FAQ: Furlough-salary reduction plan

by Dave Jones
August 28, 2009

This information is intended to assist administrators to plan for implementation. Answers are subject to change as operational details are finalized. Additional FAQs will be added as information becomes available. The date following each answer indicates when it was last revised. Use the “search” function to find topic specific information.

1. Implementation

1.10 How will the Plan be implemented? Payroll releases are being developed to implement the accrual of furlough hours and the reduction in pay. Given the complexity of the Plan and the limited time for implementation, a number of situations will not be automated in the payroll system and will require local intervention. Academic Personnel, Human Resources and Payroll Coordination are collaborating to address these situations and to develop guidance for the campuses. (7/21/09)

1.11 What is the effective date of the Plan? The Plan is effective Sept. 1, 2009, and employees who are subject to the Plan will participate for 12 months, through Aug. 31, 2010. For employees who are paid monthly, the reduction will be reflected in their September paycheck, which is issued around Oct. 1, 2009. For employees who are paid biweekly, the reduction will begin with the first full pay period in September. (7/21/09)

2. Plan Participation

2.10 What employees are subject to the Plan? The Plan covers the following types of employees:

• Faculty
— Academic Senate
— Non-Senate

• Non-Senate Academics

• Health Sciences Compensation Plan Faculty Members

• Policy-covered (nonrepresented) staff
— Career, limited, floater, per diem and partial year career appointments
— Regular status (career employee who is not required to serve a probationary
period or who has passed probation) and probationary employees
— Full time and part time

• Represented staff and academic employees (subject to obligations under the Higher Education Employer-Employee Relations Act)

• Senior Management Group Members

• Rehired retirees

• Recalled faculty

• New hires

(7/21/09)

2.11 Student employees are excluded from the Plan. How are students being defined for the purpose of this exemption? The payroll program will identify student employees by using a combination of appointment codes and titles. The following groups will be excluded:

• Undergraduate and graduate employees
• Graduate student researchers
• Teaching assistants
• Medical residents

(7/21/09)

2.12 Are employees who participate in a Voluntary Separation Program subject to the Plan? Yes. Employees who separate from UC subsequent to the Plan’s effective date are subject to the Plan. Severance pay under the VSP will be calculated based on the separating employee’s prefurlough (unreduced) monthly salary. (7/21/09)

2.13 How will the Plan impact MSP Staff Physicians who have a base, non-base and incentive component to their pay? The Plan will apply to Staff Physicians who are working in regular staff appointments. Their base pay will be subject to the reduction, and the non-base and incentive components of their pay will be excluded from the reduction. This is consistent with how the Plan will apply to Health Science Compensation Plan faculty. Application of the Plan to Staff Physicians who are contract employees will depend on the terms of the individual contracts. (7/21/09)

2.14 How will the Plan apply to employees on individual employment contracts? This will depend on the terms of the contract. The Plan excludes employees whose participation is precluded by law. Employees with contracts that cannot be changed unilaterally by the University will be asked for a voluntary salary reduction appropriate for their pay band. Human Resources will work with the Office of General Counsel to develop guidelines for how to handle these situations. (7/21/09)

2.15 Will the furlough Plan apply to an employee on a leave with pay? Yes. The employee will receive an accrual of furlough days and a corresponding reduction in pay will apply to the pay they receive while on leave. (7/21/09)

2.16 Are employees who are on leave without pay (such as disability, FMLA, personal, etc.) at the time the furlough Plan becomes effective subject to its requirements? Employees who are on leave without pay at the time the furlough Plan becomes effective on September 1, 2009 will be subject to the furlough Plan beginning at the time they return to work until the end of the Plan on August 31, 2010. (8/5/09)

2.17 How will the exclusion for extramural funds be applied? Compensation that is 100 percent funded from extramural funds is excluded from the Plan. For those with salaries that are partially funded from extramural funds, the exclusion will apply to that portion of their salary. To the extent an individual has a partial component of their salary reduced, they will also receive the corresponding proportional share of furlough days/hours.

