servants may also work for public law corporations, institutions or foundations under state supervision. The civil servant with life tenure represents the standard type of civil servant. There are also civil servants with a set tenure if the function is assigned only for a limited period of time. Civil servants who have not completed their training are employed with the revocable status of "civil servant in preparatory service"; at the beginning of their employment civil servants are employed on probation.

40 Special provisions apply to individual groups of civil servants with a special legal status. These are local government officials who have been elected in a municipality either by the people or a local government body (local council) and appointed as senior civil servants on a temporary basis (e.g. mayor, municipal commissioners). Accordingly, this is a small group of people restricted to the top level of the respective local authority administrations. The legal status of local government officials elected for a limited period is characterised both by the ideas contained in civil servants law and by ideas related to local authority policy. It is primarily determined in accordance with the Länder statutes relating to civil servants, but continues to be affected also by local provisions on appointments, positions and functions. Politically appointed civil servants who hold an office for the exercise of which they must be permanently in agreement with the fundamental policy of the government, and hence can be placed in temporary retirement at any time without stating reasons. The total number of politically appointed civil servants is defined by law and is relatively small. Only 400 of the 132,600 civil servants in the direct federal public service are political appointees. In the federal administration these include state secretaries and directors general in the ministries, senior civil servants in the Federal Foreign Office and in the intelligence services (Office for the Protection of the Constitution, Federal Intelligence Service) and the president of the Federal Criminal Police Office. Rights and duties The public administration plays a key role in securing the present and future existence of the state through best fulfilment of essential public tasks. The state has to ensure fulfilment of these tasks particularly in the process of globalisation and growing European integration. For this reason, the authors of the Basic Law assigned this task to professional civil servants who ensure, based on their expertise and loyal service, the stability of the administrative apparatus and thus serve as a counterweight to the political powers shaping the state.

41 The employment relationship of civil servants is one of service and loyalty characterised by commitment to the good of the people and the body politic. The crucial element of this particular employment relationship is the civil servant's commitment to public service for his/her entire working life, which requires a high level of professional achievement, a sense of responsibility and commitment to the common good. The rights and duties which shape the employment relationship of civil servants ensure that public interest takes priority over the interests of specific groups or their own interests. Above all, it is this special employment relationship of civil servants which the Basic Law sees as a guarantee that the democratically determined will of the body politic is actually enforced. More specifically: Civil servants have to fulfil their tasks fairly and without partisanship and consider the general good in exercising their office. In particular, they are to avoid any suspicion of seeking their own advantage. On principle, they may not accept rewards or gifts. Civil servants are to advise and support their superiors, carry out the latters' orders and follow their general guidelines. Their duty of obedience does not however release them from full personal responsibility. They must examine the lawfulness of each official act. Civil servants must report any reservations as regards the lawfulness of an official order to their immediate superiors without delay (duty of remonstration). If the order is upheld without the reservations of the civil servant being remedied, they are to turn to the next higher level. If that superior confirms the order, the civil servant must carry it out. In this case, he/she is released from any personal responsibility. The duty to obey ceases to apply in any case in which the civil servant would violate human dignity or commit a criminal or administrative offence by carrying it out. The duty of obedience and the duty of remonstration serve to ensure the public administration's ability to function, which otherwise would be impaired if every civil servant were in a position to refrain from carrying out an official act because of reservations as to the lawfulness of this act. Civil servants must show their support for the free, democratic basic order as defined in the Basic Law through their whole conduct and work to uphold it. They may engage in political activities as allowed by the Basic Law, but may not express any political opinions when performing the duties of their office and must in other respects exercise the

42 moderation and reservation in political activities emerging from their position in society and in consideration of the duties of their office. Like all citizens, civil servants have the basic right to form associations and societies. They may do so without restrictions and may defend their interests together. They have no right to strike, however. The Basic Law provides that, because of their special obligations, civil servants are entrusted to secure and safeguard the administrative functions. A strike would be incompatible with this and would be directed against the parliament, the democratically elected body that adopts laws governing civil servants' remuneration and working conditions and in doing so has to pay due respect to the mutual relationship of service and loyalty. Hence the democratic body politic is strengthened if civil servants waive the right to strike upon entering this special relationship of loyalty because of their special commitment to the general good. In any case, the ban on strikes does not mean that concerns expressed by trade unions concerning employment conditions are ignored. The opposite is the case: Their concerns are represented by umbrella organisations of the public service as part of their role in preparing general rules for the public service. The fulfilment of their constitutional task not only requires that civil servants are bound in a particular way by their duties but also that they are granted rights which place them in a legally and economically autonomous position enabling them to fulfil the duties of their office according to the principles of the rule of law and to remain unaffected by party interests, without fear or threat to their livelihood. Above all, such autonomy is guaranteed by the civil servants' life tenure, appropriate remuneration and retirement benefits (maintenance principle) and by their right to be allocated to an appropriate post or role. In addition, civil servants have the right to social and medical assistance and are entitled to claim protection for themselves and their families from their employer, both during and after their employment. Civil servants' law defining these rights and duties is not a straitjacket. Instead, civil servants' law is constantly adapted to modern developments, while maintaining its core substance. For example: the promotion of mobility and part-time work, EU citizens' eligibility for civil servant status, initial allocation of managerial posts on probation or for a set period of time, and more flexible and merit-based remuneration.

43 Disciplinary law The disciplinary law deals with the consequences of service violations. While the duties of civil servants are defined in the statutes governing the rights and duties of civil servants of the Federation and the Länder, the disciplinary law stipulates the consequences of such violations and the procedures. With the coming into force of the new Federal Disciplinary Act for federal civil servants on 1 January 2002, the disciplinary law was thoroughly reviewed and adjusted to the requirements of a modern public administration and administration of justice. Disciplinary considerations are always based on the provisions of the Law on Federal Civil Servants, or the applicable Land law on civil servants, according to which civil servants commit a disciplinary offence if they breach their duties intentionally or negligently. If there is sufficient reason to suspect a breach of duty, the employer is obliged to institute disciplinary proceedings and to establish the facts in question during this procedure. After the investigation a decision has to be taken as to whether the proceedings should be closed or disciplinary action should be taken against the civil servant. The disciplinary law provides for five disciplinary measures which, after a due assessment of the circumstances, may be imposed on a civil servant depending on the seriousness of the offence: reprimand, fine, reduction of remuneration, demotion and dismissal from service. However, dismissal from service is imposed only if the civil servant has lost the confidence of his/her employer or of the general public following a serious violation of duty. The law provides for only two disciplinary measures applying to retired civil servants: reduction or deprivation of retirement benefits. Using what is known as a disciplinary order, superiors themselves may impose a reprimand, a fine or a reduction of benefits. A disciplinary order is an administrative act which may be legally contested via objection, action for a recision, or - under certain conditions - appeal on questions of fact or of law. If the employer thinks that demotion, dismissal from service or deprivation of retirement benefits should be imposed on the civil servant concerned, he/she may not impose this measure himself/herself but has to bring a disciplinary action before the competent

44 administrative court which will then rule on the disciplinary measure. The court decision may be appealed on questions of fact and, under certain conditions, on questions of law only. Depending on the individual circumstances, it may be necessary to suspend a civil servant from official duties already before an unappealable decision has been taken in the disciplinary procedure. In addition to the possibility provided by law to temporarily suspend the civil servant from official duties, a civil servant may provisionally be removed from service on disciplinary grounds once the disciplinary action has been initiated. Such a measure should be considered if, after a preliminary evaluation of the case, it is to be expected that in the course of the disciplinary process the civil servant concerned will be dismissed from service. Under such circumstances, depending upon the economic situation of the civil servant concerned, a certain amount may be retained from his/her monthly salary, not to exceed 50%. The number of disciplinary proceedings conducted in Germany is relatively low. In 2000, 1,776 disciplinary procedures were initiated (including 967 in privatised enterprises such as the German railways and the German postal service), including 540 formal and 1,236 informal procedures. This is the equivalent of only 0.5% of federal civil servants. No nation-wide statistics are kept for the Länder and municipalities. Career paths The career system reflects possible career paths of civil servants. The law on public service careers contains generally binding rules applicable to personnel policies in all branches of public administration, which objectivise personnel policies, ensure continuity despite leadership changes, and guarantee a uniform minimum standard for professional performance. The many functions of the public administration require qualified staff, who can only be obtained by means of systematic previous training and in-service training. The various tasks require staff who have completed training designed with this in mind. In order to perform public service tasks correctly and effectively, an appropriate career structure has been developed that covers a wide range of functions. The complex career system which is based on specific training should enable civil servants to assume not only individual tasks but all tasks linked to a particular career. The fact that a civil servant can

45 be assigned a great variety of roles within the framework of his/her specific career qualification also ensures greater flexibility in human resources management. The training for careers that are rather untypical for the public administration is provided as in-service training in the course of a preparatory service. For the performance of particular tasks the public administration also needs specialists who - thanks to their education - have obtained expertise which cannot be conveyed by the public service and which need not be improved in a preparatory service (e. g. doctors). For these specialists, service careers for specific disciplines have been established. Admission of specialists to the public service is conditional on a certain length of full-time occupational experience, instead of completion of preparatory service and the career examination. Even if an applicant does not have the necessary specific career qualification, he/she may be admitted to the public service under certain conditions. In the case of these "other applicants", the ability to perform the duties of an office must be acquired by experience in life and at work inside or outside the public service, as established by a special independent body, the Federal or Land Personnel Commission. In view of the different tasks in the public administration on the federal and regional levels, certain career paths are offered only by the the Federation and the Länder. For example, career paths in the Foreign Service or the military administration are offered only at the federal level, while the preparatory service for teachers at primary and secondary schools is subject to Land legislation. The annex to the Federal Ordinance on Careers and Promotion of Civil Servants (Bundeslaufbahnverordnung) contains a complete list of all careers in the federal public service, which includes, among others: the customs service, the public building technical service, forestry service, meteorological service, archive service, library service, protection of the constitution service, Federal Intelligence Service, technical services at accident insurance institutions, non-technical and technical services in the administration of the federal armed forces. The specific course of a career path is determined by rules on career structure, examination and education, which take the form of an ordinance. This ordinance determines the admission requirements, the selection procedure, the training process in

46 the preparatory service, the career examination procedure and the sequence of steps within a career path. Career paths may be assigned to one of the following classes of service: the ordinary service, the intermediate service, the higher intermediate service or the higher service. Affiliation to a class of service depends on the entry-level position in the public service. Classes of service Civil servants and judges as per June 30, 2001 Higher Higher Intermediate Ordinary Total service intermediate service service service Federation no. 18,300 41,700 69,300 3, ,600 % Länder no. 334, , ,000 8,700 1,252,500 % Local no. 26,700 92,100 59, ,600 authorities/associations of local authorities joint local authorities: % Indirect public service no. 6,700 40,200 5, ,300 % no. 386, , ,400 13,100 1,616,000 Total % Source: Federal Statistical Office, series 14, vol. 6, 2000 The preconditions for admission to the preparatory service are in the ordinary service, successful completion of secondary school education or a recognised equivalent, in the intermediate service, successful completion of general school education (10 years) or attendance of a secondary modern school as well as follow-up professional training or a recognised equivalent,

47 in the higher intermediate service, successful completion of a polytechnic education (Fachhochschule) or other school education qualifying for admission to a university or a recognised equivalent, in the higher service, successful completion of university studies in an appropriate subject area. Here, studies in law are regarded as being equal to economics, finance and social sciences for the general administrative service. The preparatory service provides practical and theoretical training and ends with a career examination. Civil servants are employed subject to revocation during the preparatory service, which lasts in the ordinary service 6 months in the intermediate service 2 to 2 ½ years in the higher intermediate service 3 years in the higher service 2 to 2-½ years In most cases, the preparatory service for careers in the higher intermediate non-technical service is carried out at polytechnics (Fachhochschule) inside the administration. Training consists of specific studies at a Fachhochschule and professional practical study periods of 18 months each in training authorities. For this purpose, the Federal College for Public Administration has been established within the federal administration. It provides training in the following subject areas: general internal administration, work administration, foreign affairs, Federal Border Police, administration of the federal armed forces (Bundeswehr), and finance, public security, social insurance, meteorological service.

48 The Länder operate their own polytechnics for administration with, in most cases, the following subjects: general administration, policing, fiscal administration, and administration in the judiciary. Recruitment to the preparatory service is possible until a maximum age of 32 years, increased to 40 in the case of the severely disabled. Special regulations exist for applicants whose applications were delayed by child-raising or looking after relatives in need of care. After the successful completion of the career examination, civil servants are to prove themselves during a probationary period. As a rule, the probationary period stretches over a period of one year in the ordinary service, over two years in the intermediate service, over two years and six months in the higher intermediate service and over three years in the higher service. After successful completion of the probationary service, civil servants, if they are at least 27 years of age, are appointed for life. Professional development opportunities Promotion is based on the principle of merit. Promotions take place in accordance with aptitude, qualifications and professional achievements. In most cases, it is necessary to change posts; the higher post is occupied on a probationary basis prior to the promotion. Since civil servants are assigned established posts, their promotion requires that an adequate higher post is available. In order to gain an informative, objective and comparable picture of the performance of public service staff, performance appraisals are prepared regularly every five years in accordance with criteria set out in assessment guidelines - and where appropriate on specific occasions. They serve as the basis for proper personnel decisions and measures of personnel development and constitute an instrument of personnel management. In order to improve the comparability of the appraisals, guidelines for assessment grades were established in the federal service in 1997 (so-called quota arrangement). The share of civil servants given the highest grade should hence not exceed 15%, the share of the second highest should not be more than 35% of the civil servants within a grade or functional level to be assessed.

