On Sept. 1, school and department administrators will begin to see an accrual rate applied to regular staff salaries to build funds with which to pay employee vacation salary and for sick leave used to supplement disability pay. The change is an accounting practice only and does not affect the accrual of individual employee vacation or sick leave hours.
Under the change, vacation costs will be charged to department accounts as they are earned -- rather than as employees take vacation or when employees leave or retire. The new accounting practice makes it possible to match costs of vacation pay to the department accounts in which they were earned. The vacation accrual charge will be displayed as a cost on the expenditure statement where the employee's salary is charged. The account will receive a credit when employees take vacation.
Although applying an accrual rate to staff salaries initially may appear to be an added cost to departments and projects, it is actually just a different method of recording real costs, said Nancy Walsworth, a cost and management analyst in the Office of Research Administration. Under the new system, departments and projects will fund the cost of employee benefits in the same fiscal year in which the benefits are earned, she said.
The accrual rate is pending approval by the Office of Naval Research, which negotiates fringe benefit rates on behalf of government sponsors of federal research conducted at Stanford, and is in addition to the fringe benefits rate charged to departments and schools. (See Vantage Point, page 12.)
The new accounting practice will be automatically implemented through an interface linking Kronos and the Oracle Financials system, which is scheduled to launch Sept. 1. Managers should ensure that staff members accurately track vacation in Kronos, since credit for employee leave requires that vacation and sick leave be recorded through Kronos. Since exempt and nonexempt/bargaining unit employees earn different amounts of vacation, there will be a separate rate for each group.
A small proportion of the new accrual rate will pay for disability sick leave. When employees are on some form of disability (short-term, long-term or workers' compensation), they frequently use sick leave to supplement their disability payments, up to the level of their normal salary. This Disability Sick Leave (DSL) rate will pay for those supplements. The account will receive a credit to offset the sick leave charged when an employee on disability is receiving supplemental sick leave pay. The incremental DSL rate will be the same for exempt and nonexempt/bargaining unit employees.
As employees leave or retire, their payout for vacation earned after Sept. 1, 2003, will be paid from a central vacation accrual fund. Vacation earned prior to Sept. 1, 2003, will remain the responsibility of the operating unit.
Stanford Report, August 6, 2003