For example, an employee with a $50,000 annual salary, 60 percent funded from General Funds and 40 percent from extramural funds, would be in Salary Band 3 based on his/her full-time salary rate. He/she would accrue 9.6 furlough days during the year (60 percent of 16 days), and his/her salary would be reduced by $1,800 (6 percent of $30,000). It is intended that this process will be incorporated into the initial payroll release and will be effective with September payroll. (8/5/09)

2.18 What is the definition of extramural funds? Extramural funds include federal, state, other government or private contracts and grants (including AARA contracts and grants), cooperative agreements and campus awards of special State appropriations for AIDS, Tobacco, and Breast Cancer research programs. OP has been working with the campus payroll offices to confirm the payroll specifications used to identify extramural funds. (8/5/09)

2.19 How is an extramural contract and grant fund identified in the UC Davis financial system? One method that can be used to determine whether an account is classified as an extramural sponsored project is accessing Decision Support Report FIS11, Account Lookup. When a query is executed for a particular account, the query will return the sub fund type code associated with the account. The following sub fund type codes are classified as sponsored project funds:

C – Federal Contracts
F – Federal Grants
J – Private Contracts
L – Local Government
N – State Government FFT
P – Private Grants
S – State Government
V – Local Government FFT
W – Private Grants FFT
X- Private Contracts FFT

All extramural sponsored project awards are established in the financial system with a fund number unique to that particular project and the department administering the award establishes an expenditure account(s) to record all financial expenditure activity associated with the project. The fund number is a five digit number identifying the fund source and is assigned in a framework that provides for grouping of funds into “sub fund groups” and sub fund group types” based on type of sponsor and type of award. Because each expenditure account is associated with the project’s unique fund number, identification of the account as a sponsored project fund can be determined by understanding this relationship. (UCD 8/25/09)

2.20 Are employees on H1 visas affected by the furlough program? Staff and academics on H visas are not included in the furlough program. Individuals holding any other visa types will be included in the furlough/reduction. The H visa is job and site specific; once approved, the employee is eligible to work at the job for which that visa was approved and any changes in terms of and conditions of employment require additional submissions for federal agency approval. (UCD 8/25/09)

3. Furlough/Salary Reduction Plan

3.10 How do the furlough days and salary reduction correspond to each other? Employees will receive the allotted number of furlough days specified for their salary band in hourly increments each month, and their pay will be reduced by a corresponding percentage in even increments each month during the 12-month Plan period. For example, an employee whose salary is within Salary Band 2 ($40,001-$46,000) is allotted 13 furlough days off and will receive a 5 percent salary reduction, with the salary reduced accordingly for each pay period for 12 consecutive months. (7/21/09)

3.11 What salary figure is being used to determine the applicable salary band for the salary reduction? What elements of pay are included? As of what date? An employee's full-time salary rate, as of Jan. 1, 2009 (or the hire date, if later), will be used to determine the salary band. This is consistent with the methodology used to determine salary bands for employee medical contributions. The salary rate is defined as the monthly salary the employee is appointed to receive under an academic, nonacademic, and/or administrative title payable through the University. This includes such things as stipends. It does not include:

• Overtime payments
• Shift or other differential pay
• Consulting fees or payments in lieu of private practice
• General assistance "by-agreement" payments
• Compensation for extension teaching
• Any remuneration received which is in excess of 100 percent of full-time equivalent of your regular and normal position
• Perquisites and any bonuses or other special compensation

(7/21/09)

3.12 What types of pay will be reduced under the Plan? Compensation subject to the Plan includes base pay, similar forms of regular pay and stipends. The following types of pay will NOT be reduced under the plan:

• Pay for summer session teaching
• Summer additional compensation
• Teacher-University Extension (UNX payments)
• BYA salaries
• Overtime
• Shift differential
• Bonus pay *
• Incentive pay *
• Terminal vacation pay
• Severance pay
• Workers Compensation supplement

* Many categories of bonus and incentive pay have been cancelled or deferred by the Regents.