49 Each Land is responsible for regulating its own assessment system. Within the framework of defined promotion procedures, qualified civil servants have the possibility to step up to one higher class of service. As a rule, civil servants have first of all to undergo a selection procedure, and having passed this an orientation period corresponding to the preparatory service; for the intermediate and higher intermediate service, the civil servants must also pass a relevant career examination. For the higher service, on the other hand, once the orientation period of at least 2 ½ years has been completed, only an interview with the Federal Personnel Commission is required, making it easier to advance to a limited area of functions similar to the previous work. In order to ensure a modern, effective and efficient public administration it is extremely important to choose the right people for leadership positions. Therefore the various public employers assign managerial posts only for a probationary period or fixed term, making selection and assignment more performance-oriented. If the wrong person has been chosen for the job (e.g. someone whose lack of managerial skills later becomes apparent), this can be corrected. This mechanism also reinforces managerial mobility, motivation and competition for managerial posts. Highly focused training courses help public service staff update and add to their qualifications. Improving knowledge and skills, including the use of new technologies, also prepares the public service to meet growing and changing challenges. Such training is offered at the public service's own training facilities and externally. The Federal Academy for Public Administration in Brühl is the central training facility at the federal level. Mobility The administration of the future will also be characterised by more rapid change in public functions. This requires greater employee mobility, both geographically and in terms of subject matter, in order to be able to optimally use the human resources of the public service, particularly in view of changing personnel needs. For operational reasons, or at the request of the civil servant, he/she may be temporarily or permanently moved to another post within the same authority,

50 may be temporarily seconded to another authority within the remit of his/her employer or of another employer (e.g. from the Federation to a Land), or may be permanently transferred to another authority within the remit of his/her employer or of another employer. These measures have on principle no effect on remuneration and pensions (except for the possible cessation or additional granting of certain allowances), and may be taken without the consent of the civil servant. His/her consent is however necessary for secondment of more than two years to a function not corresponding to his/her office, in particular if it is of a lower value, or to another employer for more than five years, for a transfer to a lower office, unless this transfer is necessary due to considerable changes in the functions, structure or of existence of the previous agency. Even in cases where the consent of the civil servant him/herself is not necessary, transfers entailing a change in location, secondments for more than three months as well as transfers generally require the approval of the staff council. If no agreement is reached, the highest service authority is responsible for the final decision. Furthermore, a civil servant may be temporarily seconded with his/her consent to another public institution which is not part of the German public service (e.g. international and intergovernmental organisations), or also assigned to a non-public institution. The consent of the civil servant is not required if his/her previous agency is fully or partly converted to a public organisation under private law. The approval of the staff council is on principle also required for such assignments. The civil servant concerned works for the agency to which he/she has been assigned, but continues to receive his/her remuneration from the former employer. A civil servant may on request be granted special unpaid leave to work in a public, intergovernmental or supra-governmental institution or in the development aid sector - if a

51 corresponding service or public interest exists. It is also possible for civil servants to be given unpaid leave for a maximum of five years to work in the private sector if no service reasons are against this. The legal status of civil servants during special leave remains unchanged. He/she is however not obliged to render services and no duty of maintenance is incumbent on the employer. The time of unpaid leave may be taken into account in civil servants' pensions if it serves public or service interests. In the same way, civil servants may be given leave on full or partial pay in certain cases if the purpose of the leave also benefits the service. In a Europe which is steadily growing closer together, the mobility of civil servants, i.e. their temporary work in a public service organisation of an EU partner state, has become particularly important. To this effect national contact points have been established in all EU states in a joint project with the title "National Contact Points" for the promotion of mobility within the European Union. These contact points are intended to actively support the authorities, for example by providing information about the public service, current vacancies, and the labour and social law framework in a given EU member state. According to the plans of the European Commission, up-to-date information about vacancies will in future be available in a central database. Social insurance Civil servants are not integrated into the various areas of statutory social insurance (see the following chart). As a rule civil servants are not obligated by law to be insured with the statutory pensions insurance scheme (Social Code VI, SGB VI), the statutory accident insurance scheme (SGB VII), the statutory unemployment insurance (SGB III) and the statutory health insurance scheme (SGB V). This exemption from compulsory insurance in the social security insurance schemes for employees who are legally obligated to participate in these schemes is caused by specific social security systems geared to the needs of civil servants and their special employment relationship. Nonetheless, civil servants are obligated to insure themselves against the risk of long-term care, according to the conditions of the compulsory old-age nursing home insurance (SGB XI).

52 Table: Social security system - the various statutory insurance schemes Statutory Statutory Unemployment Statutory Old-age nursing- pensions accident insurance health home insurance insurance insurance insurance (Social Code XI) (Social Code VI) (Social Code (Social Code III) (Social Code V) VII) Exemption from compulsory insurance Liability to insure Civil servants Payment of old- Accident No Self-insurance Insurance against age pensions by compensation termination of plus remaining risks the employer by the employer the contract of employer through service allowances allowances by the employer The principles of private social security insurance also apply to the special service relationships of judges and military personnel. In the case of civil servants, pensions are directly paid by the employer. This is one of the basic principles of the professional public service. Moreover the employer is liable to pay in-service accident benefits to civil servants. Integration into the system of unemployment benefits is not necessary, since civil servants are generally employed for life after completion of a probationary period. Social security insurance against the risk of illness and the need for long-term nursing care Civil servants are required to insure themselves and their families against the risk of illness and the need for nursing care on their own responsibility. Generally, this requirement is met by taking out a a private insurance policy. Premiums have to be paid for from remuneration and benefits. However, this private health and old-age nursing care insurance has to cover only part of the costs incurred in the case of illness or the need for nursing care; civil servants are additionally entitled to allowances. As a result of the employer's obligation to take care of its civil servants and their families, the employer refunds a certain percentage of the necessary and appropriate costs incurred in the case

53 of illness, need for nursing care, birth or death, as well as costs for early detection of diseases and vaccinations. These percentage levels are set in accordance with so-called assessment rates for specific persons. The same applies to all pensioners. In the federal public service, assessment rates are graded in accordance with personal criteria. According to this grading, active civil servants receive a 50% allowance, and retired civil servants a 70% allowance, to partially cover their illness-related costs. The civil servants' insurance covers 70% of spouses' and 80% of children's health care costs. As far as the latter - whom the law on allowances calls relatives fit to be taken into consideration - are already covered by the public health insurance as the primary insured (e.g. because they are in employment which obligates them to compulsory social insurance), the right to benefits resulting from this insurance preempts the right to allowances. Civil servants who were covered by the statutory health insurance until they achieved the status of civil servant can opt to continue their coverage under the statutory health insurance scheme, instead of changing to a private insurer. Nevertheless, in such a case they will have to pay the insurance premium themselves, since they - in contrast to public employees - are not entitled to a subsidy from their employer. In spite of their general freedom to subscribe to a private or public insurance company, civil servants are nevertheless obliged by law to take up statutory or private nursing-care insurance. The choice for one or the other depends on the type of health insurance, statutory or private. The scope of benefits in the case of the need for nursing care is subject to relevant provisions in the Code of Social Law XI (SGB XI). According to their constitutional power to legislate in certain areas, the Länder in their capacity as public employers regulate these matters in their own responsibility. Nevertheless the allowance regulations in force in the Federation and the Länder are largely concurrent, not least to ensure equal remuneration and pensions of all civil servants in Germany. In some cases the Land law on civil servants refers to the federal law on allowances and merely adds special provisions related to the specific situation in a given Land.

54 Public expenditure for allowances The following tables show federal public expenditure for allowances over the last 10 years and the annual rate of change in %. The German postal services and the German railways have not been included, since after their privatisation the two companies manage their financial resources themselves. Annual federal public spending for allowances (excluding the German postal services and railways) Year Expenditure for allowances in million Staff Pensioners Total Differences are possible due to the rounding up/down of numbers. Source: Federal Ministries of Finance and of the Interior

55 Trends in federal expenditure for allowances compared to previous year change in % Beschäftigte staff Versorgungsempfänger persioners The costs for allowance schemes currently equal 5% of the total federal expenditure for remuneration and approx. 13% of the total federal expenditure for pensions. The expenditure for allowances paid to pensioners on the federal, regional and local level have increased from 1.4 billion in 1990 to 2.8 billion in Expenditure for allowances paid to pensioners from the Federation, the Länder and municipalities in billion Year Total Federation Länder Municipalities Source: Second Pensions Report of the Federal Government, 2001 The development of average allowances paid to individual recipients can also be broken down to the federal and regional level.

56 Year Total Federation Länder annually per beneficiary, in ,738 1,227 1, ,761 2,147 3, ,426 2,812 3,681 Source: Second Pensions Report of the Federal Government, 2001 Termination of the employment relationship between public employer and civil servant Effective employment of civil servants can only be terminated, other than by death, in the cases permitted by law. As a rule, the active employment of civil servants ends on retirement. By law, civil servants must retire on reaching the age of 65. Exemptions from that rule apply to certain groups of civil servants, for example to police and prison staff and to firefighters, who generally retire at the age of 60. The age limits apply to women and men equally. Civil servants may also apply for retirement at the age of 63, or at 60 in case of serious disability. Furthermore, a civil servant must retire if he/she is permanently unable to perform his/her official duties for health reasons and is no longer able to fully perform other work, even after re-training ("rehabilitation before retirement"). The pension is reduced in cases of early retirement. A striking feature is that only 9% of civil servants continue to work up to the regular retirement age of 65 and some 16% up to the special retirement age (60+/-), while as many as 47% retire early because of unfitness for service. Civil servants who are no longer able to fully perform their official duties, but can work for at least half the normal working hours, can opt for a regulation known as "limited fitness for service" introduced in This regulation provides that the civil servant continues to work as much as he/she is fit to do and receives a salary in accordance with the reduced working hours, but at least as much as the pension which he/she would have received in the event of inability to work. Since 1 January 2002, this regulation also applies to civil servants who are younger than 50 years of age. This regulation expires on 31 December At the same time it has become possible for retired civil servants to re-enter the active public service even if they are only partially fit for service.

57 Civil servants who retired in 1999 by reasons for retirement 1) Invalidity 47% Normal retirement age (65 years) 9% Special retirement age 16% Other reasons 3% Persons age-eligible for retirement upon application (63 years) 25% 1) In the direct public service (excluding German railways and postal services), according to the law governing civil servants' and soldiers' pensions and allowances 4. The foundations of the relationship between public employer and employee Originally the public service was the exclusive preserve of civil servants. Wage earners were employed in the public service as support staff for the first time at the start of the 19 th century. Today about two-thirds, or 3 million, of the 4.8 million staff in the public service have the status of public employee (salary earners and wage earners). The high percentage of employees in the public service first of all reflects the fundamental change in the state's perceived role. In contrast to the 19 th century the state is no longer seen exclusively as the custodian of public order, but is also considered responsible for the growth and well-being of the community. These tasks have been assigned to a great extent to public employees, while civil servants are mostly allocated to the classic sovereign functions (police, inland revenue, customs administration and ministries). Regulating employment by means of collective agreements Like employees in the private sector, employees in the public service are employed on the basis of an employment contract under private law. This employment contract is based on

58 the general rules of German labour law and - as in other sectors of industry - on the specific rules of the relevant collective agreements. The right to form associations and societies with the right to conclude collective agreements was initially refused to public employees, and only given to industrial/private-sector workers. The door was opened to settling arrangements for their working conditions in a collective agreement after the right to form associations and societies was initially recognised by expressly including "civil servants and state-workers" and was guaranteed by Art. 159 of the Weimar Constitution of The Reich Office Workers Collective Agreement (Reichtsangestelltentarifvertrag - RAT) of 2 May 1924 played a pioneering role for subsequent collective agreements in the public service. The Act on Collective Agreements (Tarifvertragsgesetz) adopted after the Second World War also applied to the public service from the outset. Collective agreements applying to the public service are now generally uniformly negotiated between the employers in the federal services, the Land services and the local authority services on the one and the trade and labour unions represented in the public service on the other. The federal service is represented on the employers' side by the Federal Minister of the Interior, who works closely here with the Federal Minister of Finance and seeks the consent of the Federal Cabinet in important matters. The Länder are represented in collective agreements by their employers' association, namely the employers' association of the German Länder (Tarifgemeinschaft deutscher Länder, TdL) whose elected chairman is generally the Land minister of finance. The local authority service is also represented at federal level by an employers' association the local authorities employers' association (VKA) - whose member associations are organised at Land level and are comprised of the local authority territorial communities (municipalities, towns, districts, etc.) as well as local authority and local authority-influenced enterprises (e.g. airports and savings banks). Co-operation is voluntary between areas which have equal status. Some of the major trade and labour unions represented in the public service today are: ver.di - United Services Union, and DBB - wages and salaries negotiating arm of the German Civil Service Federation. These collective agreements specify almost all the major working conditions in the public service. Civil servants are subject to the Collective Agreement for Salary Earners in the Public Service (BAT) and complementary collective agreements (e.g. relating to the salary tables and salary increases). Wage earners in the public service on the federal and Land level are subject to one collective agreement (Framework Collective Agreement for Wage Earners in the Public Service, MTArb). Wage earners employed in the local authority

59 service are subject to a separate collective agreement (Federal Framework Agreement for Wage Earners in Local Authority Administrations and Operations, BMT-G II), also with additional collective agreements on individual questions. After German unification, parallel collective agreements were concluded for the public service in the former East Germany with differences which are being reduced in the course of further adaptation (for salary earners the Collective Agreement for Salary Earners in the Public Service, for wage earners the Framework Collective Agreement for Wage Earners in the Public Service and of the new Länder or the Federal Framework Agreement for Wage Earners in Local Authority Administrations and Operations in the new Länder). Duties and rights Generally, public employees have the same rights and duties resulting from their employment relationship as private-sector employees. In addition to the main duty of working, a series of additional duties exists for each employee. In general, for instance, each employee is obliged to work towards the best interests of the employer in accordance with his/her abilities. This duty of loyalty is particularly strong in the case of public service employees because their employment is with a public employer and the latter performs tasks for the public good. Public service employees are thus required among other things to carry out their tasks for the common good, impartially and justly. Moreover there exists the duty of political loyalty. This means that public employees have the duty to conduct themselves in a way that reflects their commitment to the constitutional principles of the Federal Republic of Germany. The extent of the duty of loyalty is however dependent on the function performed, so that in this sense the requirements are only comparable in certain positions with those of civil servants. A public employer can punish a public employee's breach of duty set down in the employment contract in the same way as a private employer: He/she can reproach the employee for a certain behaviour, express disapproval of a certain behaviour, warn or reprimand the employee. A reprimand consists of an employer's complaint that makes clear to the employee his/her performance shortcomings indicating that the terms and existence of the employment relationship would be placed in danger unless such shortcoming are remedied.

