Project Description

Social Security at the EPO: an overview

Many of the things that apply to other European organisations and in particular to the European Union also apply to the European Patent Office (EPO). The same applies to issues and problems relating to social security. However, due to its specific nature, the EPO has its own unique problems.

The EPO, the second largest European organisation after the Commission in terms of the number of employees, is a substantially independent body, which is neither part of the European Union nor attached to it in any way like the EU agencies. Its member states include the 27 EU member states, but also 11 non-EU states. It is also not one of the Coordinated Organisations, although some links exist or were planned[1].

In contrast to other European international organisations, which are mostly financially dependent on their member states, the EPO is entirely self-financing through the annual fees and royalties generated by (applications for) patents and even generates money for its member states. Being a typically scientific and technical organisation, its political visibility is lower, so that the management and the Administrative Council, which represents the member states, can operate relatively far from the public eye.

It is easy to understand that these particularities have had and continue to have an influence, not always positive, on the way in which social relations and social security – in the case in point – have been structured and are governed at the EPO. In addition, the fact that the EPO is spread over four locations, two in Germany, one in the Netherlands and one in Austria, does not simplify the problems associated with social security.

[1] (cf. e.g. Art.1(2) and Art. 50 of the EPO Pension Rules)

Let us now look in a little more detail at the structure of social security at the EPO, drawing some parallels with that of the EU if necessary, its specific problems, its shortcomings, the challenges ahead in order to solve them and the (legal) actions that the SUEPO (Union Syndicale EPO) has already taken or intends to take to counter them.

Before continuing, it should be noted that staff are automatically affiliated to the EPO’s social security and pension schemes, unless they are appointed for a fixed term of less than two years. In this case, they may choose to join the national social security or pension scheme.

Pension scheme (Article 54 of the Staff Regulations)

All civil servants are automatically retired at the age of 65, or before, at their request or for health reasons, under certain conditions.

Since 2009, two pension schemes co-exist.

The first system, the OPS (Old Pension Scheme), to which all employees hired before 1 January 2009 are affiliated, is a traditional DBO (Defined Benefit Obligation) system, i.e. a system in which pension amounts are defined according to length of service (maximum 35 years), the annual accrual rate (currently 2%) and the last basic salary. The employee has the right to choose between the pension scales of the last host country in which he/she was employed by the EPO, or his/her home country. The right to a retirement pension is acquired at the age of 60. If the staff member leaves the service before the age of 60, the pension is deferred, or at his request, and if he has reached the age of 50, it is anticipated, but reduced according to his age.

As in the European Union, one third of the financing is provided by the employees and two thirds by the employer. On the basis of actuarial calculations, the reserves required to pay pensions up to a certain time horizon are determined. The monthly amounts to be paid are then calculated on the basis of the assumed discount rates. These amounts are then used to pay pensions and the surplus goes into a reserve fund, the RFPSS. So far, the monthly amounts paid by employees and employers have been sufficient to pay the pensions. From next year onwards, however, some of the funds in the RFPSS may have to be drawn on, as originally planned in the scheme. With more than 10 billion euro in its coffers, the RFPSS is well equipped for its task, whatever the management may say. Moreover, a second fund, the EPOTIF, of about 4 billion euro is currently available just in case.

We note in passing that the administration has repeatedly used commissioned financial studies based on unrealistic scenarios in recent years to cast doubt on the financial soundness of the EPO and the pension reserve fund, in order to increase production rates and reduce salary adjustments, among other things.

Although the basic salary is not taxed by the host or member states, as it is subject to an internal tax, the member states do not recognise this right with regard to pensions, which are taxed there. However, Article 42 of the Pension Regulations provides for an adjustment of the pension after taxation of approximately 50% of the tax[1].

Let us now turn to the second pension scheme of the EPO, the NPS (New Pension Scheme), which was introduced on 1 January 2009 and to which all employees hired from that date are affiliated. This scheme can be defined as a hybrid as it consists of two parts: the first part comprising the NPS itself, i.e. a traditional pension scheme similar to the OPS, but which only covers part of the pension entitlements, as it is capped[2], and the second part, the SSP (Salary Savings Plan), a retirement savings plan[3], covering the rest. The monetary split between the NPS and the SSP depends on various factors, but mainly on the grade and the corresponding salary of the employee.

The introduction of this second pension system in 2009 had the effect of creating two groups of employees with the same qualifications and assigned to the same tasks. Staff representation and the SUEPO strongly opposed the introduction of the second pension scheme, believing that the financial concerns behind it were unfounded, that it was unfair to new recruits and that it was wrong to divide staff into two categories. Several actions were taken, including legal actions by the staff representatives[4], but without success.

