Proper Allocation of Vacation Expenses
Since July 1, 2004, the University Corporation is accruing vacation liabilities for project staff and charging them towards projects. Vacation accruals are automatically calculated and booked at each pay period. This new procedure ensures the precise allocation of project related personnel expenses for vacation towards projects.
An employee working on a project is proportionally also earning the right for vacation time. The liability resulting from the "right to vacation time" is immediately charged to the project at the end of each pay period (bi-weekly) and collected in a liability account.
At the time the employee actually takes the vacation, the project is no longer affected, but the liability account is charged.
Vacation Accruals are not Fringe Benefits
Vacation accruals are not included in the Fringe Benefit Rate. The Fringe Benefit Rate includes only additional costs for insurances such as health insurance, dental insurance, vision, workers comp. retirement insurance, the employer portion of state (SDI) and Federal (FICA) taxes, etc.
Vacation on the other hand is considered paid time off, such as holidays, personal day, or sick days. The regular salary will continue to be paid to the employee, although he/she is not expected to be present at work, but can be on vacation.
Warning: Potential Effect on Project Budget!
The employee must still take the vacation during the project period to avoid cost overruns. This is particulary the case for full-time employees. If an employee is not taking vacation during the course of the project and continues on working, the employee is actually working "over-time" for exactly the time he/she is entitled to vacation.
Example:
An employee is entitled to 2 weeks of vacation per yer. Consequently, the employee should work 50 weeks and go on vacation for 2 weeks. As a result, 52 weeks will be charged to the project. If the employee does not take the vacation and continues working through the entire year, the employee is actually working 52 weeks and still has a vacation accrual of 2 weeks. As a result 54 weeks will be charged to the project.