Service Contract (SC) in UN and UNDP. What is it?

The service contract (SC) is a modality for hiring individuals under a non-staff contract.

Selection of the candidate for Service Contract (SC).

The vacancy should be posted on the UNDP job website. Depending on the degree of knowledge and skills required, local media advertising is recommended, with due regard to the cost/benefit issue if it is envisaged that it will produce the calibre of candidate needed. For positions in the SB5 Band, it is also recommended that international organizations and NGOs are informed of the vacancy as this might facilitate reaching potential candidates. The requisite academic qualifications for this level must include a postgraduate degree and years of relevant experience commensurate with the job.

The UNDP Office must establish an ad hoc panel for the purpose of selecting the best-qualified candidate. A minimum of two candidates must be assessed to ensure a competitive and transparent process. In exceptional cases, the Office may interview only one candidate after the competitive process only one candidate meets the requirements, provided that the Office documents the efforts made to identify other qualified candidates, including re-advertisement. The selection process must ensure that due regard is given to achieving an equitable balance in terms of gender and diversity appropriate for the location. The Panel provides its recommendation to the Resident Representative for a final decision.

UNDP Offices may also use a roster of pre - assessed candidates, in accordance with locally established roster procedures. The selection process through the roster process remains subject to the approval of the Resident Representative.

UNDP Offices may also transfer an individual SC holder from one project to another in the same duty station with similar functions and the same level of remuneration, without having to re-advertise the vacancy and go through a new competitive process, provided that the candidate has a satisfactory service evaluation record. In such instances a new service contract must be issued.

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The SC is a decentralized contracting instrument, which is cost effective and flexible for use only by UNDP country offices and regional centres outside of Headquarters. The SC is not for use in HQ duty stations and Liaison Offices e.g. New York, Geneva, London, Madrid, Montreal, Paris, Rome, Vienna, Brussels, Copenhagen, Geneva, Tokyo and Washington.

Payment under the SC is based on services satisfactorily provided in accordance with the terms of reference under the SC. The payment terms can be based on (i) all-inclusive lump-sum monthly payments, where cash payments are included for pre-existing social security as described in the Section on Social Security Arrangements below or (ii) monthly remuneration with the provision of a local social security scheme where applicable and legally feasible

Social Security and other conditions of the SC are generally consistent with what is called for in the local labour market for similarly situated services, except where UNDP has defined a minimum or maximum standard. For example, a maximum termination indemnity is established for all SC holders, irrespective of local practice; a minimum standard of 16 weeks is set for maternity leave, irrespective of local practice.

The individuals engaged under a SC are neither staff members nor โ€œofficialsโ€ for the purpose of the Convention on the Privileges and Immunities of the United Nations of 13 February 1946. They may however, be given the status of โ€œexperts on missionโ€ in the sense of Section 22 of Article VI of the Convention. Such determination is made in each case by the Secretary-General who alone has the authority to assert immunity on behalf of the Organization. If they are required to travel on behalf of UNDP, they may be given a UN certificate in accordance with Section 26 Article VII of the Convention.

The services performed by an individual engaged under a SC, do not carry any authority either directly or by delegation, to legally bind UNDP or otherwise enter into any agreements or financial obligations on behalf of UNDP with other international organizations, governments, legal entities or individuals.

Reference Checks

a) UNDP Offices must require written independent references to verify the credentials and experience of the candidate and substantiate them prior to the issuance of an offer of contract.

b) Requesting offices, with support from the UNDP HR Unit, are responsible for conducting reference checks and documenting findings before submitting for issuance of a contract.

c) Candidates that apply for vacancies under a Service Contract must complete the modified format of the P-11 form to facilitate reference checks with previous employers.

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Contract Duration

a) Usually a SC is issued for a minimum period of 6 months, renewable, but not more than 12 months at a time. In the case of project personnel, the maximum period for the use of a SC is normally for the duration of the project.

b) Generally, services expected to be completed in less than 6 months should be contracted under the IC modality.

c) SCs are not intended to be of an indefinite duration. It must be recalled that in the UNDP Office SCs are used for work that could be outsourced and therefore the need for the services must be annually reviewed and documented at the time of renewing the SC.

d) All SC holders must be clearly notified at the outset, and then reminded upon renewal, if any, that there is no assurance of continued engagement and that the SC will be reviewed from year to year, on the basis of need for the service, availability of funds and the quality of performance.

