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Vacation Accrual/DSL Reminders & Case Studies ABCs of Research February 7, 2005

Vacation Accrual/DSL Reminders & Case Studies ABCs of Research February 7, 2005 Sara Bible, ORA Tana Hutchison, CO Jamie Lutton, CO Topics for today … Definitions and reminders Changes to Administrative Guide Memo 22.5 Beginning Vacation Balance Central Vacation Account

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Vacation Accrual/DSL Reminders & Case Studies ABCs of Research February 7, 2005

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  1. Vacation Accrual/DSLReminders & Case StudiesABCs of ResearchFebruary 7, 2005 Sara Bible, ORA Tana Hutchison, CO Jamie Lutton, CO

  2. Topics for today … • Definitions and reminders • Changes to Administrative Guide Memo 22.5 • Beginning Vacation Balance • Central Vacation Account • Presentation on Expenditure Reports • Sponsored Projects • Questions and Case Studies • DOs and DON’Ts • Resource web page • Contacts

  3. Vacation Accrual Definition • A financial vacation accrual allows us to build up funds to pay staff while they are on vacation, thus recognizing this cost as it is earned, not when the vacation is taken • Similar to staff members saving money toward their own vacation trips, Stanford needs to put aside money to pay their salary when they are on vacation • If this is not done, vacation is a “hidden” cost, that can come back to bite you! This is a change from our old cash basis policy

  4. Disability Sick Leave Accrual Definition • A Disability Sick Leave (DSL) accrual covers the sick leave supplemental pay while a staff member is on: • Short-term or Long-term Disability • Worker’s Compensation Disability • DSL is like “insurance” for the department, to protect it when someone is out for a long period of time and charges sick leave • Includes maternity leave • Includes long-term illnesses

  5. Vacation Accrual/DSL rates • Vacation Accrual rates include a small component for Disability Sick Leave • FY05 Rates • Exempt 8.8% • Non-exempt 7.4% • Bargaining unit 7.4%

  6. Vacation Accrual Reminders • A typical year contains 52 weeks of salary comprised of: • Salary while on the job, and • Salary while on vacation • If a person earns 4 weeks of vacation in a year, but only took 3 weeks off: • the University has received one week’s more work than it was entitled to, and • that cost should be reflected and money put aside to pay for the future vacation

  7. Changes to Administrative Guide Memo 22.5 - Vacations • Vacations should normally be taken in the fiscal year when it is earned • If an employee has not scheduled vacation they may be required to take vacation prior to the end of the fiscal year in which it was accrued or prior to the close of a grant or contract that supports the employee’s salary • RPH 3.1 Fiscal Responsibilities of Principal Investigators • These accrual rates enable Stanford to charge the appropriate funding source for vacation earned by benefits-eligible staff as they are working.

  8. Kronos Reminders • Review your unit’s Kronos practices and processes • Do you know who is on vacation? • Do you ensure it is recorded in Kronos? • If staff members don’t record vacation themselves do you have a way for your Kronos Administrators to be informed and to make the entry for them? • If your Kronos Administrator has to make a Kronos “Historical Edit” to correct vacation taken in a prior pay-period is an email sent to LD_coordinator1@lists.stanford.edu, so that the appropriate financial adjustment can be made? • Do your Kronos Administrators know who is on Disability or Worker’s Comp, and how to record the sick leave component? • Do you review Kronos reports?

  9. Beginning Vacation Balance • For every vacation-eligible person (except those in the Lab Time Card System) the vacation earned prior to the policy change is unfunded • It is an “empty bucket” that must be filled at some time in the future • We will not require its immediate funding (you don’t have to fill up the bucket right away) • The amount to go in the bucket for each person is: Their earned, but unused vacation at 9/1/03 X Their pay rate at the timetheir bucket is filled

  10. Beginning Vacation Balance • The “bucket” will be filled up over time as employees leave or transfer to another department • We recorded the beginning unfunded hours for each employee (at 9/1/03) • When employee transfers or departs, the beginning unfunded hours must be funded (put into the central accrual account) SIMILAR TO PRIOR PRACTICE • These hours have never been “paid for” • There is no “windfall” to receiving department, and no additional cost for them to cover these hours in the future • Treatment causes a “timing” variance • Allows “borrowing” from central accrual account when employee uses unfunded beginning hours