60 The severest punishment is, finally, termination of employment by dismissal. No provision comparable to the disciplinary law of civil servants applies to employees in the public service. Since employees in the public service are employed on the basis of an employment contract under public law, the labour courts are responsible for resolving legal disputes. Employees can defend themselves before a labour court by means of a dismissal protection action. They may also enforce claims emerging from employment - e.g. for a higher pay grade because work performed meets a pay grade characteristic set out in the collective agreement - by legal action before the labour court. Like employees in the private sector, public employees have the right to strike in order to enforce their demands in the framework of collective negotiations. Strikes must be organised by the trade and labour unions and may not have any other purpose than reshaping the working conditions or enforcing demands in collective bargaining. They are only permissible as a last resort after all available means of reaching an agreement have been exhausted. Political strikes are prohibited in Germany. Advancement opportunities In contrast to civil servants, public employees are not recruited to a particular career, but for a specific occupation. The activity is assessed in accordance with criteria set out in the collective agreement and forms the sole basis of placing the employee in a specific pay grades. Promotion to the next-higher pay grade is on principle conditional on the employer assigning the employee to a different higher-ranking function. Similar to the practice followed in promoting civil servants, however, in most cases the collective agreements allow for public employees to advance to the next pay grade if they have performed their duties satisfactorily over time (so-called advancement on grounds of proven abilities). The length of time required for such advancement varies according to pay grade; it ranges from two years in the lowest pay grade to 15 years in one of the highest pay grades It is common practice for employees not to be assigned permanently to a higher function immediately, but initially only temporarily. This means that the employer has the opportunity to examine the suitability of the employee for the higher function. This probation period usually lasts between three and six months.

61 Mobility Employees may be transferred, seconded or allocated under the existing employment contract. Furthermore, an employee may be temporarily seconded with his/her consent to another public institution which is not one of the German employers (e.g. international and intergovernmental organisations), or also assigned to a non-public institution. A transfer to another public employer is not possible. In such a case a new employment contract must be concluded. Public employees may also take unpaid leave, like civil servants. Changes in terms of employment An alteration of the conditions of employment to the disadvantage of the employee, e.g. assignment to a lower-paid job, may not be ordered unilaterally by the employer. Doing so requires that the employment contract be changed by mutual agreement or by way of termination of contract with the option of altered conditions of employment. Social security Public employees are by law generally obligated to be insured in the statutory social insurance, i.e. they are members of the statutory health, long-term care, accident, pensions and unemployment insurance schemes. The public employer and employee share the costs of social insurance in accordance with the applicable contribution rate which is a defined percentage of the gross income (the cost of accident insurance is borne by the employer alone). Social insurance contribution rates in % in 2002 Pensions insurance Unemployment Health insurance Nursing-care Social insurance insurance insurance This means that the amount of contribution depends on the income level; social insurance contributions are calculated on gross income only up to a certain limit (income limit for the

62 assessment of contributions). Income exceeding this limit is not taken into account in calculating contributions. Generally the contribution rates and the income limits for the assessment of contributions are reset every year. In addition, public employees are enrolled in an occupational pension scheme known as supplementary pension for public employees. There is an exception to obligatory membership in statutory social insurance in the case of health insurance: If the public employee's income exceeds the contribution assessment limit, he/she may take up insurance either voluntarily in the statutory health insurance or with a private health insurance fund. If the employee is insured in a private health insurance fund, he/she receives from the employer an allowance towards the contribution up to the amount which the employer would have to pay if the employee were a member of the statutory health insurance. Up to now, these public employees have been able to claim government aid instead of this allowance in the same way as civil servants. Termination of employment The employment relationship between public employer and employee may be ended by terminating the employment contract. To terminate the employment contract the staff council must be involved, otherwise the termination is invalid. A distinction is made between termination with due notice (routine dismissal) and exceptional termination. They differ with regard to the notice period and the grounds for termination. Routine dismissals are subject to a defined notice period. This period is two weeks to the end of the month during the six-month probationary period. After six months, the notice period increases to one month and rises - depending on the length of employment - up to six months. After 15 years of employment, but not before the employee has reached the age of 40, employment of public employees subject to the Federal Collective Agreement for Public Employees/Framework Collective Agreement for Wage Earners in the Public Service can no longer be terminated with due notice. Such routine termination of the contract by the employer requires a cause justifying this from a social point of view. Termination is only socially justified if it is brought about by reasons inherent in the character or conduct of the employee, or because of urgent operational requirements standing in the way of the continued employment of the employee in this operation.

63 Exceptional termination for serious reasons is permissible without adhering to a notice period. There must be circumstances making continued employment until expiry of the notice period unacceptable for the employer. Even employees whose contract in fact may not be terminated with due notice can be dismissed without notice on grounds of their personal behaviour. Legislation provides particular protection against termination of contracts of conscripts, pregnant women, severely disabled staff and staff representatives; such protection also applies to employees who, on the basis of collective agreements, have taken on other work in the context of rationalisation measures, or whose working hours have been reduced in order to avoid termination on operational grounds (e.g. layoffs). Other grounds for termination are: Contract of annulment: The employment contract may be ended at any time by mutual consent. Reaching the retirement age: Employment ends at the end of the month in which the employee turns 65. If the employee wishes to terminate the employment contract earlier because he/she is entitled to premature pensions from the pensions insurance or the supplementary pensions scheme, employer and employee must conclude a contract of annulment. Reduced working capacity: Employment ends if it is established that the employee is able to work only to a limited extent. In the case of partially reduced working capacity the employee has the right to continued employment, provided an adequate position is available. Expiry: Temporary employment ends at the time specified in the contract of employment. However, temporary employment is only permissible with sufficient reason (a temporary employment contract may not be used to circumvent statutory protection against dismissal). An exception from this rule is allowed only in the case of first employment, when the contract may be limited for two years without reason.

64 Termination of contract during the probationary period: During the probationary period at the beginning of employment (six months in the case of salary earners and three months in the case of wage earners), the employer can make use of a facilitated termination procedure. 5. General terms of employment for civil servants and public employees Irrespective of the different regulation procedures - unilateral regulation (statutes and ordinances) for civil servants, and collective agreements for public employees - many of the terms and conditions of employment are the same for the two groups, so that they can be described together. Working hours The normal working week is between 38.5 and 40 hours, not including breaks. Civil servants in the Länder and local authorities have a standard 40-hourworking week. Federal civil servants and those in the public service of the city of Hamburg and the Länder of Hesse and North-Rhine Westphalia have a 38.5-hour working week, while in Berlin the working week is 39.5 hours. The standard working week in the former West Germany consists of 38.5 hours, while in the former East Germany it consists of 40 hours. The working hours specified must constitute an average. The number of working hours may be lower or higher in the individual weeks, depending on operational requirements and agreements with the staff council. The start and end of the work day are established in service agreements between the respective employer and the staff council. Flexitime is also practised in many cases here: Staff members are able to plan their daily working hours themselves, apart from a specific "core time"; time credits or hours owed must be taken care of within certain periods.

65 Overtime Public service staff is obliged to work overtime, or at night or on bank holidays or shifts where necessary. The staff council has a say in what time of day employees must work overtime and how it is to be distributed among employees. Different regulations on compensation for overtime apply to civil servants and public employees. On principle, overtime is to be primarily compensated for by time off; civil servants may however only claim this compensation if they have worked more than five hours of overtime per month. In addition to compensatory time off, public employees also receive overtime pay, (for each hour compensated for between 15% and 25% of the hourly salary, depending on the pay grade). If it is impossible to compensate for overtime with leave, employees are paid the respective hourly salary, plus 15% to 25%. In the case of civil servants, payment is permitted only in certain areas, and the payment is in accordance with a flat-rate hourly salary. Part-time work Part-time work is specifically promoted in the public service, and is becoming even more popular. More detailed information is available on the Internet at or The Federal Ministry of the Interior has drawn up a guide on parttime employment which is also available on the Internet at The possibility for civil servants to work part-time has developed gradually. Since 1997 civil servants, upon formal request, may be employed part-time, with no particular preconditions and with no limit in terms of hours, if this does not interfere with operational interests. If part-time employment is applied for in order to care for children or other relatives in need of care, the civil servant has a right to work part-time, and this may only be rejected in rare exceptions. In teh case of such family reasons, civil servants may also work less than 50% of the full-time, whilst in other cases civil servants must work a minimum of 50%. The Act on part-time work and limited employment (Teilzeit- und Befristungsgesetz), which came into force on 1 January 2001, grants public employees the right to part-time work, on

66 the basis of a consensus between employers and employees. The employer's legitimate interests are respected by giving employers the right to reject the employee's application for part-time work on operational grounds. In the case of part-time employment, the salaries are on principle proportional to the number of working hours. It is not permissible to exclude part-time workers from certain benefits altogether. number Part-time staff in the public service Source: Federal Statistical Office, series 14, vol. 6, 2000 The proportion of part-time workers in the public service was 25% in 2000 (26% excluding professional and fixed-term military personnel). For female staff the proportion was 41.2%. Hence the public service plays a pioneering role in comparison to private industry. Differences exist between civil servants and employees. For civil servants the proportion of part-time workers was only 15.5% (female civil servants 37.0%), for public employees, on the other hand, it was 30.7% (female employees 42.7%). Of all part-time employees 85.3% were working at least half the regular hours, and the rest less than half. There are also distinct differences between the areas of employment: For instance, the proportion of part-time workers was higher among Land civil servants - in particular because of teachers - than among federal civil servants. Part-time staff (including old-age part-time work) as per 30 June 2000 Total Federation Länder Local authorities/ associations of local authorities joint local authorities: Indirect public service civil servants and judges 279,000 8, ,700 19,600 6,800 proportion of women in % salary earners 727,400 20, , ,500 87,300 proportion of women in % wage earners 202,800 6,600 27, ,000 13,200 proportion of women in % Total 1,209,200 36, , , ,300 proportion of women in % Source: Federal Statistical Office, series 14, vol. 6, 2000

67 Old-age part-time work Old-age part-time work as a subcategory of part-time work was introduced in 1996 with the Act to promote a gradual transition of elderly workers into retirement (Altersteilzeitgesetz). This Act provided the legal basis upon which in 1998 the collective agreement regulating old-age part-time work was reached for public employees. Along these lines, statutory regulations governing old-age part-time work were adopted for civil servants. Old-age parttime work enables older staff to terminate their active working life prematurely and to move smoothly into retirement. Full-time or part-time workers who have reached the age of 55 are eligible for old-age part-time work. All staff have the right to old-age part-time work from the age of 60 onwards, if no operational reasons are against this. Those who opt for old-age part-time work may choose between two models, the part-time or en bloc model. Over the whole period of old-age part-time work the working hours are reduced by 50%. Those who chose the part-time model will work reduced hours for the whole duration of the part-time contract, while those who chose the en bloc model will work full-time for a certain duration of time and will be released from work altogether towards the end of the part-time contract. For the whole duration of the old-age part-time agreement, all staff, no matter which model they opted for, receive half of their former salary, which is increased by the employer to 83% of the former net salary. Number of old-age part-time staff as per 30 June 2000 Federation Länder Civil servants/judges 3,400 5,600 Salary earners/wage earners in the public service Source: Federal Statistical Office, series 14, vol. 6, ,300 15,400 If the employer hires unemployed persons or apprentices to fill the jobs directly or indirectly vacated, a major part of the additional expense for this is refunded by the labour administration since such hired reduce the burden on the unemployment insurance system. Refunds by the labour administration are paid only for public employees, not civil servants.

68 Telework The modern work model known as telework is becoming increasingly important in Germany's public service. Both civil servants and public employees may conclude individual telework agreements with their employer if the duties related with their function can be fulfilled this way. In the interest of maintaining employee's integration into and identification with the agency, telework arrangements usually involve alternating between workplaces at home and office according to what has been agreed between employer and employee/civil servant. In 1999, the federal administration launched three pilot projects with 47 telework positions. In 2001, this number rose to 752 and at the beginning of 2002 to 992. Holidays All public service staff have 26 working days of holiday up to the age of 30, 29 days between the ages of 30 and 40 (30 working days from the A 15 pay grade upwards), and 30 working days from the age of 40 onwards (on the basis of the five-day working week, this therefore corresponds to a total of six weeks). There is also paid leave at short notice for special occasions, for certain family events, for a relocation for occupational reasons, to carry out civic duties, to care for sick relatives at short notice and others. Long-term unpaid leave may be granted on request to care for family members, for other important personal reasons if operational circumstances permit this, or to exercise another activity which is in the interest of the service. Maternity protection, parental leave Pregnant public service staff are released from their duties for six weeks before and eight weeks after giving birth (twelve weeks in the case of premature and multiple births; with

69 premature births additionally the time of the six weeks prior to birth not used) just as in private industry. Female civil servants continue to receive their remuneration, whilst female employees receive a combination of maternity benefit from the statutory health insurance and a supplement from the employers up to the amount of their salary. After this period of maternity leave, either both parents together or the mother or father alone may take parental leave, until the child has reached the age of three. In Germany all employees are entitled to this legal right. Parental leave is unpaid. Nevertheless all employees receive a public social benefit the amount of which depends on the monthly income but may not exceed per month. Continued payment of salary in case of illness In case of illness, civil servants continue to receive their remuneration with no time limit (they may be retired in the case of a long-term illness). This is in line with the special nature of civil servants' employment for life with the duty of the employer to ensure the maintenance of such civil servants. In case of illness, employees continue to receive their salaries/wages on the basis of general German labour law, but improved by means of the collective agreements: The employer pays the full salary for up to six weeks, with previous bonuses and overtime pay being included in the calculation. If the illness continues for more than six weeks, employees receive "sick pay" (90% of net wages or salary) as a health insurance benefit from the seventh week onwards. Additionally, the employer pays the difference between "sick pay" and the previous net wages/salary (also including bonuses, overtime pay, etc.). After employment of between one and three years, this allowance is paid until the end of the 13th week of illness; with employment of more than three years, it is paid until the end of the 26th week of illness *). *) For public employees who were already employed in June 1994, however, the regulation valid until that year still applies, according to which the employer continued to pay the full salary/wage, depending on the length of service, for up to 26 weeks (rather than only paying the difference between "sick pay" and last net wages/salary).