[1] cf. CA/D 14/08

[2] See Art. 10(1) of the New Pension Regulations and CA/D 12/08

[3] cf. Art. 65(3) of Staff Regulations and CA/D 13/08

[4] cf. p.ex. judgement 3427, ILOAT

Incapacity – Articles 62ter and 62quater of the Staff Regulations (former invalidity insurance)

In 2015, the Administrative Council[1] amended the regulations concerning invalidity by emphasising the concept of partial or total incapacity. Prior to this reform, employees were required to contribute to an invalidity insurance. In case of disability, emoluments and a lump sum were paid to cover the loss of income due to disability. The reform reduced the emoluments and abolished the lump sum in one fell swoop, without replacement or alternative. This put older employees in a difficult position as they could not find disability insurance on similar terms in the private market. Employees who had contributed for more than 25 years saw it all disappear overnight, just when they needed it most.

After five years of proceedings, the Internal Appeals Committee gave its opinion last March on an appeal submitted by colleagues with the support of SUEPO. It unanimously concluded that by abolishing the “lump sum” without providing transitional measures for a smooth transition, the EPO had failed in its duty of care. The Appeals Committee also recommended to the President of the EPO, Mr. Campinos, to take appropriate transitional measures.

Following the refusal of EPO President Campinos to follow the unanimous recommendations of the Appeals Committee on this point, a number of colleagues with the support of the SUEPO filed a complaint with the Administrative Tribunal of the ILO (International Labour Organisation – ILOAT).

[1] cf. CA/D 2/15 et CA/14/15 rev 1

Health insurance

Together with pensions, it is one of the most important pillars of social security. At the EPO, health insurance is governed by Article 83a of the Staff Regulations, the relevant Implementing Regulations and Circular 368 (Guide to cover). It covers staff members and their dependents, and includes expenses incurred in the event of accident, pregnancy and childbirth. The choice of doctor, pharmacist and hospital is entirely free internationally. It is not always necessary to consult a general practitioner. Reimbursements for GPs’ and specialists’ fees, as well as hospital costs, are generally 100%.  Reimbursements for other costs (dentists, home care, medicines, medical analyses, physiotherapy, ….) vary between 80% and 100%, and are partly subject to ceilings. The rates of reimbursement for the various medical expenses are set out in the guide to cover, which is updated periodically with the participation – in an advisory capacity only – of the staff representatives. The contribution is fixed by the President of the EPO on the basis of an actuarial study. One third of the contribution is payable by the staff member.

The health insurance system is administered by the external company Cigna (formerly Van Breda). As in the European Union, there is a structural problem in that the health insurance fund is not jointly managed by the employer and the insured, as in the Member States.

Due to its distribution over four locations, the EPO has to deal with specific conditions in each of them with regard to health care. In particular, there are major differences in the approach to health care in Germany and the Netherlands, both from a strictly medical point of view and from a cost point of view. For example, the average costs per insured person of the EPO in Munich are significantly higher than the average costs of insured persons of the EPO in The Hague. The EPO has therefore had to put in place some specific regulations for some of its sites.

Due to the entry into force of a new health insurance law in 2006 (“zorgverzekeringswet”) in the Netherlands, the EPO has concluded a group contract with a Dutch insurer[1], the premium due to the Dutch insurer being paid directly by Cigna.

There is also a life insurance policy[2], which normally ceases when the agent leaves the service.

[1] cf. Circular 314

[2] cf. Article 84 of Staff Regulations

Long-term care insurance

Article 83b of the Staff Regulations and its Implementing Rules define cover in the event of dependency, i.e. when an insured person needs help to perform everyday tasks as a result of a significant and lasting reduction in his independence. The staff member, his/her spouse, children and other dependents are covered by this insurance. Some retired colleagues in the Netherlands have had difficulties in the past in meeting the costs incurred due to their dependency, given the exorbitant costs in the Netherlands when one is not part of the national care system. SUEPO and the staff representatives are closely following the developments and are involved in the updating of the regulations[1].

[1] cf. updates 266 Circular

Family allowances (Articles 67 to 70a of the Staff Regulations)

  • Household allowance

This is set at 6% of the basic salary. Staff members who are married or have one or more dependents are entitled to this allowance.

  • The allowance for dependent children

Dependent children:

This is granted for any legitimate, natural or adopted child who has not yet reached the age of 18 and, on request, for children who have not yet reached the age of 26 and are in school or vocational training. For children who have not yet reached the age of 4, there is an additional allowance for young children. This allowance has recently been amended by the Management Board and is the subject of much criticism from Hague staff, as the amount is significantly lower than the costs of Dutch childcare.

