Payout of Vacation and Banked Leave at Termination of Employment

Effective January 1, 2018

Introduction

This document serves to establish the administration of payout of vacation, vacation carryover, and an employee’s “Banked Leave” upon movement, retirement, or termination of employment at the University of Wisconsin Milwaukee. “Banked Leave” is defined as vacation leave that is banked pursuant to UW System Operational Policy BN1 (formerly called Annual Leave Reserve Account (“ALRA”) leave for unclassified staff and classified sabbatical for university staff employees).

Banked Leave Pools

In accordance with UW System Operational Policy BN1, Faculty, Academic Staff, and University Staff who retire or terminate employment are eligible to receive a lump sum payment for any remaining vacation and/or Banked Leave hours accrued under that policy. UW System Operational Policy BN1 also provides that, if the termination of employment is not the result of layoff or dismissal for cause, it is in the institution’s discretion to allow employees to extend their termination date beyond the last day worked by utilizing vacation and/or Banked Leave hours.

As of July 1, 2016, UW System required institutions to collect a charge, based on payroll and at the cost of employing departments, to create an institution-wide pool to pay for lump-sum payouts of Banked Leave. This left departments in the position of determining whether to require employees to take Banked Leave via lump-sum that is paid centrally, or to allow employees to use Banked Leave to extend employment, at the cost of the employing unit. In light of this new required pool to fund Banked Leave payouts, this policy limits the use of accrued leave to extend employment beyond the last day worked, as described below, to mitigate the additional costs to units. It also defines when Banked Leave may be transferred to or from a UWM employing unit.

Hire from another UW institution or State of Wisconsin agency

For employees hired by UW-Milwaukee from another UW institution or State of Wisconsin agency, any vacation earned to date during the current calendar or fiscal year shall transfer to the new leave-eligible appointment. All carryover vacation and/or Banked Leave hours must be paid out by the prior employer. UW-Milwaukee will not accept carryover vacation and/or Banked Leave liability for employees transferring from another UW institution or State of Wisconsin agency.

Movement Within UWM

If a UW-Milwaukee employee moves from one leave-eligible position to another leave-eligible position within UW-Milwaukee, the employee will retain all accrued vacation, vacation carryover, and/or Banked Leave hours. If an employee moves to an appointment that is not eligible to earn vacation, the balance of accrued vacation and vacation carryover will be paid out by the last employing department. The balance of Banked Leave hours will be paid out at the conclusion of the vacation-earning appointment by UW-Milwaukee, using the Banked Leave pool, as described further below.

Hire of UWM employee by another UW institution or State of Wisconsin agency

If a UW-Milwaukee employee moves to another UW institution or another State of Wisconsin agency, any unused vacation accrued during the current calendar or fiscal year will transfer to the new leave-eligible appointment. The new employer will determine if it chooses to accept vacation carryover and/or Banked Leave hour balances for the new employee pursuant to its own policies, which would mean that, if accepted, the new employer will be responsible to pay those leave hours without reimbursement from UW-Milwaukee. UW-Milwaukee will not transfer funds to another institution to pay for any transfer of accrued leave. Any unused vacation carryover and/or Banked Leave hours not accepted by the new employer, as of the date the employee’s last date of employment at UW-Milwaukee, will be paid by UW-Milwaukee as a lump sum on the employee’s final paycheck.

Resignation or Retirement (without transfer to another UW institution or State of Wisconsin agency)

Any employee who resigns from UW-Milwaukee without retiring (“retire” means to activate one’s retirement annuity with Wisconsin Employee Trust Funds), or whose employment ends as result of termination for cause or layoff regardless of whether retirement is activated, will be required to take a lump sum payout of accrued vacation and Banked Leave at the conclusion of the last date worked at UWM.

Any employee who retires from UW-Milwaukee for reasons other than termination for cause or layoff (an “eligible employee”) will be permitted to take either a lump sum payout of accrued vacation and Banked Leave or the employee may use some or all accrued vacation and Banked Leave to extend his or her termination date beyond the last day actually worked at UW-Milwaukee as follows:

  1. Eligible employees who were employed at UWM on January 1, 2018, and had more than 800 hours of Banked Leave on January 1, 2018, may use accrued vacation and Banked Leave to extend employment for up to 26 weeks after the last date actually worked or December 31, 2018, whichever date is later. Any remaining accrued vacation or Banked Leave remaining will be paid out in a lump sum.
  2. Eligible employees who were employed at UWM on January 1, 2018, and had 480 to 800 hours of Banked Leave on January 1, 2018, may use accrued vacation and Banked Leave to extend employment for up to 20 weeks. Any remaining accrued vacation or Banked Leave will be paid out as a lump sum.
  3. All other eligible individuals may use accrued vacation and/or Banked Leave to extend employment for up to 12 weeks. Any remaining accrued vacation or Banked Leave will be paid out as a lump sum.

An employee who elects to extend employment by using accrued vacation or Banked Leave as described above will be required to first utilize accrued vacation or vacation carryover, and then Banked Leave hours (ALRA or classified sabbatical). Any leave that is not taken to extend employment will be paid out via lump sum. Per UW System BN 1, institutions may decline to allow an employee to use leave to extend employment. UWM has determined that employees should generally be allowed to use leave to extend employment subject to the rules and limits outlined above. Should an employing unit determine that allowing use of leave to extend employment as outlined in this policy is not feasible, such as due to budgetary constraints or lack of continued salary funding for the position, that unit’s Dean or Division Head shall consult with the Vice Chancellor for Finance & Administrative Affairs for review of the circumstances and approval prior to denying use of the leave to extend employment. Prior to approving or denying the request, the Vice Chancellor for Finance & Administrative Affairs will discuss any request from academic units with the Provost.

Employees may have options for mitigating the tax consequences of a lump-sum payout, such as cashing out banked leave in the years prior to retirement (available on a limited basis for certain university staff), using lump-sum payouts to contribute to a retirement annuity, or retiring earlier in a calendar year before a full year’s worth of salary is earned in order to avoid exceeding a certain income level. Employees should consult with UWM Benefits staff regarding these options and with their own tax advisors as to individual tax consequences.

The institution-wide pool will be used to pay for the cost of Banked Leave that is taken by lump sum. The cost of paying out Banked Leave taken by extended employment, as well as vacation and vacation carryforward (regardless of whether paid via lump sum or extended employment), will be the responsibility of the employing unit.

Per UW System Operational Policy BN1, to be eligible for a lump sum payment of vacation and/or Banked Leave at termination, the employee must be expected to remain terminated from all UW System leave-eligible employment for at least 30 days.

The formula for lump sum payouts is established by UW System Administrative Policy 230.

As stated above, this policy is effective on January 1, 2018. There shall be no exceptions to any provision in this document except by written approval of the Chancellor.