70 Service anniversaries Employees receive an "anniversary bonus" of , and and a day off after service of 25, 40 and 50 years respectively. Some Länder have however abolished these anniversary bonuses for their civil servants. Outside activities Public service staff are permitted to engage in outside activities only to a limited extent. The possibilities of holding outside positions are or may be restricted to differing extents depending on the nature of the activities: Engaging in outside activities requires the express prior approval of the superior (with a few exceptions which are expressly named in law). Permission is to be refused if it cannot be ruled out that the outside position might interfere with operational interests. Such a reason for refusal exists, for instance, if the outside activity takes up more than eight hours per week of the time of the civil servant or might influence his/her impartiality. Outside activities which, due to their very nature, do not give rise to an expectation of a conflict, such as all private activities, but also literary, scientific, artistic or lecturing activities do not require prior approval. Paid outside activities must be reported in advance to the superior. However, the superior may prohibit such outside activities - whether they are reportable or not - if it has been established or is almost certain that the staff member will fail to comply with his/her official duties. Moreover, outside positions outside the public service may on principle only be exercised before or after working hours and outside the office. At the request of their employer, civil servants may be obliged to hold outside positions. Outside positions held at the employer's request, or voluntarily on his behalf or on behalf of another public entity, institution or foundation under public law, shall be deemed as "outside positions within the public service". In such a case, compensation is granted only if this outside position has to be held without adequate release from the duties of the main

71 position. In cases where compensation is granted, annual compensation ceilings exist which are graded according to pay grades, or repayment obligations where these are exceeded. Certain types of outside positions which are expressly named in the relevant ordinances of the Federation and the Länder are excluded from such compensation ceiling and repayment obligation. With regard to outside activities of salary earners, the collective bargaining agreement refers to the regulations applying to civil servants. Hence, restrictions applicable to civil servants apply to salary earners in the public service accordingly. Paid outside activities of wage earners require the consent of the employer. Staff representation In a similar way to the Act Governing Labour Relations at the Work Place (Betriebsverfassungsgesetz) applicable to the private sector, the Federal Personnel Representation Act (Personalvertretungsgesetz) governs the right of all public service staff to be involved in all matters affecting their interests. In accordance with the distribution of responsibilities set out in the Basic Law, the rights of participation are governed by the staff representation laws of the Federation and the Länder, which are largely identical. The participation of the staff councils is intended to ensure that public service's staff interests warranting protection are taken into account. Participation is restricted to internal affairs. In all agencies the staff elect local staff councils. Corresponding to the multiple-tier administrative structure, in addition to the local staff council, there is a main staff council at the superior authority of the intermediate tier, as well as a district staff council, and a central staff council at the highest authority (e.g. a ministry) (also known as "gradual representation"). These staff councils are elected by the staff of the respective agencies. The size of the staff councils depends on the size of the agencies. Here, the different groups of staff, i.e. wage earners, salary earners and civil servants, must be proportionally represented.

72 Number of members on staff councils in accordance with the Federal Staff Representation Act Number of staff Size of staff council 5 to 20 one member 21 to 50 three members 51 to 150 five members 151 to 300 seven members 301 to 600 nine members 601 to 1,000 eleven members In agencies with 1,001 to 5,000 employees, the number of members increases by two for each started 1,000; with 5,001 or more employees by two for each further started 2,000. The maximum number is 31. The district or the central staff council is involved only if matters concerning the staff of the intermediate authority or of the ministry itself, the respective subordinate authorities or the entire department are to be decided on. Staff councils have a wide variety of rights of participation, namely rights of codetermination, hearing, advising and notification. The local staff council shall be involved in matters exclusively regarding the respective agency, while the district or central staff council shall be involved in matters regarding the respective subordinate authority or the whole purview of the highest authority. Measures subject to codetermination (such as appointments, transfers, promotions, employment beyond the retirement age, establishment and dissolution of social institutions, assessment guidelines, measures to prevent accidents at work and workplace design) may only be taken with the consent of the staff council. If no agreement is reached at local level, the superior agency, and finally the highest authority (ministry) may be called upon, which involves its central staff council (district staff council, central staff council). If no agreement can be reached here either, a conciliation body composed of equal numbers of representatives from both parties, takes a decision. Its decision is however only a recommendation if it touches on the parliamentary accountability of the central administration. These are for instance personnel matters and organisational decisions.

73 If the staff council merely contributes to decisions (e.g. merger of agencies, early retirement, termination of employment contract with due notice), the intended measure is to be discussed with it in good time and in detail. If no agreement is reached, the matter can be submitted to the highest service authority, as is the case with codetermination. The latter then takes a definitive decision after negotiating with the central staff council. The weakest rights of involvement are the rights of hearing, advising and notification. They do not give rise to a veto, nor do they lead to superior agencies becoming involved. These include for instance basic changes in working procedures and processes, passing on personnel requirements, new buildings, conversions and extensions, advisory participation in examinations and exceptional termination. The participation of the staff council in employment contract terminations is however extremely important in that it is a precondition for the validity of these measures under labour law. With certain objections from the staff council against the dismissal of an employee with due notice, the agency is also obliged to continue to employ the dismissed person until any dismissal protection proceedings have been concluded. 6. Occupational health and safety Generally there is no difference between the public and private sectors with regard to occupational health and safety regulations. Public occupational health and safety regulations, which are oriented towards European law, also apply to the public service. Exceptions shall be permissible when the public interest so requires (for example for certain activities of the police, the federal border police, the fire brigades or the federal armed forces). Compliance with public regulations is generally monitored by occupational health and safety agencies of the Länder. The central office for occupational health and safety at the Federal Ministry of the Interior is the competent agency within the federal public service. The federal executing agency of the accident insurance scheme acts on its behalf. Special regulations apply for some federal ministries. Like employers' liability insurance associations in the private sector, special accident insurance institutions exist for salary and wage earners in the public service, which have the status of autonomous "accident insurers" of local authorities and the Länder. Like their

74 private counterparts, they adopt regulations on accident prevention and monitor compliance with these regulations. The Federal Ministry of the Interior or, more precisely, the Central Office for Occupational Health and Safety (Zentralstelle für Arbeitsschutz), is the competent authority for the federal public service, with exceptional regulations for some federal ministries. Under the provisions of the public accident insurance, salary and wage earners in the public service, like their counterparts in the private sector, are insured against occupational accidents and occupational illness with the competent accident insurance institutions (accident insurers or executing agencies). Contributions are borne by the public employers. Civil servants are not insured with the public accident insurance fund. Protection in the case of on-the-job accidents and occupational illness is ensured directly by the employer on the basis of the Act Governing Civil Servants' Pensions and Allowances (Beamtenversorgungsgesetz) (c.f. "Social insurance").

75 IV. The pay systems in the public service 1. The remuneration of civil servants Legal basis The remuneration of civil servants, judges and military personnel (i.e. professional and fixed-term military personnel) is governed by the Civil Servants Remuneration Act (Bundesbesoldungsgesetz - BBesG). It applies to all civil servants of the Federation, Länder, local authorities and local authorities associations, as well as of other bodies, institutions and foundations under public law. The law on remuneration is uniform throughout Germany; specific characteristics for civil servants in the individual Länder may only be taken into account where the Civil Servants Remuneration Act permits exceptions. All regulations relating to remuneration by law or ordinance which refer not only to federal public service staff require the approval of the chamber of the Länder (Bundesrat). The basis for remuneration is the so-called maintenance principle, which is one of the principles of the professional civil service guaranteed by the Constitution (Art. 33 (5) of the Basic Law). According to this, the employer is obliged to provide suitable maintenance commensurate to the office assigned (but not the specific function) to active civil servants, also if they become disabled or reach retirement age. Remuneration is intended to ensure that civil servants are able to devote themselves entirely to their jobs; only a financially independent civil service is able to fulfil the functions assigned to it by the Constitution. Unlike that of public employees, the remuneration of civil servants is not a direct payment for individual work done, but compensation for their service as a whole, in other words for civil servants making their entire working capacity available to the general public and carrying out their duties to the best of their ability (civil servants with life tenure). The parliament does however have considerable scope for discretion in assessing which remuneration is suitable. The maintenance principle sets a general standard to be given concrete form in each case in accordance with the circumstances at the time.

76 Elements of remuneration Remuneration, which is paid monthly in advance, consists primarily of the basic salary. This is supplemented by the family allowance, as well as allowances in specific cases. Performance bonuses or performance allowances, as well as special allowances in accordance with labour market conditions may also be paid. Special expatriation allowances apply to assignments abroad. In addition, civil servants receive annual special payments and capital-forming benefits. Basic salary The basic salary is the main element of remuneration; it is determined in accordance with the pay grade of the office held. It is therefore not a matter of which function the civil servant actually performs, but solely of the pay grade of the office assigned to him/her. The offices and their pay grades are governed by the Federal Remuneration Schemes (Bundesbesoldungsordnungen), and additionally where appropriate by the Land Remuneration Schemes (Landesbesoldungsordnungen). There are four remuneration schemes. Schemes A and B govern the remuneration of civil servants and military personnel, scheme C that of professors and lecturers at higher education institutions, and scheme R governs the remuneration of judges and public prosecutors. Civil servants in pay grades A 2 to A 16 (the vast majority of all civil servants and military personnel) and C 1 to C 4 (for professors and lecturers at higher education institutes) receive incremental salaries, whilst civil servants in pay grades B 1 to B 11 receive fixed salaries. Scheme B applies to civil servants and military personnel in senior positions (such as state secretaries, directors general, deputy directors general, head of divisions, presidents of higher federal authorities, generals, etc.). Remuneration scheme R (for judges and public prosecutors) contains both incremental and fixed salaries (pay grades R 1 and R 2 incremental, R 3 to R 10 fixed salaries).

77 Remuneration scheme A assigns the following pay grades to the different careers for civil servants: ordinary service: pay grades A 2 to A 6 intermediate service: pay grades A 6 to A 9 higher intermediate service: pay grades A 9 to A 13 higher service: pay grades A 13 to A 16, B 1 to B 11. The top pay grade of a lower class of service is usually the entrance pay grade of the next class. In contrast to the fixed salaries, with incremental salaries the basic salary within the individual pay grades is divided into steps. Progression up the steps is governed by the civil servant s age, as a rule from the age of 21 onwards, and performance. As a minimum, the initial basic salary of the respective pay grade is paid. The basic salary increases within the respective pay grade up to the fifth step at intervals of two years, up to the ninth step at intervals of three years, and beyond this at intervals of four years. In the higher pay grades of the higher intermediate and higher services, the final basic salary can be reached at the earliest at the age of 49 and 53, respectively 1) Federal Remuneration Scheme A Pay grade Basic Salaries ( per month) valid as per 1 January 2002 Increase at a 2-year interval 3-year interval 4-year interval S t e p A A A A A A A A A A A , A A A A ) Prior to the Act to Amend the Public Service Law (Dienstrechtsreformgesetz) of 1997 the basic salary generally increased at two-year intervals (as is still the case with public employees). Thus, the final basic salary was reached at an earlier age. The Act to Amend the Public Service Law extended these

78 Federal Remuneration Scheme B Basic salaries (valid as of 1 January 2002) Pay grade Basic salary per month B 1 4, B 2 5, B 3 5, B 4 6, B 5 6, B 6 6, B 7 7, B 8 7, B 9 8, B 10 9, B 11 10, It has been possible since 1997 to advance to the next step in remuneration scheme A (in case of consistently outstanding performance) in only half the usual time (performance step). An early increase in the basic salary is irrevocable and is meant for long-term high performers. If a civil servant s level of performance is not suitable, he or she does not move on to the next step in the basic salary until performance justifies such a move. Performance steps may not be granted to civil servants on probation. The performance step may be given in each calendar year to up to 10% of the civil servants, judges and military personnel in employment on 1 January with an employer under remuneration scheme A and who have not yet reached the final basic salary. On the basis of its progress report on the amendment of public service law adopted on 20 June 2001, the Federal Government intends to improve these provisions; the legislative procedure has not been concluded yet. Reform measures ( p. 98) The following table provides an overview of the allocation of certain functions to specific pay grades. intervals from 1997 onwards to 3 or 4 years from the 5th step upwards; conversely, it introduced the possibility of earlier progression as a reward for outstanding performance.

