Vacation AccrualDSL Reminders

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Vacation Accrual/DSLReminders Case
StudiesABCs of ResearchFebruary 7, 2005

• Sara Bible, ORA
• Tana Hutchison, CO
• Jamie Lutton, CO

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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 DONTs
• Resource web page
• Contacts

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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

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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
• Workers 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

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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

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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 weeks more work
  than it was entitled to, and
  
• that cost should be reflected and money put aside
  to pay for the future vacation

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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 employees 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.

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Kronos Reminders

• Review your units Kronos practices and
  processes
  
• Do you know who is on vacation?
• Do you ensure it is recorded in Kronos?
• If staff members dont 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_at_lists.stanford.edu, so that the
  appropriate financial adjustment can be made?
• Do your Kronos Administrators know who is on
  Disability or Workers Comp, and how to record
  the sick leave component?
  
• Do you review Kronos reports?

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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
  dont 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 time their bucket is fill
ed
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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

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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 - Hou
rs earned monthly since 9/1/03
Employees are paid for Vacation when - Emplo
yees use Vacation time, as an Active employee
- Employees are paid out for Vacation upon
Termination
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Central Vacation Account
Money comes out when
Money comes in via
Employees use Vacation (Automatic) Employe
es leave and receive a Vacation Payout (Automati
c)
Central Vacation Account
9/1/03 Vacation Funding (Manual) Burdening (
since 9/1/03)
(Automatic)
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Vacation Accrual Example Chemistry Department

• 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

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How it WorksFringe Benefit Impact
Example does not include TGP.
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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
  

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How it AppearsSample Expenditure Report

• Note RBE stands for Regular Benefits Eligible
• Example shows case where employees used exactly
  what was accrued

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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
  

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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 workers compensation.

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Vacation Accrual on - Sponsored Projects

• What happens if project staff dont take as much
  vacation as they have earned on a project?
  
• This could cause the project to appear to be
  over budget
  
• If people dont 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
  

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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 Investigators 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

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Sponsored Projects - Example

• 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
  

• 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

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• Questions
• and
• Case Studies

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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.

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Question 2

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

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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.

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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?

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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?

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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
  months 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.

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Vacation Accrual/DSL

• More questions or case studies?

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Vacation Accrual DOs DONTs

• 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
  

• DONTs
• Dont budget separately for vacation accrual
• In iJournals dont transfer accrual dollars for
  vacation earned

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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.htm
  l
  

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Vacation Accrual and Disability Sick Leave

• Contacts
• Controllers Office
• Karen Craig, klcraig_at_stanford, 4-3899
• Tana Hutchison, tana_at_stanford, 3-9793
• Jamie Lutton, jlutton_at_stanford, 4-9597
• Office of Research Administration
• Sara Bible, sbible_at_stanford, 5-1712
• Nancy Walsworth, nancyww_at_stanford, 5-7437
• Office of Sponsored Research
• Contact your assigned OSR representatives