Members of the European Parliament (MEPs) have finally agreed on a new system which will eradicate the current pay disparity between representatives of different countries and the expenses system, which critics believe has been widely abused.
The new rules have been developed using modern HR principles and should bring a more transparent, corporate approach to pay and expenses, although the changes will not be implemented until the next elections in 2009.
Under the current rules each MEP is paid the same salary as serving MPs in their own country – so while members from Italy receive more than 12,000 euros (£8,180), Hungarian MEPs get as little as 840 euros (£570).
Amazingly, expenses for the 732 MEPs are refunded on a flat-rate basis rather than on the actual costs incurred which has led to a number of high-profile scandals.
Critics of the system have claimed that lower paid MEPs use travel expenses to top up their salaries, claiming back a fixed allowance which can be thousands of euros more than the actual cost.
The most common criticism is that MEPs, who are based in Brussels and Strasbourg, will travel as cheaply as possible, and then be reimbursed for the most expensive route or ticket.
The new deal will see all MEPs paid a basic salary of 7,000 euros (£4,770) by the EU, rather than their national parliaments, and will introduce an expenses system based on actual costs. It will also mean a change in employment status as they will become employees of the EU, paying income tax back to the European budget.
The deal has been criticised by some MEPs as too generous as it also contains healthy pension provisions, which have held up the agreement for several years. There are also several opt-out clauses with any re-elected MEPs entitled to continue with the current system.
Charles Cotton, reward adviser at the Chartered Institute of Personnel and Development, said the proposals would bring the European Parliament closer to more accepted remuneration practices.
“It’s hugely important that the expenses system is sorted out. A lot of this should be about communication between the MEPs and the electorate on how to justify pay levels and expenses,” he said.
“Transparency around remuneration is crucial in any organisation, especially when it uses taxpayers’ money. It will be a huge HR challenge because the MEPs are responsible for setting their own remuneration.”
However, European consultant Peter Reid is less enthusiastic, expressing concern that the changes will make little real difference to most ordinary people’s opinion of politicians.
“It’s taken decades to agree on these changes, but it still means a massive pay hike for the majority of MEPs. This is just one of the many areas that bring Europe into disrepute.”
Reid argues that the single salary could even exacerbate the problem in poorer EU countries because it will bear no relation to local pay levels.
“The single salary will be obscene in some member states with MEPs earning more than their own prime minister. MEPs have been policing themselves for too long and behaving in a way that would be completely unacceptable in the vast majority of private companies.”