Exceptional situations where contract duration may be less than 6 months

There may be certain situations, such as contracting for emergency operations, e.g. Tsunami Emergency Relief, or management and development projects, where issues of funding or uncertainty of duration, might make it difficult to issue an initial SC for 6 months or more. In such cases, and where the contract is expected to be extended, a SC of less than 6 months may be issued at the outset. This will avoid the need to switch the type of contract from IC to SC, after an initial short period. In accordance with their delegation of authority, this exception may be approved by the Resident Representative, prior to issuance of the SC. The Regional Bureau and the respective HR Business Advisors are to ensure proper oversight and monitoring.

Contract Extension

a) If a decision is taken to extend a SC, a brief review is made to see if the terms of reference are still valid or need to be modified. More often than not there will be little or no change in the terms of reference (TOR) for lower level SC holders since many of these contract holders will be providing basic services such as cleaner, gardeners, messenger work or driving. However, for contract holders at higher levels, a careful review of the TOR must be carried out. The UNDP Office should indicate under section VII of the Service Evaluation form why there is a continuing need for the activities that justify an extension of the SC.

b) After the first service evaluation, a SC can be renewed for periods up to 12 months at a time, in line with funds availability and suitability of performance, based on the Service Evaluation form. All contract extensions must be submitted prior to the expiration of the contract.

Expiration of Contract

a) In the event that a SC will not be renewed upon expiry, an advance formal notice issued to the SC holder at least one month before the contract expires, keeping in mind that in all cases the minimum number of days of notice under the contract must be provided for termination as set forth below and in the contract itself:

i. The advance notice should allow the SC holder, to use up any accumulated annual leave, keeping in mind that unused leave is not commutable to cash; and

ii. The Responsible Officer must inform the operational units (HR/Finance/IT) in writing of expiration of a SC in order that necessary actions are taken, e.g. recovery of any indebtedness to the organization, return of UNDP, property such as computers/laptops, building access ID cards, keys, badges, etc. and release of final pay. A copy of the notification must be placed in the individual's personnel file.

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b) UNDP Offices must ensure that the individual is administratively terminated from participation in social security schemes, arranged and paid for by UNDP that might be in effect. When an individual chooses to continue in a local scheme after termination, it is the responsibility of that individual to make the arrangements for continuation and payment of the entire premium.

c) The UNDP Office may provide a letter of reference upon request.

d) Where an SC holder has violated the standards of conduct or other material terms of the contract, including acts fraud or misrepresentation, the contract must be terminated and, not let to expire.

When to Use an SC

The SC is intended for engaging individuals under the following conditions:

i. national personnel or others legally authorized to work in the country;

ii. for non-core support services in the UNDP Office that would normally be outsourced to a company, i.e. custodial, security and IT service, refer to ST/IC/2005/30 document on outsourcing;

iii. for development project personnel, where UNDP on request of an executing entity, or implementing partner under the harmonized operational modalities (hereinafter โ€œexecuting entity/implementing partnerโ€) or, where UNDP itself serves as implementing partner of a development project, provides personnel contracting services to support execution or implementation of the project; the SC issued will be limited to services to that project only, refer to http://content.undp.org/go/userguide/results/; and

iv. No authority other than UNDP may issue a UNDP SC. Therefore, an executing entity/implementing partner issues its own contracts, but may use the UNDP SC as a guideline. See Annex IV, which provides a matrix on how to use the SC.

b) For any of the above activities that are less than 6 months, the IC contract must be used except in the case of exceptional situations as mentioned in section 40.

Use of the SC

a) The following are examples of the improper use of the SC:

i. hiring international personnel;

ii. hiring local office personnel for core functions (i.e. staff functions that are of a continuing nature and are part of UNDPโ€™s central work, except support services that would normally be outsourced to a company and functions that are within the development project context);

iii. hiring local office personnel to perform internal control functions. Refer to Annex VI for the list of minimum control functions that must not be undertaken by individuals holding a Service Contract.

iv. as a form of probation for possible conversion to core functions within the management project;

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v. as means to minimize or inflate compensation; and

vi. as means to complement duties of non-performing staff or staff on any type of leave.

Competition for temporary or fixed term appointment positions

When applying for UNDP positions under the TA/FTA of the Staff Rules, individuals holding SCs are to be considered as external candidates. Therefore, all processes applied for external candidates must be followed. However, a SC holder can be given priority consideration through a transparent and competitive process in accordance with the Guiding Principles listed in the Recruitment and Selection Framework.

