Recent Support to Severance

1
Recent Support to Severance

• Operational features
• design of compensation packages

2
Why focus on severance?

• Sensitive topic
• Banks position on this has changed over time
• Funding from adjustment
• Funding from investment
• OPMemos of 1996 and 2002
• Expenditure Eligibility guidelines
• Recent Board query

3
Outline

• Compensation package design
• How many employees?
• How much money?
• Regional differences?
• Method of downsizing
• Training assistance
• Return on investment

• Operational features
• How much support for severance?
• What changes did the OPMemo introduce?

4
Operational feature How much support

• Roll-out of severance projects has been uneven
• What proportion does severance constitute of
• investment lending
• A countrys IDA / IBRD allocation

5
Number of severance-funding projects by year
6
Severance in investment lending
7
Operational feature How much support?

• Bank sometimes supported only part of severance
  payments
• Severance as proportion of the loan loan has
  varied from 5 to 100
• Retroactive financing has been allowed

8
Since the 2002 OpMemo

• Major part of severance support still for SOE
  employees
• Severance support for SOE employees has been 100
  times that for other categories of public
  employees

9
Design features

• How many employees were downsized?
• How much did severance cost?
• Per head severance payment?
• Regional trends?

10
Severance payment per person
11
Per employee severance - regional trends
AFR 39 times per capita GNI
EAP No projects
ECA 2.7 times per capita GNI
LAC Sample too small
MNA No projects
LAC Sample too small
12
Design features of severance-funding projects

• Redundancy Vs. Voluntary Retirement
• Which one and why?
• Consultation with unions
• VRS uncertainties
• Pension liabilities

13
Design features of severance-funding projects

• Training Assistance
• Common, but not universal
• Activities funded under this component
• Size
• Design

14
Design features of severance-funding projects

• Return on Investment
• FRR and ERR
• Assumptions
• Sensitivity Analysis