79 Functions and pay grades Function Title Pay grade Messenger Oberamtsgehilfe / Oberamtsgehilfin A 2 Hauptgefreiter (Lance Corporal) A 4 Unteroffizier (Sergeant) A 5 Office clerk Sekretär / Sekretärin A 6 Stabsunteroffizier (Sergeant) A 6 Policeman Polizeimeister / Polizeimeisterin A 7 Assistant desk officer (e.g. in a tax office) Inspektor / Inspektorin A 9 Policeman Polizeikommissar / Polizeikommissarin A 9 Leutnant (Second Lieutenant) A 9 Polizeioberkommissar / Polizeioberkommissarin A 10 Engineer (Fachhochschule) Technischer Regierungsoberinspektor A 10 (starting office) Company commander Hauptmann (Captain) A 12 Teacher at an elementary school / Hauptschule Lehrer / Lehrerin (Teacher) A 12 Policeman Polizeihauptkommissar / Polizeihauptkommissarin A 12 Teacher at a Realschule Realschullehrer / Realschullehrerin A 13 Desk officer in a ministry Full-time mayor in a town with up to 10,000 inhabitants Teacher at a Gymnasium Regierungsrat / Regierungsrätin Oberregierungsrat / Oberregierungsrätin Regierungsdirektor /Regierungsdirektorin A 13 A 14 A 15 Bürgermeister / Bürgermeisterin (Mayor) A 15 Studienrat / Studienrätin Oberstudienrat / Oberstudienrätin Studiendirektor / Studiendirektorin A 13 A 14 A 15 Commander of a battalion Oberstleutnant (Lieutenant-Colonel) A 14 Head of division in a federal ministry Ministerialrat / Ministerialrätin A 16/B 3 Head of an embassy Botschafter / Botschafterin (Ambassador) A 16/B 3 Full-time mayor in a town with up to 100,000 inhabitants Oberbürgermeister / Oberbürgermeisterin B 6 Brigade commander Brigadegeneral (Brigadier) B 6 Director in a federal ministry Ministerialdirigent / Ministerialdirigentin B 6 Division commander Generalmajor (Major General) B 7 Director-General in a federal ministry Ministerialdirektor / Ministerialdirektorin B 9 State secretary in a federal ministry Staatssekretär / Staatssekretärin (State Secretary) B 11

80 The distribution of active civil servants and judges among the different pay grades at the federal level, the level of the Länder and at local level is as follows: Civil servants and judges divided into pay grades Federation Länder Local authorities A1-A4 A 5 A 6 A 7 A 8 A 9 A 10 A 11 A 12 A 13 A 14, C 1 A 15, C 2, R 1 A 16, C 3, R 2 B 2, B 1 B 3, R 3, C 4 B4- B11, R4- R10 Source: Federal Statistical Office, series 14, vol. 6, 2000 For the Länder, the preponderance of pay grade A 9 is accounted for by the police, and that of pay grades A 12 and A 13 by teachers. Approximately 95% of all civil servants are in pay grades A 5 to A 15. Family allowance The family allowance (previously: local cost-of-living allowance, which was originally intended to compensate for the differences in the cost of living of civil servants in individual posts) is a part of remuneration, in the same way as the basic salary. Its amount depends on the family situation of the civil servant, and in step 1 also on the pay grade. In line with the maintenance principle, the family allowance also takes account of the additional burdens typically involved with having a family in comparison with single civil servants. The family allowance paid in step 1 (so-called marriage allowance) is paid to married, widowed and divorced civil servants (if obligated to pay a maintenance allowance resulting

81 from the marriage). In the lower pay grades up to A 8 it is 95.96, from A 9 upwards it is per month. For each child to be taken into account, the family allowance is increased by 86.21, from the third child onwards by per month. In accordance with the decision of the Federal Constitutional Court of 24 November 1998 on the appropriate level of maintenance paid to civil servants with many children, civil servants receive monthly benefits of in addition to the family allowance from the third child onwards as from Independently of the payment of the family allowance, civil servants, judges and military personnel, as other citizens, are entitled to the general state child benefit payments. From 2002 onwards, the monthly figure for this is for the first, second and third child 154 each for each additional child 179. Allowances Allowances are additional payments made in all areas of work, and hence also in the public service, in addition to the basic remuneration (basic salary/family allowance) in recognition of specific requirements and services. There are three groups of allowances: Functional allowances: These serve to differentiate between the offices, are issued in the remuneration schemes of the offices themselves and are considered an element of the basic salary. They are automatically included in the general salary increases and are also taken into account in calculating pensions. Thus, for instance, in the top pay grade of the intermediate service pay grade A 9 - up to 30% of civil servants may receive a functional allowance if they perform functions exceeding the general level of this pay grade. Post allowance: There are post allowances for performing outstanding functions, such as the police allowance and fire service allowance ( ), an intelligence service allowance (depending on the pay grade, between

82 and ), a flight crew allowance ( ) and a prison staff allowance ( 95.53). There is the so-called ministerial allowance for work in the federal ministries and at the highest federal courts, the amount of which depends on the pay grade (e.g in pay grade A 13). Most civil servants receive a "general post allowance", which was introduced at the time in order to harmonise the development in remuneration at the federal level and in the Länder. After being partly incorporated in the basic salaries, this allowance ranges between and In the past the greater part of the post allowances was pensionable, and was also indexed along with general salary increases. With the 1998 Pensions Reform Act (Versorgungsreformgesetz) the pensionability and indexing of the post allowances were abolished from 1999 onwards. Extra pay for difficult working conditions/overtime pay: This is remuneration for work which is carried out either outside normal working hours or under difficult conditions, e.g per hour for work on Sundays or bank holidays, 1.28 per hour for work at night, between and per month for alternating shifts and shift work, between and for nursing service, as well as allowances for flying activities, for divers, for certain military deployment, etc. There are only certain areas (teachers, the police, customs, the fire brigade) and specific service schedules for which overtime is paid. Overtime is paid in terms of a flat-rate, proportional hourly wage. Extra pay for difficult working conditions and overtime pay are not pensionable. In the case of illness, only such extra pay for difficult working conditions is provided which is set out in monthly sums. At the federal level, almost 4% of total expenditure for remuneration of federal civil servants and military personnel is currently spent on allowances. Performance bonuses and allowances The Act to Amend the Public Service Law (Gesetz zur Reform des öffentlichen Dienstrechts) of 24 February 1997 entitled the Federal and Land Governments to introduce for their areas by means of legal ordinances performance allowances and

83 bonuses for outstanding special performance. These performance-related instruments make it possible to react directly and quickly to service performance and to increase the motivation of particularly well-skilled and high-performing staff; they supplement the performance steps in the basic salary, which were also introduced with the 1997 Act to Amend the Public Service Law. In order to prevent performance bonuses and allowances becoming set elements of remuneration and to keep them from becoming routine, there are restrictions in the Civil Servants Remuneration Act with regard to the beneficiaries (10% of civil servants and military personnel with incrementally rising salaries), the amount and modes of payment. The performance bonus as a one-off payment is the clearest way to emphasise its particular nature as a reward because it is given for an outstanding service which has already been provided, and hence does not become a routine additional payment. A bonus may be granted up to the amount of the respective basic starting monthly salary of the civil servant. Example: In pay grade A 13 a performance bonus in the form of a one-off payment of up to a maximum of the basic starting salary of pay grade A 13, in other words at present 2,758.01, may be paid. The continuous performance allowance is dependent on a positive performance evaluation and is time-limited (at most twelve months) and paid monthly up to 7% of the basic starting salary; it may be revoked. Example: In pay grade A 13 a performance allowance in the form of a monthly payment up to a maximum of 7% of the basic starting salary of pay grade A 13 ( 2, x 7%=) for at most twelve months (= 2, in total) may be paid. For the federal service, the details have been set out in the Ordinance on Performance Bonuses (Leistungsprämienverordnung) and in the Ordinance on Performance Allowances (Leistungszulagenverordnung) of 1997 (BGBl. I, p. 1598). On the basis of its progress report on the amendment of public service law adopted on 20 June 2001, the Federal Government intends to improve these provisions.

84 Special allowances to ensure functionality and competitiveness To deal with acute staff shortages, special allowances may be paid in the framework of budgetary provisions where this is necessary in a specific case. The special allowance may not exceed a maximum of 10% of the basic monthly starting salary of the pay grade of the civil servant or member of the military. The basic salary and the special allowance together may not exceed the final basic salary. The decision to grant special allowances is taken by the highest responsible service authority in co-ordination with the ministry in charge of remuneration or by the body specified by the latter. Details are governed in Section 72 of the Civil Servants Remuneration Act. Expatriation allowances Civil servants, judges and military personnel officially living and working abroad receive the following expatriation allowances, in addition to their domestic remuneration: an expatriation bonus for work performed abroad, an expatriation child bonus, and a rent subsidy. Additionally, a portion of this remuneration is subject to calculation of differences in the purchasing power in terms of additions or subtractions. These arrangements also apply to public employees, as appropriate.

85 Salary examples (gross monthly salaries) 2002 Police officer, intermediate service Starting salary on entry at age 19 Final salary typical career at age 50 Pay grade/salary Civil servant in public administration, higher intermediate service (e.g. at a tax office) Pay grade/salary Junior school teacher A 7 1,706 on entry at age 22 A 9 1,909 on entry at age 25 A 9 2,621 typical career at age 54 A 11 3,126 A 12 3,447 at age 54 Pay grade/salary A 12 2,457 A 12 3,379 Civil servant in public administration, higher service (e.g. lawyer as professional deputy in an intermediate authority) Pay grade/salary Director in a Land ministry, head of division in a federal ministry, mayor in a town with more than 10,000 and up to 30,000 inhabitants on entry at age 29 typical career at age 54 A 13 3,104 A 15 4,711 pay grade B 3 (fixed salaries) 5,805 Family allowance for spouse: Pay grades A 1 A 8: 95.96, other pay grades: Family allowance per child: First and second child: 86.21, from the third child onwards: The pay of public employees Legal basis The pay of public employees is governed by collective agreements concluded between the public employers and the trade unions - as are the terms of employment in general. The principles of pay are to be found in the Collective Agreement for Salary Earners in the Public Service (BAT) and in the Framework Collective Agreement for Wage Earners in the Public Service (MTArb) of the Federation and the Länder. The pay itself is governed by collective agreements relating to salaries and wages, which are renegotiated usually annually between employers and trade unions and may be terminated with a certain

86 notice period. The current agreements are Agreement no. 34 annexed to the BAT (governing salaries) and Agreement Nr. 4 annexed to the MTArb (governing monthly wages) of 30 June 2000, determining salaries and wages from 1 April 2000 to 31 October Individual agreements may be concluded for senior functions above the highest pay grades covered by the collective agreements. In contrast to the remuneration of civil servants, the pay of public employees is not maintenance but a direct compensation by the employer for the work to be performed by the employee. The pay of salary earners in the public service is composed of the following elements: basic salary, local cost-of-living allowance, other allowances. Basic salary The basic salary is dependent on the specific work carried out by the salary earners, on the basis of which they are allocated to a pay grade between X and I. The allocation of activities to pay grades is in accordance with the Pay Scheme (Vergütungsordnung of the BAT, which is annexed to the collective agreement. Salary earners have an actionable claim to be paid in accordance with the pay grade which corresponds to their work under the Pay Scheme. The pay grades of the basic salary can be divided into four groups - comparable to the classes of service of civil servants - to which in each case a specific profile of requirements can be assigned: X to VIII Simple work which as a rule can be carried out without qualified vocational training after a certain instruction phase, comparable to the ordinary service of civil servants (pay grades A 1 to A 5)

87 VIII to V b Work for which broad knowledge is required which as a rule is acquired through three years of professional training, comparable to the intermediate service of civil servants (pay grades A 5 to A 9) V b to II a Work for which extensive specialist knowledge is required which as a rule is acquired in specialist studies at a Fachhochschule, comparable to the higher intermediate service of civil servants (pay grades A 9 to A 13) II a to I Work for which an academic degree completed at a higher education institute is required, comparable to the higher service of civil servants (pay grades A 13 to A 16) In the salary tables, there are several steps within the different pay grades depending on age. As a person gets older the salary increases from the starting step in intervals of two years, until the final step is reached. Table of basic salaries Basic salaries at age: Pay (monthly in ) valid from 1 January 2002 I 2, , , , , , , , , , , , , I a 2, , , , , , , , , , , , , I b 2, , , , , , , , , , , , , II a 2, , , , , , , , , , , , III 1, , , , , , , , , , , , , IV a 1, , , , , , , , , , , , , IV b 1, , , , , , , , , , , , , V a/b 1, , , , , , , , , , , , , V c 1, , , , , , , , , , , VI b 1, , , , , , , , , , , , VII 1, , , , , , , , , , , , VIII 1, , , , , , , , , , IX a 1, , , , , , , , , IX b , , , , , , , X , , , , , Unlike with civil servants, reaching the next step with salary earners depends exclusively on age, and hence not performance. If a salary earner is transferred to a more demanding activity, he/she is automatically grouped in the correspondingly higher pay grade. In most cases, a salary earner is also able to reach the next pay grade after a certain time without his/her work changing if

88 Distribution of salaried employees in pay grades as per 30 June Federation Länder Local authorities X IX b IX a VIII VII VI b V c V b IV b IV a III II a I b I a I Pay grades performance has been in accordance with the requirements of the job (known as promotion on grounds of proven abilities). A separate pay scheme and salary table apply to nursing personnel. Separate pay arrangements have also been agreed for wage-earners, which, however, are similar to the regulations applying to salary earners. Thus, for instance, no vocational training is required in the lower pay grades for wage-earners, completed vocational training in the intermediate pay grades and special knowledge and skills in specialist areas in the higher pay grades. Local cost-of-living allowance The local cost-of-living allowance (which has been taken over from the previous civil servants remuneration law) was originally intended to compensate for the differing cost of living of staff in different posts. It is now in part an element of the basic pay, and in part an allowance for spouses and children. The amount depends on the family situation and the pay grade. All salary earners receive the local cost-of-living allowance of step 1, married salary earners that of step 2, and salary earners with a child that of step 3.

89 Table of local cost-of-living allowances ( per month) as per: Step 1 Step 2 Step 3 Pay grades I to II b Pay grades III to V a/b Pay grades Vc to X With more than one child the local cost-of-living allowance increases by for each additional child to be taken into account. The partners to the collective agreement have not yet agreed to apply the decision to give up the local costof-living allowance of civil servants in favour of the family allowance by adding the amount of the first step of the local cost-of-living allowance to the basic salary also to public employees. Wage earners do not receive a local cost-of-living allowance, but only an allowance for children, in addition to their monthly wages, in the same amount as the share of the local cost-of-living allowance for salary earners relating to children (currently per month). Allowances Public employees largely receive the same allowances as civil servants. The main differences are as follows: General allowance: The general allowance for salary earners has not yet been incorporated into the basic salary. Its amount corresponds with the amount paid to civil servants prior to the reform of the remuneration system, and is indexlinked. In the case of wage earners, the general allowance was already integrated into the monthly wages as part of a 1991 reform. Post allowance: As a rule, post allowances are agreed on in collective agreements. If they are paid for specific cases only (e.g. police allowance), they are governed by separate provisions outside the collective agreement. Functional allowances: Special allowances linked to pay grades can be compared with the functional allowances of civil servants, which are not paid to public employees. These are allowances allocated to individual characteristics of the post and which are either paid after a probationary period or for a particular function (e.g. to staff in the typing pool). The person concerned is hence promoted within the level of a pay grade without reaching the next grade.

90 It would also be possible to refer to these allowances as a kind of intermediate pay grade. Extra pay for difficult working conditions: Extra pay for difficult working conditions is in part expressed in percentages, and hence directly linked to the pay grade (e.g. overtime allowances, allowances for work on Sundays or bank holidays). Performance allowances and bonuses: For public employees, such allowances and bonuses are not dealt with in the collective agreement. However, the Federation as an employer has introduced this instrument of performancerelated pay for its employees by means of a separate arrangement outside the collective agreement, and the local authorities and local authority associations through a framework contract.