Conversion from Individual Contract (IC) to SC

When individuals have been on IC, and the duration of the functions and other requirements set forth in this User Guide qualify for the use of a SC, it is appropriate to convert such individuals to SCs based on the following principles:

  • the competitive process used to engage the IC was consistent with the process required for engagement of an SC,
  • special attention must be paid to explain the range of conditions of service, including social security coverage;
  • The rate of remuneration would be based on the SC remuneration scales for the location, including the addition of social benefits or payment in lieu thereof, as described in this User Guide.
  • the offer letter issued by the UNDP Office must specify the change in status and in benefits, and request the individual to sign the letter attached to the offer in the form set forth below:

"I understand that my form of contract with UNDP is being changed as of (date), from an "Individual Contract (IC)" to that of a "SC". I also understand that the main purpose of this change is the extended duration. The change in my contractual status and in my remuneration and benefits has been explained to me. In accepting these arrangements, I understand that issuance of the SC does not entitle me to any adjustments or benefits in respect of my prior service with UNDP under IC signed _________โ€.

Staff members under temporary, fixed-term, continuing or permanent / appointments

  • UNDP staff members that perform functions that are central to UNDPโ€™s core work and hold contracts under temporary, fixed-term, continuing or permanent appointments must not be separated for the purpose of issuing a SC.
  • Former staff members that are separated on grounds of disciplinary action or unsatisfactory performance are not eligible for a SC.
  • Staff members separated for abolition of post or reduction in posts cannot be offered a SC with the same functions they occupied before separation. In the case of separation by retirement or abolition of post, the break in service requirement governing the separation must be strictly adhered to. No exception shall be granted to the minimum break in service period.
  • Any offer of a SC to a staff member who has separated by resignation must be made after a break in service of at least 1 month.

Pay setting for individuals contracted will be determined on the basis of the following:

Level of the responsibility, which can be expressed in five broad bands or ranges:

  • First range: SC1-2, representing work in the custodial, maintenance, security, driving and messenger areas; this would be considered mechanical and physical operations;
  • Second range: SC3-4, representing work of a more basic processing support nature covering clerical, secretarial, certain technical functions; this work requires appropriate educational background and relevant work experience;
  • Third range: SC5-7 representing work of a specialized and comprehensive support nature progressing to integrated execution at the higher level; this work requires appropriate educational background and relevant work experience;
  • Fourth range: SC8-9 representing work of an analytical nature requiring basic conceptual comprehension; this work requires appropriate educational background and relevant work experience;
  • Fifth range: SC10-11 representing work of a conceptual, analytical and advisory nature at the higher professional level related to development, humanitarian and emergency project work that require substantive innovation and may involve some functions that are supervisory in nature to oversee project activities. Qualifications at this level include a postgraduate degree and relevant experience commensurate with the job.

  • The pay ranges established are for the purpose of having an objective and analytical basis for setting the levels of pay for individual contracts to ensure objectivity and non-arbitrariness in pay setting and also to avoid any basis for charges of under or over-payment in relation to the market or of favoritism in setting pay rates. Further guidance in aligning the TOR to the pay ranges can be found in the Handbook on Setting Service Contract Remuneration.

Pay adjustment

After a SC is issued the level of remuneration established on initial contract must not be adjusted for any reason. In the event that the SC is extended, the pay will either remain the same or be adjusted if the remuneration scale has been revised in accordance with the Handbook on Setting Service Contract Remuneration. If upon renewal of the SC it is established that the level of remuneration has surpassed the market rates for similar situated services, the level of the remuneration remains unchanged with no adjustment for each contract renewal until the gap is closed.

Currency of Remuneration

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The SC stipulates a fixed level of remuneration in local currency and payments are made in local currency, except in duty stations where it is the common practice of organizations that are retained as comparators for setting the SC remuneration scale, make remuneration payments in a currency other than the local currency. If the remuneration scale is denominated in a currency other than the local currency and is paid in local currency, the UN prevailing rate of exchange must be applied. Payment of remuneration to SCs in currencies other than the local currency should be based upon documentary evidence of similar practice by all the surveyed and retained employers and confirmation of legality by the appropriate national authorities.