  11. Central Vacation Account Example 100 Hours + 50 Hours - 30 Hours - 120 Hours 0 Hours Employee Vacation balances consist of: - Beginning vacation balance as of 9/1/03 - Hours earned monthly since 9/1/03 Employees are paid for Vacation when: - Employees use Vacation time, as an Active employee - Employees are paid out for Vacation upon Termination

  12. Central Vacation Account Money comes out when: Money comes in via: Employees use Vacation (Automatic) Employees leave and receivea Vacation Payout (Automatic) Central Vacation Account 9/1/03 Vacation Funding (Manual) Burdening (since 9/1/03) (Automatic)

  13. Vacation Accrual at 9/1/03 100 hours Has not yet been paid for 75 hours accrued from 9/1/03 to 2/28/05 Paid for through accrual rate Employee quits on 2/28/05 and is paid for a total of 175 vacation hours Central vacation account will pay out 175 hours of vacation. Chemistry must fund the central account for the 100 hours which have not yet been paid for 75 hours covered by vacation accrual, already charged to Chemistry using VAC/DSL rate How do I fill up their vacation bucket of 100 hours? 100 hours from Chemistry budget or 100 hours from funds received when employee transferred to Chemistry Vacation AccrualExample: Chemistry Department

  14. How it Works:Fringe Benefit Impact Example does not include TGP.

  15. Presentation on Expenditure Reports • FY2004 required many extra entries to record correct amounts in the right places, causing the reports to be very confusing • Different treatments for different periods of the year are explained in online documentation • Vacation Accrual Charge was presented as part of Fringe Benefits • FY2005 presentation is “clean”! • Salaries appear with subtotal by person • Subtotal of Net vacation is provided • Vacation Used Credits appear with subtotal by person • Vacation Accrual Charge appears as one amount per month per classification (i.e., one amount for all exempt staff) • The credit and the charge are combined in the Net Vacation Category • Net Vacation is part of Salary, not Fringe Benefits, recognizing that vacation is salary, regardless of when it is paid out

  16. How it Appears:Sample Expenditure Report Note: RBE stands for “Regular Benefits Eligible” Example shows case where employees used exactly what was accrued

  17. How to Make Corrections • Just as for any other “burden” (like fringe benefits or indirect costs), the vacation accrual charge is moved automatically when salary charges are moved through an iJournal • You CANNOT make an entry to a Vacation Accrual Expenditure Type • However, the credits posted to Vacation Used Expenditure Type when someone is on vacation will NOT move automatically when you move salary for that time period to another account • YOU MUST record an entry to move the proper amount of the Vacation Used Credit to the appropriate account as part of your iJournal • When we implement Labor Distribution Adjustments in Spring 2005 this will be more automated

  18. Vacation Accrual on - Sponsored Projects • How do I budget for this on a sponsored project? • For budget purposes, assume that the vacation earned and used will offset each other each year • Continue to budget only the “full salary” (not the vacation burden or the credit for vacation used) • Add this statement to the budget justification: • Per our negotiated rate agreement with the Office of Naval Research, the budgeted salary amount for staff includes 8.8% vacation accrual/disability sick leave (DSL) for exempt employees and 7.4% for non-exempt employees. This amount does not exceed total salary. The vacation accrual/DSL rates will be charged at the time of the salary expenditure. No salary will be charged to the award when the employee is on vacation, disability or worker’s compensation.

  19. Vacation Accrual on - Sponsored Projects • What happens if project staff don’t take as much vacation as they have earned on a project? • This could cause the project to appear to be “over budget” • If people don’t take vacation you may achieve the goals of the project “early” since they expended more effort than expected (because they did not take vacation) • They should be moved to other accounts (PTAs) at that time • If staff members continue to be charged to the sponsored project, in excess of the budgeted amount (in total for their salary and vacation) it is NOT considered cost sharing • This situation is considered voluntary uncommitted cost sharing and need not be recorded as cost sharing. Costs could be transferred to other appropriate accounts if needed • Rebudgeting authority may allow you to charge the sponsor “more” for the salary and vacation and less for other costs

