401.0 Compensated Absences
The following policy provides for the uniform and consistent accounting and reporting of compensated absences liability. The policy also serves as a reference for answering questions.
Compensated absences liability refers to the amount PSU owes its employees for leave balances (e.g., accrued vacation) as of the date of the financial statements. The liability is an estimate based, for each employee, on the leave balances applicable to compensated absences liability, multiplied by the employee's salary rate and an estimated percentage for other payroll expenses (OPE).
The liability includes amounts to be paid in paid time off or some other means, such as cash payment at termination. The typical type of compensated absences liability is "accrued vacation." See Clarifications, below, for what is and what is not included in the term "compensated absences liability."
VACATION LEAVE: Vacation leave balances are included in compensated absences liability because (1) the employee's right to receive compensation is attributable to services already rendered, and (2) it is probable that the employer will compensate the employee for the benefits either through paid time off or cash payment. Vacation leave balances are the primary component of compensated absences liability.
Vacation leave balances are subject to a maximum cap. In addition, for some employee classes, payments of vacation leave balance at the time of termination is subject to a lower cap. Vacation leave balances beyond the termination cap up to the maximum cap ARE included in compensated absences liability because it is probable that the employee will take the additional hours through paid time off before termination.
TRIAL SERVICE: Vacation leave balances of employees in trial service ARE included in compensated absences liability because it is probable that trial service employees will meet the conditions for compensation in the future.
MISCELLANEOUS OTHER LEAVE: Some forms of miscellaneous other leave meet the criteria of compensated absences liability. Examples include balances of comp time and shore leave.
BENEFITS THAT WILL LAPSE: Benefits earned but expected to lapse and thus not result in compensation to employees are NOT accrued as compensated absences liability.
SICK LEAVE: Sick leave balances represent possible future compensated absences but are NOT considered a compensated absences liability. Although sick leave is earned and attributable to services already rendered, it is also contingent on a specific event (e.g., illness) that is considered outside the control of the employer and employee. In addition, policy is that payment at termination or retirement does not include payment of accrued sick leave.
PERSONAL LEAVE: Personal leave hours are NOT considered a compensated absences liability because they must be used before the end of the fiscal year and are not carried forward into the following fiscal year.
MILITARY AND JURY LEAVE: Military leave and jury leave are NOT considered a compensated absences liability because they are not earned on past service and are contingent on a specific event that is outside the control of the employer and employee.
SABBATICAL: Sabbatical is NOT considered a compensated absences liability because (1) sabbatical leave is considered a change in assigned duties, and (2) the salary paid during the leave is compensation for service during the period of leave.