Analysis of pay categories continues to be reviewed. More detailed information about how different types of pay will be impacted will be made available prior to implementation. (Revised 8/5/09)

3.13 Will the reduction be spread out equally over the Plan’s term, or will pay be reduced in the month the furlough days actually occur (being that the January paycheck could be pretty brutal with all the holiday days in December, and would come right at the time people are paying off their holiday purchases)? The reduction will be spread out equally over the Plan’s term. (7/21/09)

3.14 Salary compression will become a factor for those employees who are paid at or near the different thresholds. How will the University address this? In response to the many requests for a finer leveling approach, the Plan was designed with multiple cost reduction tiers ranging from 4 to 10 percent. Due to the nature of any graduated plan, there will be differentiating impacts for those near the tier thresholds. However, it should be understood that the Plan is temporary and, at this time, intended to be in force for only twelve months. (7/21/09)

3.15 The cost reductions may cause some employees to fall below their official pay ranges. How will this be addressed considering UC policy that employees are paid within range? The Plan is only intended to last for 12 months and it is understood that it may cause some employees to fall, temporarily, below their pay range. (7/21/09)

3.16 Will employees be allowed to take a voluntary pay cut prior to the Plan’s implementation in order to fall into a lower reduction threshold? Actions such as this would undermine the integrity of the Plan which is to help the University cope with and address the unprecedented drop in state funding for the fiscal years of 2008-09 and 2009-10. Also, a voluntary pay reduction would be considered permanent, and not subject to automatic reversal at the end of the Plan’s term. Management should not encourage or allow these types of pay changes. (7/21/09)

3.17 How will overtime pay be calculated under the Plan? Overtime pay that is derived as a percentage of base pay will be derived as a percentage of the pre-reduced rate of pay. (Revised 8/5/09)

3.18 How do we handle a merit increase received during the reduction period? The employee’s prereduced salary will be maintained in the payroll system while the Plan is in effect. A merit increase would apply to the prereduced salary, then the increased salary would be reduced by the applicable rate. The number of furlough days and the corresponding percent pay reduction will not be adjusted due to salary changes. Details about how to apply a merit increase in the payroll system will be addressed in implementation guidelines. (7/21/09)

3.19 Will there be guidelines addressing how new hire rates shall be set during this period? At a permanent rate and then reduced? A new hire would be set up at a permanent rate, which would then be reduced by the applicable furlough rate. Details about how to set-up a new hire in the payroll system will be addressed in implementation guidelines. (7/21/09)

3.20 Should campuses include language in their offer letters in anticipation of the Plan? Yes, it is recommended that the campuses include language in all offer letters, including offer letters to the Senior Management Group, which informs the candidate of the salary reductions under the Plan. (7/21/09)

3.21 How will the Plan impact the payout of vacation pay for an employee who leaves work while the Plan is in place? Terminal vacation pay will be calculated based on the separating employee’s prereduced rate of pay. (7/21/09)

4. Furlough Days

4.10 How will furlough days be scheduled? Campuses will have the flexibility to establish local procedures. Some or all furlough days may be formally scheduled by a campus, division or department. As part of the UC Davis furlough plan, the campus will close for a specified number of days. Specifics of this plan are being finalized and will be forwarded to employees shortly. Employees should be given advance notice of closure days scheduled by their division or department.. Any leftover furlough days that have been allotted to the employee may be discretionary days off with agreement from the employee’s supervisor. In practice, furlough days will be tracked in the payroll system. To the extent employees are given discretion to schedule some or all of their furlough days, the intent is for the days to be used each month as the days are accrued during the 12 months the Plan is in effect. (Revised 8/25/09)

4.11 How will the furlough days be kept track of? The payroll system will be used to track the accrual and use of furlough days. The appropriate number of furlough hours will be added into a furlough bank each month. For example, a full-time employee in Salary Band 4 will accrue approximately 12 hours of furlough time a month (1½ days) for a total of 18 days during the 12-month term of the Plan. Furlough hours will be subtracted in the system when they are used. Campuses will also use local leave tracking systems to monitor the use of furlough days. (Revised 8/5/09)

4.12 What if an employee reaches his/her maximum vacation accrual? Furlough days are not vacation days. They are days off of work that correspond to a reduction in pay. Therefore, there is no change to current policies and procedures regarding the accrual of vacation time. (Revised 8/5/09)

4.13 Can an employee make arrangements with his/her supervisor to accumulate furlough days to use all at once during or at the end of the furlough period? Any furlough days that are in excess of those used for campus closures are intended to be used on a monthly basis spread over the course of the furlough period. However, accrued furlough days may be saved up and used in blocks prior to the end of the furlough period with the supervisor’s agreement. (8/5/09)