  20. Vacation Accrual on - Sponsored Projects • How can I fill up the 9/1/03 vacation balance bucket? • For the most part, the accounts to be charged should be appropriate non-sponsored accounts • We recognize that a portion of the vacation balance as of 9/1/03 was earned while people were paid by currently active sponsored projects • With the Principal Investigator’s permission and if the award terms permit rebudgeting, you may charge the sponsor their relative proportion of the beginning balance for a sponsored project that is still active • You may not charge the sponsor for any vacation balance that was accrued (built up) while the employee was working on prior or other sponsored projects • if you are not certain whether award terms permit sufficient rebudgeting, contact OSR, RMG or ERA for advice

  21. Vacation Accrual at 9/1/03 100 hours earned on sponsored project A (ended 7/1/02) 100 hours earned on sponsored project B (will end 5/31/05) 100 hours earned on departmental, non-sponsored account 300 Hours Total 75 hours accrued from 9/1/03 to 2/28/05 on Project B Employee quits on 2/28/05 and is paid for a total of 375 vacation hours How do I fill up their vacation bucket of 300 hours? 100 hours from Project B (with permission from PI and rebudgeting authority) 200 hours from departmental, gift or other non-sponsored account You may NOT charge Project B for the vacation earned on Project A or the departmental account 75 hours covered by vacation accrual, already charged to Project B Sponsored Projects - Example

  22. Questions and Case Studies

  23. Question #1 • Are PTO and Stanford Holidays included in the vacation accrual rates? • When Stanford decides to give employees an extra two holidays, has that been approved by the sponsor? In essence, the sponsor pays for those days but no work is being done in return.

  24. Question #2 • I am doing a salary journal and I was wondering if the vacation accrual gets journaled automatically as does the fringe benefits?

  25. Case Study #1 - Scenario • A person in our dept. accrued approximately 25 hours on a sponsored project before the new vacation accrual “bucket” system was put in place. The person was told repeatedly to take vacations and also manage the vacations of one other staff member also on the grant. They never took their vacations and now there is approximately 75 hours of vacation accrued. • From our understanding, the dept. is still liable for the initial 25 hours, and 50 hours were charged to the grant.

  26. Case Study #1 - Questions a. Now that the grant is closing, what happens to that money (associated with the 50 hours) and what PTA do we charge in order to recover those 50 hours worth? b. Where does the money come from to pay the vacation off, now that the grant is ending? They are owed vacation money and an expected grant is not immediate. c. How do we force people to take vacation during the grant period? d. What if the grant period is very short? How do you ask them to take a few days off here and there especially when most people would rather build up their vacation hours?

  27. Case Study #2 • PIs need to carefully manage their awards to support their research goals. They rely on us to project their activity and work with them to keep them on budget. The vacation policy makes is harder for us to project into the future, as we never know when or if people are going to take vacation. Asking the PI to estimate their employees’ vacation schedules has only provided limited help. • What suggestions do you have?

  28. Case Study #3 • If an employee works 80% time and chooses to work a 4 day week (Mon. – Thurs) instead of 6.4 hours per day, how is vacation charged when two consecutive weeks of vacation (10 days) are taken? • Does the vacation accrue at the end of the month? So it does not allow an employee to count that month’s vacation toward vacation time taken earlier that month. • …and it is an issue that only a full day of vacation may be taken by an exempt employee as opposed to being able to take a half day off, … that does not always fit reality.

  29. Vacation Accrual/DSL More questions or case studies?

  30. DOs Keep Kronos records up to date Encourage staff to take vacation in the year it is earned In iJournals do transfer dollars for vacation used credit when moving salary for same time period DON’Ts Don’t budget separately for vacation accrual In iJournals don’t transfer accrual dollars for vacation earned Vacation Accrual: DOs & DON’Ts

  31. Vacation Accrual: Resources • Vacation Charges Resource Page • Description & background • Templates: • Unfunded beginning (9/1/03) balance • Termination funding form • Example • Self test • Frequently asked questions … and answers http://www.stanford.edu/dept/DoR/Resources/vac.html

  32. Vacation Accrual and Disability Sick Leave • Contacts: • Controller’s Office: • Karen Craig, klcraig@stanford, 4-3899 • Tana Hutchison, tana@stanford, 3-9793 • Jamie Lutton, jlutton@stanford, 4-9597 • Office of Research Administration: • Sara Bible, sbible@stanford, 5-1712 • Nancy Walsworth, nancyww@stanford, 5-7437 • Office of Sponsored Research: • Contact your assigned OSR representatives

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