91 Salary examples (gross monthly salaries 2002) including all elements of payment paid on a regular basis Starting salary Final salary Skilled worker on entry at age 20 pay grade 4 1,750 typical career at age 40 pay grade 7 a 2,344 Typist on entry at age 18 pay grade VIII 1,710 typical career at age 43 pay grade VII 2,214 Nurse working in alternating shifts (not including nurses on call) on entry at age 20 pay grade Kr. IV 1,960 typical career at age 40 pay grade Kr. VI 2,598 Salary accountant on entry at age 23 pay grade V c 1,900 typical career at age 45 pay grade IV b 2,879 Qualified engineer (Fachhochschule) on entry at age 23 pay grade V a 2,040 typical career at age 45 pay grade III 3,576 Hospital doctor (not including doctors on call) on entry at age 29 pay grade II a 3,074 typical career at age 47 pay grade 1 a 4,700

92 For married salary earners in pay grades X to V c or Kr. 1 to Kr. VI the monthly gross salary increases by and in the higher pay grades by A monthly supplement of is paid per child. 3. Special payments There are two special annual payments in the public service, in addition to regular salaries: at the end of the year the so-called "special bonus" (for civil servants) or "bonus" (for salary and wage earners). It has been paid since 1973 in the amount of one month s salary so that the annual income is in fact a 13 th month salary. This special payment is however not paid if the staff member leaves the public service in the first quarter of the following year (civil servants) or changes employers (salary and wage earners). Since 1993 this payment has been frozen, i.e. the 13th month salary is paid in accordance with salaries paid in It is therefore only 86% of present salaries in In the new Länder the bonus was introduced at a rate of only 75% of a month's salary, so that because of freezing since 1993 it is presently 64.5% of a current month's salary (2002). The "holiday bonus" paid in the middle of the year, which is however quite independent of when holiday is taken. It is a standard for staff in the lower to middle pay grades and in pay grades from A 9 (civil servants ) and V b (salary earners). The holiday bonus is for all staff in the new Länder. Part-time staff receive a proportionate amount of these special payments in the same way as their regular salaries. Furthermore, civil servants and public employees receive capital-forming benefits in accordance with the general Act on Capital Formation (Vermögensbildungsgesetz),

93 amounting to 6.65 per month, which must be invested in accordance with the provisions of this act (e.g. in house savings plans or capital formation plans). 4. Salaries and wages in the new Länder In accordance with the Unification Treaty, the previous provisions initially continued to apply to public employees in the five new Länder. On 1 January 1991 they were largely replaced by special collective agreements applying only in the new Länder, i.e. the BAT-O (for salary earners), as well as the MTArb-O and the BMT-G-O (for wage earners). From 1 July 1991 onwards, in view of the productivity and financial power of the new Länder, the salaries and wages of public employees were initially fixed at 60% of the corresponding salaries in the old Länder by collective agreements. Salaries and wages have gradually increased to move closer to the West-German level (in per cent): from onwards 70 from onwards 74 from onwards 80 from onwards 82 from onwards 84 from onwards 85 from onwards 86.5 from onwards 87 from onwards 88,5. from onwards 90. The remuneration of civil servants, judges and military personnel in the new Länder is paid on the basis of a legal provision (ordinance) applying exclusively to this group of people. The amount of remuneration has increased in parallel with the salaries and wages for public employees in the new Länder. As in the past, remuneration will continue to be adapted to the level of payment in the old Länder in accordance with the economic and financial circumstances and development in the new Länder.

94 Salary and wage increases In Germany, there are no automatic salary and wage increases, e.g. in accordance with the development of labour productivity. In the public service, too, any increase in nominal salaries must be agreed on separately. For salary and wage earners (as in other economic sectors) this is done in negotiations between the trade unions and the public employers leading to a new collective agreement on salaries and wages. For civil servants, the German Bundestag must debate and adopt an act governing increases in remuneration (Erhöhungsgesetz), which requires the consent of the chamber of the Länder (Bundesrat). Section 14 of the Civil Servants Remuneration Act (Besoldungsgesetz) states the following on this matter: "Remuneration shall be regularly adjusted by a federal law in accordance with economic and financial developments and taking account of the specific responsibilities governing official functions". Public employees In general, the negotiations for salary and wage earners are held first. The trade unions terminate the previous collective agreement relating to salaries and wages at the end of the agreed term, and state their claims. On the employers side the negotiations are held jointly by the Federation, the Länder and the local authority employers (who as such are independent of one another). The joint representation of the Federation, the Länder and the local authorities in the negotiations is based on a voluntary, unwritten agreement. The trade unions may also call upon salary and wager earners to strike in order to achieve their objectives in the negotiations. Civil servants may not strike, but on the other hand they may not be put to work as "strike-breakers" in jobs held by striking public employees either. If the negotiations are initially unsuccessful, it is possible for conciliation proceedings to be initiated in which a commission of representatives of the partners to the collective agreement work out and adopt a recommendation to the parties to the collective agreement under an impartial chairperson. The recommendation is not binding, but does entail an obligation to the parties to re-negotiate without delay. No strikes may be held during the conciliation procedure. The new collective agreements relating to salaries and wages are then binding on the employers and trade union members concerned for the period of their agreed minimum

95 term. On the basis of the employment contracts, they are also applied to public employees who are not members of trade unions. Civil servants The procedure to increase remuneration for civil servants is generally initiated once the collective agreement has been concluded for public employees. The Federal Government submits a draft bill to the parliament. Before the Federal Government adopts the draft, the Federal Minister of the Interior discusses it with the trade unions of civil servants; this discussion, however, does not have the status of negotiations. The position of the trade unions is communicated in the annex to the draft bill submitted to the parliament. As a rule, the draft bill goes along with the collective agreement because the relevant aspects of the economic and budgetary situation have been examined in detail during the collective bargaining. Sometimes, however, the increases for civil servants enter into force later than those for public employees, so that civil servants suffer a relative disadvantage in the year in question and conversely there is a lower burden on the public budgets. In most cases, the act governing increases in remuneration is adopted relatively late in this procedure, but enters into force retroactively. It would also be possible for the parliament to decide in advance on increasing the remuneration of civil servants regardless of the collective bargaining of public employees. Such a practice is however the exception. As a result of the procedure outlined above salaries and wages in the public service generally develop along the same lines, at all levels and for all groups of public service staff. Having said that, the increase in remuneration for civil servants will be reduced by 0.2 per cent from 1999 onwards on the basis of the 1998 Act to Reform the Pension System. This 0.2 per cent reduction, used to fund the pension reserves, will be discontinued from 2003 until 2010, when it will resume until Salary and wage increases from 1993 to 2001 The overview below shows salary and wage increases in the public service from 1993 to 2001 in comparison with average pay increases in the economy as a whole and developments in the cost of living.

96 Salary and wage increases in the public service in comparison with the private sector and developments in the cost of living. Year Collective agreements for public service staff: Average increases in the private sector % Increase in the cost of living % % from onwards (civil servants not until ) % from onwards for lower pay grades, from for higher pay grades (for lower and higher-grade civil servants not until and , respectively) % from onwards and a one-off payment of DM no increase, only a one-off payment of DM % from (for civil servants not until , in the higher pay grades from ) % from % from onwards (for civil servants 2.9 % from ) and a one-off payment of DM % from onwards and a one-off payment of DM 400 (for civil servants from pay grades A 1 to A 11 a one-off payment of 4 x DM 100 for the months of August to December) % from (for civil servants: 1.8 % from and 2.2 % from ) 2.3 3) 2.5 1) Source: Federal Ministry of Labour and Social Affairs, Results of important collective agreements for public service staff, ) Source: Consumer price index for the cost of living in Germany, Federal Statistical Office, series 17, vol. 7, ) Source: Federal Ministry of Labour and Social Affairs, Results of important collective agreements for public service staff for 2001, as per 1 October 2001

97 The remuneration of members of the government The remuneration of members of the Federal Government, i.e. the Federal Chancellor and the federal ministers as well as their supporting parliamentary state secretaries / ministers of state are basically governed by the Act governing Federal Ministers (Bundesministergesetz, BminG) and the Act governing the Legal Status of Parliamentary State Secretaries (Gesetz über die Rechtsverhältnisse der Parlamentarischen Staatssekretäre, ParlStG). Pursuant to these acts their remuneration consists of the following elements: the official salary, the local cost-of-living allowance and the official expense allowance (Federal Chancellor: 1,022.58, federal ministers: , parliamentary state secretaries: per month) and, if appropriate, compensation for necessary costs of running two households amounting to per month. The Act governing Federal Ministers links the official salary and the local cost-of-living allowance to the remuneration of the highest-ranking civil servant (state secretary, pay grade B 11). Pursuant to this act the official salary of the Federal Chancellor amounts to 1-2 / 3 and that of a federal minister to 1-1 / 3 of the basic salary of pay grade B 11, while that of a parliamentary state secretary/minister of state equals the basic salary of pay grade B 11, the local cost-of-living allowance for these office-holders amounts to 1-1 / 3 of the local cost-of-living allowance of a permanent state secretary. A number of legislative measures have loosened this ratio. Hence, the monthly remuneration of members of the government is approximately 1,100 and that of parliamentary state secretaries/state ministers approx. 850 lower than provided for in the BMinG and the ParlStG.

98 Once they leave office, these officials receive certain benefits, i.e. transitional allowances and if their term of office lasted more than two years also retirement benefits. The transitional allowance is paid immediately after the official leaves office for a period ranging from at least six months to a maximum of three years depending on the time spent in office. In the first three months the amount of the allowance is the same as that of the official salary and the local cost-ofliving allowance; for the remaining period the allowance is 50% of that amount. Retirement benefits, remuneration from current or past deployment in the national or international public service and, beginning with the second month, also income from private activities are fully deducted from the transitional allowance, i.e. the transitional allowance is reduced by these amounts. It will no longer be paid from the second month onwards if the former office-holder still receives compensation as a member of the German Bundestag. The retirement benefit will be paid as from 55 years of age, or from 60 years of age if the term of office was less than three years. Depending on the length of term of office the retirement benefits amount to: 15-1 / 3 % for a two-year term, 20% for a three-year term, 29% for a four-year term. These percentages refer to the official salary and the local cost-of-living allowance. For each additional year spent in office the retirement benefits increase by 2.5% up to a maximum of 75% of the official salary and the local cost-of-living allowance. Under the 2001 Act to Reform the Pension System (Versorgungsänderungsgesetz 2001) the rates of retirement benefits will also be reduced as from 2003 in line with the remuneration for civil servants. Remuneration from current or past employment in the public service is fully deducted from the retirement benefits. Persons receiving compensation as members of the German Bundestag will receive only partial payment of retirement benefits.

99 Reform measures Modernising the structure of remuneration The Federal Government has adopted a draft to modernise the remuneration system. It is intended to loosen nation-wide standards governing the remuneration of civil servants and to give public employers greater flexibility in staff matters. Furthermore, the new legislation will give staff members new prospects and increase their motivation. The progress report on the amendment of public service law of 1997 demonstrated that the elements of performance-related pay introduced then must be made even more flexible. For this reason, the legal provisions must be further enhanced: Discontinuing the rule that staff members remain at a particular salary step for at least half of the intended time before being eligible to advance to the next step will make it easier to award performance steps. The quotas for people receiving performance steps, performance bonuses and performance allowances, currently 10%, will be increased. To make the system more flexible the quota for performance steps may be used alternatively for performance bonuses or allowances. Special provisions for teams will also clearly improve the possibilities of awarding performance-related pay. Reform of the remuneration of professors The Act to Reform the Remuneration of Professors (Gesetz zur Reform der Professorenbesoldung) has replaced the former remuneration steps depending on a person s age with a new remuneration system consisting of a fixed basic salary and variable performance-related pay. In addition to a minimum remuneration in the form of the fixed basic salary there will be variable elements of remuneration in the new pay grades W 2 ( 3427) and W 3 ( 4522) depending on academic performance. These two pay grades can be introduced at both universities and Fachhochschulen, providing the same competitive conditions in terms of remuneration for both. The possibilities for German higher education institutes to appoint top academics from abroad, from the private sector or non-university research institutions have improved, since it is now possible to exceed the former upper limit of remuneration grade B 10.

100 In accordance with the guiding model of the enabling state, the new legislation gives the Federation and the Länder substantial flexibility concerning the performance-related elements of remuneration, particularly in awarding performance-related pay. 8. Developments in personnel expenditure The following table shows developments in overall and personnel expenditure of the Federation, the Länder and the local authorities, along with personnel expenses as a share of total expenditure. Total personnel expenditure in the Federation, the Länder and the local authorities in billions of Federation Länder Local authorities Year Total expenditure Personnel expenditure Share Total Personnel Share Total Personnel in % expenditure expenditure in % expenditure expenditure Share in % ) As from 1998, not including hospitals and university hospitals using commercial accounting Source: Federal Ministry of Finance; until 1997 final figures/results of annual accounts, 1998/2000 cash results) While in 2000 personnel expenditure as a share of total expenditure at the federal level was only 10.8%, it was 37.6% in the Länder and 27% in local authorities because of their specific labour-intensive responsibilities. Of the total personnel expenditure of territorial authorities in 2002 ( billion), 16% went toward federal personnel, 59% Länder

101 personnel and 25% personnel of the local authorities. These core budgets do not include the revenue and expenditure of joint local authorities, owner-operated municipal enterprises and commercial enterprises of local authorities. V. The pension systems in the public service 1. The pensions of civil servants Pensions of civil servants in the Federation, the Länder and local authorities are determined uniformly by the Act Governing Civil Servants' Pensions and Allowances (Beamtenversorgungsgesetz - BeamtVG); corresponding provisions also apply to judges. Pensions for professional military personnel are governed by the same principles under the Military Pensions Act (Soldatenversorgungsgesetz - SVG). Pensions are a part of personnel expenditure and are paid exclusively by public employers and directly from their current budgets. Civil servants do not have to contribute to the general statutory social security and pension scheme; under the special tax-funded system no contributions are levied. This is however taken into account in the gross remuneration of civil servants. Civil servants entitlement to an appropriate pension is one of the traditional principles of the civil service and is protected by the Constitution. Civil servants receive a pension once they are retired. This happens: when the general retirement age (at age 65) or a special retirement age (for police and prison staff, as well as professional fire brigades: at age 60) has been reached, on request from age 63 onwards (severely disabled: from age 60 onwards) or if permanent invalidity has been established. On 1 January 2001 there was a total of approx. 864,000 pensioners (including their surviving dependants) at the federal level, in the Länder and the local authorities.