4.14 Can furlough days be used before they are accrued? For example, if an employee has no accrued vacation available, can the employee use more furlough days than what he/she has accrued as of Dec. 31 to augment the winter holidays? The Plan was developed with the expectation that employees use their furlough days each month as they accrue. However, if the campus has scheduled closure days in excess of accrued furlough days, employees may use furlough days before they have actually accrued. (7/21/09)

4.15 Must furloughs be taken as full days off or can they be taken in hourly increments? Generally, furlough time should be recorded the same as vacation – in one-day increments for exempt employees, ¼ hour increments for non-exempt employees. Campuses may establish local procedures for recording furlough time. (7/21/09)

4.16 During a campus closure, will Chancellors have the authority to exclude employees from the Plan to continue critical services on the campus, such as animal care workers, child care workers, research support staff tending 24/7 facilities, etc.? The Plan approved by the Regents included as a stated principle that “Flexibility on the use of furloughs is incorporated into the Plan to minimize disruption of essential services and work on campuses, the medical centers, and the Office of the President.” In keeping with that principle, campuses will have the latitude to manage the schedules of workers as necessary to support continuously operating facilities (e.g. to support animal care in continuously operating animal research facilities/operations). These employees will still accrue furlough days and experience a corresponding reduction in pay, and they will be expected to use the furlough time during the Plan term. (8/5/09)

4.17 What happens to unused furlough time at the end of the program? Employees are expected to use all of their furlough days during the Plan term. Furlough time is not like vacation time or comp time that can be banked for later use. Furlough time that is not used as expected during the Plan term will expire at the end of the Plan term and is not carried forward. (8/5/09)

4.18 Can an employee be called in to work on a designated furlough day? If the designated day is scheduled as a campus closure day, an employee cannot be called in to work unless required for critical business need.

If the designated day is scheduled by the employee as a floating furlough day, an employee cannot be called in to work unless there is a business necessity and the employee is given reasonable advance notice. However, every effort is to be made by the employee’s supervisor to find an alternative solution to having the employee come in to work. If an employee is required to work on a floating furlough day, every effort is to be made to reschedule another furlough day as soon as possible at the convenience of the employee and with the supervisor’s agreement. (8/5/09)

4.19 Can an employee voluntarily come to work on his/her floating furlough day to take advantage of training or educational opportunities? If an employee comes in for work-related training or education, it is considered a work day and not a furlough day. An employee who wants to take advantage of a training or educational opportunity on a day that he/she scheduled as a furlough day must schedule an alternative furlough day. (8/5/09)

4.20 How will employees on START be impacted by campus closures that are implemented as a result of the furlough program? Employees on START will need to take vacation or leave without pay during campus closures. Employees in this circumstance can work with their supervisor to adjust their work schedule so that their reduction in time coincides with the campus closure. (UCD 8/25/09)

5. Impact on Benefits

5.10 Will employees who are on START be subject to the Plan? Employees participating in START will be excluded from the Plan if their reduction in time under START is the same or greater than the reduction required for their respective salary band under the Plan. For example, if an employee in START currently has a 10 percent reduction in time, and is required to take an 8 percent reduction under the Plan (corresponding to 21 furlough days), the employee will be excluded from the Plan. (7/21/09)

Employees whose START reduction is less than that required under the Plan will require individual handling (for example, an employee with a 5 percent START reduction who is required to take an 8 percent reduction under the furlough Plan). It is strongly recommended that departments work with employees in this situation to either increase the time reduction under START so that it equals or exceeds the Plan, or cancel START so that only the Plan would apply. Otherwise, the employee’s payroll record will have to be adjusted manually, possibly every pay period, to affect the appropriate accrual of furlough time and corresponding salary reduction. Reports will be available to campus HR offices to identify START participants whose time reduction under START is less than the required reduction under the Plan. (Revised 8/5/09)

5.11 Will employees be permitted to choose START before/after the proposals are put into place? The START program continues to be in effect through June 30, 2010. Employee participation is voluntary. In all cases, participation is dependent upon the approval of the department head. (7/21/09)

5.12 What happens if my START program ends before the Plan period ends? START participants whose START contract expires before the close of the furlough/salary reduction Plan will subsequently be placed on the Plan. This will require manual processing. (7/21/09)