Remuneration Subject to Taxation

a) The total remuneration paid to individuals engaged under a SC must be specified in gross terms. The remuneration paid to the SC is not exempt from national or local taxation. UNDP is not responsible for payment of tax on earnings or other taxes due on the remuneration of the SC, nor is UNDP responsible for reimbursement of taxes paid by SC holders in respect of earnings received under SC with UNDP. The payment of taxes is the sole responsibility of the individual under SC. UNDP reserves the right to request proof of payment of taxes by the SC holder. In certain cases, national governments exempt SC holders from payment of taxes. Such exemption is solely within the purview of the national government and cannot be based on representations by UNDP that SC holders are exempt.

b) The UNDP Office must not be involved in making payroll deductions for the purpose of remitting monies to the national tax authorities, nor is it required to report the earnings of SC holders to the tax authorities. The UNDP Office must notify the SC holder upon entry that the SC holder must be in compliance with their national taxation obligations. This is also detailed in the SC template.

c) In some cases, Governments have concerns that SC holders are not complying with their tax obligations. In such cases where Governments request information from the UNDP Office relating to SC holders, it is appropriate to do the following:

i. Provide the Government with the names of SC holders in the country and general information on pay scales and inform the Government that UNDP does not provide specific financial information relating to particular individuals;

ii. Inform the SC holders that the UNDP Office has provided their names and general pay scales to the Government and remind them that they must be in compliance with their tax obligations; and

iii. Advise the Government that the UNDP Office has notified SC holders as set forth in item b) above.

d) UNDP Offices may consult the OHR Policy Unit and the Legal Office on such government queries as necessary.

Overtime

a) While overtime work is generally discouraged, situations arise when it is necessary for individuals engaged under a SC to work more than the established work hours. In such cases overtime pay may only apply to SB1 to SB3 levels and shall not exceed 40 over time hours per month; SC holders engaged in the higher ranges are not subject to overtime pay.

b) As with the overall remuneration package, the rate of overtime pay is based on the local market. In locations where the local labour practice is not specific on the amount of time that constitutes overtime and corresponding compensation, where local practice favors cash payments, subject to budgetary considerations, overtime shall be compensated on the basis of one and half the normal rate. Where local practice favors compensatory time off, subject to exigencies of service, SCs shall be compensated on the basis of one and half the normal rate. The compensatory time off must be utilized within four months following the month in which the overtime work is done, otherwise it is forfeited.

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c) Overtime pay must be requested and approved by the supervisor in advance of the extra work period to be performed, subject to the availability of funds. The cost of overtime pay must be funded from the same source as the SC itself. UNDP Offices must ensure that sufficient funds exist for functions that may reasonably expect payment of overtime.

d) Overtime pay must be monitored closely and kept to a minimum.

Performance Bonus

a) The Performance Bonus for individual Service Contract holders is governed entirely through service quality assessment. The decision to grant a Performance Bonus is not automatic or granted as an entitlement.

b) During the Service Quality Evaluation process, the Supervisor of the SC holder makes a recommendation for a Performance Bonus and confirms that the individual has met all the contract objectives and the performance was more than satisfactory. In assessing the performance, Country Offices consider the quality of the individualโ€™s services in comparison to the performance of other SC holders conducting similar services. The Resident Representative has sole discretion to approve recommendations for Performance Bonuses based on the Service Quality Evaluation and the availability of resources under the project.

c) The Performance Bonus is a one-time payment granted to a SC Holder at the end of a twelve month contract after the service quality assessment. The Performance Bonus is calculated as a percentage of 1 to 3% of the gross annual remuneration rate that was in effect at the time of the evaluation taking into consideration the level of quality of service performance. Refer to Remuneration Handbook for further guidance.

d) UNDP Offices must ensure that budget provision is made for performance bonuses and is incorporated in the request for allotment in advance for the relevant financial year.