102 Pensioners as per 1 January , , ,000 Federation Länder Local authorities Of the 864,000 pensioners at the federal level, in the Länder and local authorities, 544,000 (almost 62.9%) are former civil servants, judges or military personnel; the others are surviving dependants (widows/widowers and orphans). Also in other areas of employment the majority are direct beneficiaries, as opposed to their surviving dependants: With the former Deutsche Bahn there are approx. 146,000 (59.9%), with the former Deutsche Bundespost approx. 206,000 (76%) and in the indirect public service approx. 13,000 (63.2%) direct beneficiaries. Since civil servants are not protected by the general statutory accident insurance, the pension scheme for civil servants also includes accident benefits. Where civil servants are injured or killed by accidents at work, the employer reimburses them or their surviving dependants for medical and nursing care and material costs, and compensation is provided where appropriate for a reduction of earning capacity. If a civil servant has retired because of an accident at work, he/she receives an increased accident pension under certain conditions. Pension benefits are adjusted to general developments in the economy and in income in the same way as remuneration, in each case through a federal act. In contrast to pensions from the statutory pensions insurance and the supplementary pension scheme for public employees, pensions for civil servants are regarded fiscally as income from work and - apart from an annual tax allowance of 3,000 - are fully taxable.

103 To be entitled to a pension, a civil servant must have served a minimum of five years or must have become an invalid in the course of an accident at work. The entitlement generally requires the civil servant to be employed in the public service until retirement. Should the civil servant leave the public service prior to retirement, he/she will be insured retroactively with the general statutory pension scheme (but not in the supplementary pension scheme for the public service). Calculating pensions Pensions are calculated on the basis of pensionable years of service and pensionable remuneration. Pensionable years of service are in particular times spent in the public service, in the professional or non-professional armed services, in employment in the public service under private law, as well as required training periods. Pensionable remuneration includes the last basic salary, which the civil servant received for at least three years, and, where appropriate, the family allowance (step 1) and certain allowances expressly referred to in the law as being pensionable. These are the so-called functional allowances which can be paid for the permanent exercise of more demanding activities, but do not include post allowances, extra pay for difficult working conditions or allowances for expenses and overtime. Currently, the pension is 1.875% for each pensionable year of service up to a total of 75% of pensionable remuneration. The maximum pension is reached after 40 years. By 2010 the rate for each pensionable year of service will be reduced to % and the maximum pension to 71.75% of pensionable remuneration. For part-time work, only the respective share of full working hours is counted as pensionable years of service. Nonetheless, the full-time remuneration is taken as the basis for determining the pensionable remuneration.

104 The special age limits for professional military personnel constitute a special case, resulting from the specific requirements in terms of physical fitness, and also from the requirements of the armed forces themselves. Generally, it is not possible for them to reach the maximum pension of 75% solely on the basis of years of service; this disadvantage is compensated for by an increase in the pension rate according to age. Times of unpaid leave (e.g. child-raising leave) are generally not pensionable unless it was recognised in writing in advance that the leave was also in the interest of the public service (e.g. in the case of leave to accept a position in other national or international institutions, such as the EU or UN organisations, something which is in the German public interest ). For times of child raising - as is also the case in the statutory pensions insurance - a supplement to the pension is paid under certain conditions. If the civil servant retires before reaching the statutory retirement age, the pension will be reduced by 3.6% for each year by which the civil servant retired before reaching the statutory retirement age (65 years of age, for police officers 60 years of age) (maximum reduction of 10.8%). For severely disabled civil servants and civil servants unfit for work the statutory retirement age is 63 years. In the event of early retirement because of invalidity the following provisions apply: If the civil servant becomes an invalid before reaching the age of 60, two-thirds of the time until the age of 60 is added to the pensionable years of service to calculate the pension. If the civil servant has become an invalid as a result of an accident at work, the accident pension is at least 66-2/3% of pensionable remuneration. Retired civil servants receive a minimum pension if this is more beneficial to them. It is 35% of pensionable remuneration (including the full family allowance), but as per January 2002 at least 1, (in the old Länder) and 1, (in the new Länder).

105 As is the case with active civil servants, all pensioners are entitled to an annual special bonus, which in 2002 amounted to approx. 86% (in the old Länder) and approx 64.5% (in the new Länder) of one month's pension (known as the Christmas bonus). The annual special bonus is not an additional payment made to pensioners, but a share of their annual pensions which is paid out only in December. It is mainly the employer who benefits from this special mode of payment by earning interest on this amount; otherwise the employer would have to pay a higher pension each month and thus up to 11 months earlier. By contrast, statutory pensions are paid out in 12 equal monthly shares. Provisions regarding other pensions If civil servants or their surviving dependants receive other pensions or benefits from statutory pension schemes or from a supplementary pension scheme for public employees or surviving dependants in addition to their regular pensions, these are deducted from their regular pensions where the total of all benefits exceeds a maximum of 75% of the last remuneration (as per 1. January 2002). If retired civil servants or surviving dependants earn money through gainful employment, this is deducted from the pension where the sum of the income from work and the pension exceeds the previous remuneration in active service. If, however, the civil servant has retired because of invalidity or on request because of severe disability, he/she may keep the extra earnings only if the income from work and the pension together do not exceed 75% (as per 1 January 2002) of the previous remuneration in active service, plus an amount of 325 per month. After the civil servant reaches the age of 65, his/her income earned from work outside the public service is no longer subject to such deductions, though income earned in the public service remains subject to deduction. Surviving dependants In addition to one-off payments (remuneration for the month of death and a death allowance) surviving dependants receive a widow/er's benefit, orphan's benefit or subsistence payments as a pension.

106 The surviving spouse receives 60% of the pension of the deceased civil servant, which in 2002 amounted to at least (in the old Länder) and (in the new Länder) (minimum widow/er's benefit). The orphan's benefit is a portion of the pension of the deceased civil servant, amounting to 12% for the loss of one parent, 20% for the loss of both parents and 30% for children who have become orphans as a result of an accident. On 1 January 2001, approx. 295,000 widows/widowers and 25,000 orphans of former civil servants of territorial authorities were drawing a pension for surviving dependants. Special groups Because of their special situation, separate regulations apply to local government officials elected for a limited period of time, particularly to mayors and chief executives of a county. Their pensions are based on more favourable pension rates than those of civil servants with life tenure; they also have greater freedom to earn extra income in the private sector. Additionally, statutory provisions under Land law apply, which may vary in the different Länder. Special provisions also apply to political civil servants who may be suspended at any time even without their consent. Depending on their years of service, they then receive a pension of 75% of pensionable remuneration (as per 1 January 2002) for at least six months up to a maximum of three years. After this period their pension is governed by the general provisions applying to pensions of civil servants. However, they receive a pension on a permanent basis only if they have been in service for at least five years. If additional income earned outside the public service and the pension together exceed the last remuneration from active service, only half of the excess is deducted from the pension. Pension expenditure Since 1970 the pension expenditure of territorial authorities has developed as follows:

107 Pension expenditure in billion Source: Federal Statistical Office Total expenditure in the Federation, the Länder and local authorities has developed as follows: Pension expenditure by the Federation, the Länder and local authorities in billion Euro Federation Länder Local authorities Source: Federal Statistical Office In 2000 the pension expenditure by the Federation, the Länder and local authorities was 22.0 billion. The Federation accounted for 4.8 billion, the Länder for 14.6 billion and the local authorities for 2.7 billion. In 2000, pension expenditure for civil servants as a proportion of total staff costs was 18% in the Federation, 16% in the Länder and 7% in local authorities. In 2000, pension expenditure as a proportion of total expenditure was 2% in the Federation, 6% in the Länder and 2% in local authorities.

108 Reform of the pension system for civil servants Because of demographic developments, expenditure for the pensions of civil servants - as for other pension schemes - is expected to increase considerably. The main reason is increasing life expectancy coupled with lower average retirement age. The average retirement age - both for the pensions of civil servants and for the statutory pensions insurance scheme - is approx. 59 years, and hence six years lower than the general mandatory retirement age. Furthermore, the effects of the considerable increase in staff in the 1970s necessary at the time because of society s increased demands on the state represents an additional burden on the public service pension system. According to the second Pensions Report of the Federal Government of 2001, the pension expenditure of the Federation, the Länder and local authorities will more than quadruple, rising from approx. 22 billion in 2000 to approx. 90 billion in This will represent an increasing burden on the budgets of the Länder, in particular. To make expenditure for the pensions of civil servants sustainable for the long run, the system has been changed several times since To this end, the reform measures introduced for the statutory pension insurance, which are intended to reduce costs, have been introduced accordingly for the pension system of civil servants. With the introduction of pension reserves in 1998 the first steps were taken towards a fully funded pension system. The amendments to the Act Governing Civil Servants' Pensions and Allowances, which entered into force in 1992, the 1997 Act to Amend the Public Service Law and the 1998 Act to Reform the Pension System contained comprehensive new regulations: Amongst other things, the pension scale was extended from 35 to 40 years, the age limit for pension applications was increased from 62 to 63 years and the inclusion of training periods was restricted, the pension in case of invalidity was further reduced, reductions were introduced in the event of early retirement and the regulations on additional income were made much stricter. In order to reduce the number of early retirements, so-called old-age part-time work has been introduced, initially on an experimental basis. A core item of the 1998 pension reform was the introduction of a provision to create pension reserves. This was done by lowering the increases in remuneration and pensions

109 for civil servants by 0.2% since For the Federation, the resulting amount is placed in a special fund, which is invested by the Bundesbank in tradable federal bonds and managed by the Federal Ministry of the Interior. The Länder have set up their own provisions for creating and employing their reserves. The public budgets will be able to draw on these interest-yielding reserves, which cannot be used for any other purpose, in the future when they are faced with enormous pension expenditures, and thus these reserves will contribute to making pensions sustainable in the long run. By lowering the increases in remuneration and pensions by 0.2% a gradual reduction of the levels of remuneration and pensions by approx. 3% will also be achieved by 2014 in 15 steps. By 2002 a reduction of 0.6% was achieved in three steps. The savings resulting from these reductions will also be added to the benefit reserves every year. Because of the increasing number of early retirements, pensions are paid for increasingly longer periods. For this reason - as in the statutory pension insurance - pensions have been reduced by 3.6% for each year of early retirement (but not exceeding 10.8%), also for early retirement because of invalidity or severe disability, as from 1 January The 2001 Act to Reform the Pension System (Versorgungsänderungsgesetz 2001) applied the comprehensive pension reform with the same effect to the civil servants pension scheme. The main elements of the reform of the civil servants pension scheme, which entered into force on 1 January 2002, are the following: From 2003 onwards, the rate of increase for pensions is reduced by 0.5% annually for the following eight years. As a result, the maximum pension of currently 75% will be gradually reduced to 71.75% by No pension benefits will be cut, no one will receive less. Fifty per cent of the savings resulting from these reductions in public spending will be added to the benefit reserves and will thus continue to be used for the civil servants pension scheme. Those civil servants who provide for old age by putting aside additional savings on a voluntary basis will receive specific allowances or tax benefits by the state as from 1 January 2002 in accordance with the Retirement Assets Act

110 (Altersvermögensgesetz) and the Supplementary Retirement Assets Act (Altersvermögensergänzungsgesetz), similar to public employees under the statutory pension insurance scheme. To avoid any double burden for civil servants and pensioners, the 1998 Act to Reform the Pension System stipulates that the 0.2% reduction in the annual increase in the remuneration of civil servants and pensioners to be added to the benefit reserves will be suspended for eight successive steps from 2003 onwards, and resume from 2011 until The widow/er s benefit will be increased by child benefits. At the same time the pension rate for surviving dependants will be reduced from 60% to 55%; however, couples who were married before 31 December 2001 will not be affected, if at least one spouse is more than 40 years of age. The result of the reform is that in future the financial burden will be equally shared between old people and young people, and that civil servants will be guaranteed an appropriate standard of living in old age. 2. The pensions of public employees The pensions of public employees (including invalidity pensions and pensions for surviving dependants) are based on three pillars: the statutory pensions insurance, the supplementary pension scheme for the public service and the fully funded private pension scheme eligible for tax benefits. Statutory pensions insurance Public employees are insured under the general statutory pensions insurance, in the same way as employees in private industry. It is financed by equal contributions from employees and employers (in 2002 a total of 19.1% of gross salary and wage income up to a specific income threshold) and by public funds. The amount of the pension is not governed by the total amount of contributions paid in, but by the relative amount of the income on which contributions are based, measured against the average income of all insured parties.

111 Pensions are adjusted annually. These adjustments are linked to the developments in general economic net average salaries (so-called index-linked pensions). Supplementary pension scheme for the public service Additionally, public employees are insured under the supplementary pension scheme for the public service. The supplementary pension scheme is based on a collective agreement and is the public service s equivalent of occupational pension schemes. In the past, the supplementary pension was based on an overall pension, which was intended to supplement the statutory pension up to a maximum of 91.75% of the net salary of a comparable active employee. The aim was to bring the pensions of public employees into line with those of civil servants. Because of demographic developments (the increasing number of pensioners in relation to the number of active employees in the statutory pension scheme), the development of pay systems (civil servants law, statutory pensions and taxes) and because of a supreme court ruling, the funding of the supplementary pension scheme came under increasing pressure. The Federal and Länder Government- Service Supplementary Pension Agency (Versorgungsanstalt des Bundes und der Länder) alone faced a projected deficit of 7.7 billion by This development would have threatened the very existence of the supplementary pension scheme itself. For this reason, the collective bargaining partners thoroughly overhauled the supplementary pension scheme of the public service. The new collective agreement on the occupational pension scheme for public employees (Tarifvertrag über die betriebliche Altersversorgung der Beschäftigten im öffentlichen Dienst ATV) of 1 March 2002 consists of the following main elements: The former comprehensive pension system was discontinued retroactively on 31 December 2000 and replaced by an actuarial model of pension credits. This model of pension credits is based on occupational pension schemes typically offered by private employers. Benefits are determined independently of any reference systems such as statutory pensions, the pensions of civil servants or taxes.