5.13 Are there advantages to being in START rather than the Plan in terms of vacation and sick leave accrual and benefit protections? No. The provisions for vacation and sick leave accrual and benefits, including UCRP, are intended to be the same under both programs. (7/21/09)

5.14 Will monthly health insurance premiums be adjusted for the rest of 2009 if the furlough/salary reduction drops employees into lower medical plan salary bands? No. (7/21/09)

5.15 Will employees be allowed to change medical plans mid-year following implementation of the Plan? No. There will be an opportunity to change medical plans for 2010 during Open Enrollment in November. (7/21/09)

5.16 Will employees be able to change their DepCare or HCRA election due to a salary reduction? No. Employees cannot change or cancel elections midyear. There will be an opportunity to change or cancel for 2010 during Open Enrollment in November. (7/21/09)

5.17 How will mandatory DC Plan contributions be impacted by the Plan (including UCRP members and Safe Harbor)? Mandatory contributions to the DC Plan are a percentage of pay received by the employee, and they will be reduced as pay is reduced under the Plan. (7/21/09)

5.18 How will voluntary contributions to the 403(b), 457(b) and DC Plan After Tax plans be impacted by the Plan? If the voluntary contributions are being taken as a percentage of pay, they will be reduced. Contributions that are being made at a flat rate (for example, $100 per month) will not change. Employees can change their contribution elections at any time, subject to payroll and processing deadlines. (7/21/09)

5.19 How will the senior management supplemental benefit program contributions be impacted by the Plan? These employer contributions are a percentage of pay received by the employee, and they will be reduced as pay is reduced under the Plan. (7/21/09)

5.20 Will employees with 403(b) Plan loans be allowed to restructure their loan terms? No. (7/21/09)

5.21 Are CAP accounts being considered like the University did in 1992 and 1994? No. (7/21/09)

5.22 Will the employee contributions to UCRP scheduled to begin in April 2010 be calculated on the employee’s regular salary or the reduced salary? Both employer contributions and employee contributions to UCRP from April 15, 2010 through August 31, 2010 (or the end of the term of the Plan) will be based on the employee’s reduced salary. (8/5/09)

5.23 Will the reduction in salary have any impact on an employee’s disability or life insurance benefits? Disability benefit payments for both the Short-term Plan and the Supplemental Plan will be based on an employee’s unreduced salary and premiums will continue to be based on an employee’s unreduced salary. Basic life insurance coverage will continue at the unreduced salary rate until January 1, 2010, at which time coverage will be based on the salary rate in effect at that time. Supplemental life insurance premiums and coverage will continue at the unreduced salary rate. These provisions are consistent with the START program. (8/5/09)

6. Part-time Employees

6.10 How will the Plan affect part-time employees? Part-time employees will be allotted furlough days and have their salary reduced in proportion to their full-time equivalent salary. For example, an employee who has a 60 percent appointment and earns $60,000 per year ($100,000 full-time equivalent) is within Salary Band 5 that allots 21 furlough days and an 8 percent salary reduction, so the employee will receive 12.6 furlough days and a $4,800 salary reduction (8 percent of $60,000). (7/21/09)

6.11 How will the Plan affect benefits eligibility for part-time employees? Will those career employees currently at 50 percent time fall to a lower benefit eligibility level and lose their UCRP vesting? Benefits eligibility will not be negatively impacted by the Plan consistent with how START participants’ benefits are protected. By implementing the furlough through crediting of furlough days and a corresponding reduction in pay, employees time worked will not be reduced in the payroll system. (7/21/09)

7. Separation from the University

7.10 If an employee separates from the University before using all of his/her furlough days, will those days expire? By policy, unused furlough days will expire at the end of the term of the Plan or upon separation of employment if earlier. Supervisors and managers should work with employees to schedule the furlough time prior to separation. Managers and supervisors have the authority under policy to require the use of furlough time. (Revised 8/5/09)

7.11 Is severance pay to be calculated on an employee’s pre-reduction salary or on the reduced salary? If an employee is laid off or terminated during the furlough/salary reduction period, severance will be calculated on the employee’s pre-reduction salary. (7/21/09)