Danger Allowance

a) In addition to the base monthly remuneration, SCs who serve in locations where dangerous conditions prevail as determined by the ICSC are paid a Danger Allowance.

b) The Danger Allowance is payable based on presence at the duty station. SCs on maternity, paternity, annual or sick leave continue to be eligible as long as they remain in the duty station. The Danger Allowance is also payable for time away from the designated duty station on official duty travel up to a maximum of seven consecutive calendar days including weekends and holidays falling during that period. Payment ceases from the eighth day of official duty travel. If the SCs travel on mission to another location that qualifies for Danger Allowance, they will receive Danger Allowance at the rate of that location instead of the rate of their parent duty station.

c) Danger Allowance is not payable for days spent away from the duty station on annual leave or any type of special leave. Payment of Danger Allowance is lifted when dangerous conditions are deemed to have abated.

d) Danger allowance shall be paid at the Danger Pay rate established at the duty station for locally recruited staff. It is paid as a monthly lump-sum. For SC holders who spend one complete month in the area where the allowance is applicable, the monthly sum is paid irrespective of the number of days in the month. For periods of less than one month, the amount of danger allowance is prorated on the basis of 365 days; the daily rate is calculated by dividing the annual amount by the number of days actually spend at the duty station. Danger Allowance is payable for a minimum of one day and is not prorated on an hourly basis.

Annual Leave

a) Annual leave will be accrued in accordance with the general local practice, except that in no case is the SC to provide for less than 1.5 days of paid leave per month (for example, 18 days per year if the SC is for a twelve-month period; if less than twelve months, the leave is pro-rated).

b) All annual leave must be taken within the period of the SC.

c) When the SC is extended for an additional period, it is possible that the SC may be allowed to carry an accumulated annual leave to a maximum of 18 days.

d) Unused vacation leave at the end of the SC cannot be commuted to cash.

Medical Insurance

a) Individual SC holders may remain in a pre-existing medical scheme, whether through previous employment, a spouse or other source. In such case, UNDP provides a cash amount equivalent to both employer and subscriberโ€™s contribution, as part of the monthly remuneration, provided there is proof of coverage and the cash amount does not exceed the monthly fee amount for the SC medical insurance contract with Cigna, offered by UNDP. The individual must present proof of participation and coverage at the commencement of the SC. The UNDP Office is responsible for verifying that the individual has adequate coverage. The SC must notify the UNDP Office of any change in coverage during the term of the SC as provided in the SC. The payment of cash for medical insurance, without the individual having coverage, is not permitted. The SC must stipulate the manner in which coverage for health benefits is provided.

b) Alternatively, the UNDP Office may make arrangements for medical coverage under a local private scheme provided that the premium is lower than the global Cigna International "Group Life, Disability & Medical insurance plan" and that the scope of coverage meets the standard established under the Cigna plan.

c) In such case, UNDP remits the full premium directly to the private scheme. This option is not available if the premiums under this scheme are more than the monthly premium under the Cigna Plan.

d) In the case that the Cigna coverage is used, the premium is established in US dollars. The local currency value must be determined monthly on the basis of the UN operational rate of exchange. The premium must be collected and remitted monthly at the time of processing the remuneration in order to have coverage. Only the premium for the SC holder is subsidized by UNDP.

i. UNDP does not subsidize Cigna medical insurance for the SC holderโ€™s recognized dependents. The SC holder may choose to enroll dependents recognized by UNDP within 30 days of the starting date of their service contract, provided the SC holder pays the full premium for them. These premiums are collected by means of a payroll deduction every month.

e) In countries where a national medical scheme exists, individuals under SC may contribute directly to such a scheme, if permitted. To use this option, the UNDP Office must receive adequate evidence that the individual has coverage. It is not permitted to include an amount for medical coverage in the SC remuneration where no coverage is in place. Under this arrangement, the UNDP Office contributes the actual monthly cost of the insurance. This option is only available where UNDP has no obligation to contribute directly to the national scheme, as it cannot be subject to the national scheme.

f) UNDP Offices must ensure that all SC holders have adequate medical coverage. UNDP Offices are also responsible for ensuring that no SC holder travels on UNDP mission travel outside the country of residence without arranging medical coverage under Cigna or other local private scheme for the duration of the mission, at no cost to the SC holder.

Maternity Leave

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Paid maternity leave is to be established taking into account the general local practice in the market, except that in no case shall the period of maternity leave be less than 16 continuous weeks, which is the minimum standard. The maternity leave must fall within and be taken during the contract period.

Paternity Leave

a) Paid paternity leave must take into account the general local practice, except that in no case shall the paternity leave be less than four weeks, which is the minimum standard. The Paternity leave must fall within and be taken during the contract period.

b) The SC holder must have had at least 6 months of service with UNDP at the time of the birth of the child. The leave is to be taken in one or two equal periods during the first twelve months from the birth of a child.

c) The paternity leave is limited to once a year, regardless of the number of children born during that year, and can only be availed at a maximum up to six times during the total engagement within the UN system.