112 In this model, benefits are calculated as if contributions of 4% of the employee s pay eligible for the supplementary pension scheme were being paid into a fully funded system. The amount of benefits resulting from the model of pension credits reflect the employee s actual career. The determining factor for the total amount of benefits is now lifetime income. Each employee receives pension credits for each year of employment. They are determined on the basis of an employee s individual annual income by measuring the individual annual income against a reference income of 1,000. Then the pension credits are weighed against the so-called age factor. The younger the employee, the more pension credits he/she will accrue, i.e. the pension account will be credited with more pension credits. Upon retirement, the benefit amount is determined by multiplying the sum of all acquired pension credits by 4. A pension is paid under the same conditions as for the statutory pension insurance (oldage pension, invalidity pension, pension for surviving dependants). If the occupational pension is claimed prematurely, benefits will be reduced by 0.3% for each month the pension is paid out prematurely, with a maximum reduction of 10.8% - as in the statutory pension insurance scheme. For invalidity pensions and pensions for surviving dependants, pension credits will be added for each year before the age of 60. If employment is temporarily suspended because of statutory child-raising leave, pension credits will be accrued for each child for which the parent is entitled to take child-raising leave. The number of pension credits is based on a fictional income of 500. Occupational pensions are index-linked and increase by 1% annually. Since the new supplementary pension system is no longer linked to the amount of statutory pensions,

113 any increase in statutory pensions will no longer be deducted from occupational pensions, but will be paid out in full to pensioners. Pensions and claims to future pension benefits acquired up to the present will be guaranteed by transitional legislation. There will be no changes to pensions currently being paid out. Claims to future pension benefits acquired under the old system by employees who are still in employment will be converted to the new system. The following special provisions apply to employees in the old Länder, who were 55 years of age on 1 January 2002 (age groups close to retirement): On the basis of legislation governing the supplementary pension scheme for the public service applicable on 31 December 2000 the basic value to determine the amount to be transferred to the model of pension credits is the employee s individual supplementary pension at age 63 (for severely disabled persons the age depends on the respective provisions of the statutory pension insurance scheme). The provisions on minimum pensions and minimum supplementary pensions must also be taken into account in this respect. The statutory pension is based on personal data; from this basic value determined by factors applicable as per 31 December 2001 the occupational pension to be acquired under the model of pension credits must be deducted to obtain the current pension entitlement; this entitlement is converted into pension credits and transferred to the credit model. Under the old system the supplementary pension was determined as part of an overall pension, which after 40 years of employment in the public service amounted to 91.75% (net pension rate) of the net income of active employment. The statutory pension is deducted from this overall pension. The differential is the supplementary pension to be paid by the insurer. Under certain conditions the overall pension is raised to the level of the minimum pension of a civil servant (minimum pension). If the conditions of the law governing occupational pensions in the version applicable until 31 December 2000 are met, a supplementary pension of at least 0.4% of the last income will be paid for each year in which contributions for the supplementary pension were paid (the minimum supplementary pension pursuant to Sect. 44 a of the Statutes of the Federal and Länder Government-Service Supplementary Pension Agency). This special provision also applies to all employees in the statutory insurance scheme, including those in the new Länder, who agreed to old-age part-time work prior to 14 November 2001.

114 Replacing the comprehensive pension system with an ordinary occupational pension scheme gives public employees similar to employees in the private sector - the opportunity to make their own contributions to set up a private, fully funded pension eligible for tax benefits pursuant to Section 10a and Section 82 of the Income Tax Act (Einkommensteuergesetz). Insurers and pension benefits The most important insurer is the Federal and Länder Government-Service Supplementary Pension Agency (Versorgungsanstalt des Bundes und der Länder, VBL) in Karlsruhe. This is where public employees of the Federation and the Länder, as well as a number of public employees of local authorities and of other public sector employers, are insured (in 2000 nearly 2 million employees insured under the statutory pension scheme; the number of pensions was 931,000 with a volume of approx billion). Most employees of local authorities, as well as of churches and other institutions, are insured with local authority or church insurance funds (in million insured employees; the number of pensions was 767,000 with a volume of approx billion). The pension benefits of the Federal and Länder Government-Service Supplementary Pension Agency and local authority or church insurance funds have developed as follows: Pension benefits in billion Funding Until the end of 1998 only public employers contributed to the supplementary pension scheme on behalf of their insured employees (for the VBL the last rate was 5.2% of taxable gross income). Since the beginning of 1999 public employees have also paid into

115 the supplementary pension scheme. Since 1 January 2002 the contribution rate for the VBL has been 7.86% for the old Länder. Employers pay 6.45%, while employees only pay 1.41%. In addition, employers pay a tax-free flat rate of 2% to pay for the costs of converting the pension system to the pension credit model. The local authority and church insurance funds have different contribution rates. As from 2002, employers must pay taxes on contributions to the VBL (for the old Länder) up to an amount of per month at a flat-rate of 20%. Taxes on contributions to other insurers will have to be paid at a flat rate up to an amount of per month. For any amount going beyond this limit employees must pay taxes individually. For the VBL (in the new Länder) the contribution rate has been 1.0% since the introduction of the supplementary pension scheme in the East on 1 January The contribution is paid only by the employer. Taxes and social security contributions imposed on the supplementary pension Health insurance and old-age nursing-home insurance contributions are deducted from pensions (approx. 7.6% in 2001). Taxes are imposed only on the interest portion of both the statutory and the supplementary pensions. For tax purposes, pension benefits consist of an interest portion and a capital portion. Only the interest portion of the pension is taxable, as are all other interest earnings. The amount of the interest portion depends on the age of the pensioner on retirement; on retirement at age 65 the interest portion is 27% of the pension. This means in fact that pensions are not taxable in most cases. In accordance with the Federal Constitutional Court s decision of 6 March BvL 17/99 on the taxation of pensions, the legislator must amend the provisions on the taxation of pensions by 1 January This decision says that the unequal treatment of pensions of the statutory pension insurance scheme and pensions of civil servants as regards taxation is incompatible with the principle of equality. For this reason the Federal Ministry of Finance and the Federal Ministry of Labour and Social Affairs have announced that tax deductions for employee pension contributions will gradually be increased. during the next legislative period the necessary legal amendments will be initiated and enter into force by the date specified by the Federal Constitutional Court. the major part of pensions will remain tax-free, which will guarantee the reliability of pension benefits also in the future.

116 VI. Annex Summary of the most important sources of legislation (The majority of legislation can be found under while the BAT and salary tables are available under Statutes, collective agreements Contents Grundgesetz für die Bundesrepublik Deutschland (Basic Law for the Federal Republic of Germany) - Art. 33: Rights and duties of German citizens, eligibility for public office, reservation of office, due regard to the traditional principles of the professional civil service - Art. 9, paragraph 3: right to form associations Statutes and ordinances applying to civil servants, judges and military personnel Beamtenrechtsrahmengesetz (BRRG; Act Defining the Scope of Civil Servants Rights and Duties) - Framework legislation relating to civil servants for the Federation and the Länder - Provisions governing employment as a civil servant - Legal status of civil servants Deutsches Richtergesetz (DRiG; German Judiciary Act) - Framework legislation relating to judges for the Federation and the Länder - Special statute applying to professional judges of the Federation Soldatengesetz (SG; Act on the Legal Status of Military Personnel) - Provisions governing employment in the military Bundesbeamtengesetz (BBG; Act on Federal Civil Servants) - Applies to federal civil servants - Provisions governing employment as a civil servant - Legal status of civil servants Bundeslaufbahnverordnung (BLV; Federal Ordinance on Careers and Promotion of Civil - Provisions governing the careers of federal civil servants

117 Servants) Bundesgleichstellungsgesetz (BGleiG; Act on Gender Equality) - Act on gender equality in the federal administration and the federal courts Bundespolizeibeamtengesetz (BPoIBG; Act on Federal Police Officers) - Special statute applying to police officers of the Federation Bundesdisziplinargesetz (BDG; Federal Disciplinary Act) - Provisions governing the formal disciplinary procedure for active and retired civil servants of the Federation Bundespersonalvertretungsgesetz (BPersVG; Federal Staff Representation Act) - Provisions governing the right of staff representation for federal civil servants and framework provisions for Land legislation Bundesbesoldungsgesetz (BBesG; Act on the Remuneration of Civil Servants). Gesetz über die Gewährung einer jährlichen Sonderzuwendung (SZG; Act on Annual Special Bonuses). Gesetz über die Gewährung eines jährlichen Urlaubsgeldes (UrIGG; Act on Annual Holiday Bonuses). Gesetz über vermögenswirksame Leistungen für Beamte, Richter, Berufssoldaten und Soldaten auf Zeit (VermLG; Act on Capital-forming Benefits for Civil Servants, Judges, and Professional and Fixed-Term Military Personnel). Verordnung über die Gewährung von Erschwerniszulagen (EZuIV; Ordinance on Extra Pay for Difficult Working Conditions). Verordnung über die Gewährung von Mehrarbeitsvergütung für Beamte (MVergV; Ordinance on Overtime Pay for Civil Servants). Zweite Verordnung über besoldungsrechtliche Übergangsregelungen nach Herstellung der Einheit Deutschlands (2. BesÜV; Second Ordinance on - Provisions governing the remuneration of civil servants, judges and military personnel

118 Transitional Remuneration Arrangements after German Unification) Beamtenversorgungsgesetz (BeamtVG; Act Governing Civil Servants' Pensions and Allowances) - Provisions governing benefits for civil servants, judges and surviving dependants Soldatenversorgungsgesetz (SVG; Military Pensions Act) - Provisions governing the pensions of military personnel, as well as their surviving dependants Beamtenversorgungs-Übergangsverordnung (BeamtVÜV; Transitional Ordinance on the Pensions of Civil Servants) - Special provisions on the pensions of civil servants and judges in the new Länder Soldatenversorgungs-Übergangsverordnung (SVÜV; Transitional Ordinance on Military Pensions) - Special provisions on the pensions of military personnel in the new Länder Collective agreements and statutes for employees Collective agreements Bundes-Angestelltentarifvertrag (BAT; Collective Agreement for Salary Earners in the Public Service) Tarifvertrag zur Anpassung des Tarifrechts (Collective Agreement to Adapt the Collective Agreements in the new Länder to the BAT) - General working conditions, and in particular pay grades - in the old Länder - in the new Länder Manteltarifliche Vorschriften (BAT-O; Framework Collective Agreement for Salary Earners in the Public Service in the new Länder) Manteltarifvertrag für Arbeiterinnen und Arbeiter des Bundes und der Länder (MTArb; Framework Collective Agreement for Wage Earners in the

119 Public Service) Tarifvertrag zur Anpassung des Tarifrechts für Arbeiter an den MTArb (MTArb-O; Collective Agreement to Adapt the Collective Agreements of the new Länder to the MTArb) Bundesmanteltarifvertrag für Arbeiter gemeindlicher Verwaltungen und Betriebe (BMT- G II; Federal Framework Agreement for Wage Earners in Local Authority Administrations and Operations) Tarifvertrag zur Anpassung des Tarifrechts Manteltarifliche Vorschriften für Arbeiter gemeindlicher Verwaltungen und Betriebe (BMT-G-O; Collective Agreement to Adapt the Collective Agreements of the new Länder to the Federal Framework Agreement for Wage Earners in Local Authority Administrations and Operations) Additional collective agreements Lohn- und Vergütungstarifverträge (Collective agreements on wages and salaries) Tarifvertrag über eine Zuwendung (Collective agreement regarding bonuses) Tarifvertrag über Zulagen (Collective agreement regarding allowances) Tarifvertrag über Lohnzuschläge für Arbeiter (Collective agreement regarding wage allowances for wage earners) Tarifvertrag über Urlaubsgeld (Collective agreement on holiday bonuses) Tarifvertrag über vermögenswirksame Leistungen (Collective agreement on capitalforming benefits) Tarifvertrag für Ausbildungsverhältnisse (Collective agreements relating to traineeships)

120 Tarifvertrag zur Regelung der Alterszeilzeitarbeit (Collective agreement governing old-age part-time work) Tarifvertrag über Rationalisierungsschutz (Collective agreements on protection against rationalisation) Versorgungstarifvertrag (Collective agreement on pensions) Tarifvertrag Altersversorgung (ATV; Collective agreement on old-age pensions) Altersvorsorge-TV-Kommunal (ATV-K; Collective agreement on old-age pensions paid by local authorities) Statutes under labour law Bürgerliches Gesetzbuch (BGB; Civil Code) - General principles governing rights and duties constituted by employment Arbeitsschutzgesetz, (ArbSchG; Act on Occupational Safety) - Occupational safety measures to improve the safety and occupational health of employees at work - Arbeitszeitgesetz (ArbZG; Act on Working Hours) - Provisions governing permissible working hours Bundesurlaubsgesetz (BUrlG; Federal Act on Leave) - Governing the minimum leave of employees Entgeltfortzahlungsgesetz (EFZG; Act Governing the Continuation of Payment) - Governing the continuation of payment in case of illness Mutterschutzgesetz (MuSchG; Maternity Protection Act) - Governing maternity leave and the continuation of payment Bundeserziehungsgeldgesetz (BErzGG; Federal Act on Child-Raising Benefit) - Governing child-raising leave and child-raising benefits by the state Jugendarbeitsschutzgesetz (JArbSchG; Act to Protect Young People at Work) - Governing the minimum age of employment, limitation of working hours, etc. for young

121 people Kündigungsschutzgesetz (KSchG; Act Governing Protection against Dismissal) - Governing the permissibility of dismissals Siebtes Buch Sozialgesetzbuch (SGB VII; VII Social Code) Gesetzliche Unfallversicherung (Statutory accident insurance) - Provisions on the prevention of, recovery from and compensation for occupational accidents or illnesses Tarifvertragsgesetz (TVG; Act on Collective Agreements) - Governing the content, form and legal consequences of collective agreements Gesetz zur Verbesserung der betrieblichen Altersversorgung (BetrAVG; Act to Improve Occupational Pension Schemes) - Provisions to regulate occupational pensions, particularly in case of termination of employment prior to retirement