Dependent disabled children:

A staff member with a medically certified disabled child is entitled to a dependent disabled child allowance, regardless of the child’s age. Expenses for education or training specific to the needs of the disabled child are taken into account at 90%.

  • Allowance for other dependents

This allowance may be granted for an ascendant, parent or relative on presentation of supporting documents when the staff member is primarily and continuously responsible for the maintenance of that person.

Maternity, parental and family leave

As in the European Union, there is no specific maternity insurance and all medical expenses incurred during pregnancy and childbirth are covered by health insurance. A birth grant is provided for in Article 85 of the Staff Regulations, as well as paid maternity leave of at least 20 weeks[1]. An official is also entitled to parental leave of up to 120 working days to be taken before the child’s twelfth birthday and family leave of up to 180 days to assist a spouse or close relative who is seriously ill[2]. During parental and family leave, the staff member loses his or her right to pay, but receives a monthly allowance.

[1] cf. Article 61 of Staff Regulations

[2] cf. Articles 45bis and 45ter of Staff Regulations

Education allowance (Article 71 of the Staff Regulations)

For pre-school, primary and secondary education, direct schooling costs are reimbursed up to a certain ceiling, which depends on the place of employment, except where the child attends a European school subsidised by the EPO, in which case the costs are borne directly by the Office. There is a lump sum for indirect schooling costs.

In June 2021, the Administrative Council, on the proposal of the Administration, introduced a reform, against the opinion of the staff representation, deleting the former Article 120a of the Staff Regulations, which provided for the EPO to pay the school fees of the international schools when a staff member could not send his child to a European school for reasons beyond his control.

More than a thousand staff members in The Hague signed a petition against the reform to the Administrative Board, because the European School in The Hague does not guarantee a level of services equivalent to a type 1 European School (such as the one in Munich, which is also subsidised by the EPO), and the reimbursement ceilings set by the Board are much lower than the tuition fees of some of the international schools in The Hague (British School, American School), where many of our colleagues’ children are enrolled. Only transitional measures have been foreseen, which are considered insufficient by the staff representatives. The reform also introduces a disparity of treatment between the different sites and discriminates against the lowest grades. SUEPO The Hague is preparing a petition for review and legal action.

For post-secondary education, direct tuition fees are reimbursed up to 70%, subject to an annual ceiling, and indirect tuition fees are reimbursed through a monthly lump sum that depends on whether the child lives in the family home. The above-mentioned education allowance reform extended the entitlement to reimbursement of post-secondary education costs also to national staff, i.e. staff who are nationals of the State in which their place of employment is located.

Other allowances related to social security

There are other allowances which apply to only some of the staff, such as the expatriation allowance, installation allowance, housing allowance, etc. which can be linked to social security, depending on how broadly one wishes to define it.

As regards unemployment, there is no unemployment insurance as such at the EPO, but simple provisions concerning notice in the event of compulsory resignation or for

professional incompetence, ranging from one to nine months depending on the case[1] and an allowance in certain cases. There is also an article in the Staff Regulations concerning lay-offs[2]. Given that these regulations were designed for a group of employees who were overwhelmingly permanent officials and that dismissals were very rare, it will be necessary to review these provisions and perhaps introduce unemployment insurance, given that from 2019 onwards the new contracts are almost exclusively for a fixed term.

[1] cf. Articles 52 & 53 of Staff Regulations

[2] Article 46 of Staff Regulations

Conclusions

This article is only an overview of social security at the EPO and does not claim to be exhaustive. However, it can be deduced from this brief overview that many problems exist with regard to social security at the EPO. As we have seen, there are problems related to the coexistence of two systems of old-age insurance, those related to invalidity, those of sickness insurance and education allowance due in large part to the particularities and differences between each place of employment and the inability of the administration to deal with them, to name but a few.

There is also, and this overview may not show it sufficiently, a layering of articles, implementing regulations and circulars, which have been superimposed over the years at the whim of successive administrations (especially in the last ten years), often in a chaotic way, with all the risks – inherent in such a development – of creating intrinsic contradictions between the different standards, as clearly demonstrated, in a related field, by the latest judgments of the ILO Administrative Tribunal[1] concerning the serious shortcomings of the regulations on the right to strike at the EPO.

As you can see, there is a lot of work to be done. SUEPO is ready to do its part, but the administration will have to radically change its attitude and agree to work hand in hand with its social partners to break the deadlock.

[1] cf. judgements ILOAT 4430-4435

Roberto Righetti

Member of the USF Federal Bureau, and Member of the SUEPO-TH Bureau.

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