During the enrolment period, an employee receives and is taxed upon the elected percentage of his/her current salary. While on leave the employee receives and is taxed upon the deferred amount plus accrued interest paid out.
During the enrolment period, interest credited on deferred amounts is reported for tax purposes each December 31.
Performance Pay – non union employees
There are two kinds of pay increase:
Across the Board Increase (ABI) A pay increase based primarily on cost of living allowance, subject to Council’s approval. The ABI is applied as an across-the-board increase to the salary ranges and the employee’s salary, provided the employee received a performance level of “met objectives” or “developmental”.
Performance Pay A pay increase that is determined by the employee’s performance level, i.e. 1% (developmental), 2.5% (met objectives), or 4.5% (exceeds expectations). This increase is added to the employee’s current salary up to the maximum salary of the range.
The employee receives no ABI or performance pay increase while on earned deferred leave. When the employee returns, he/she receives a prorated performance pay increase for the time worked prior to his/her earned deferred leave. Payroll adjusts the employee’s pay to reflect any missed ABI increase(s), effective on the employee’s return date.
The employee and manager set objectives on January 1, 2016.
The employee starts an earned deferred leave on April 1, 2016 and returns on April 1, 2017.
A closing review meeting is held with the manager before the employee begins the leave.
The performance pay increase, based on performance is prorated for three (3) months (January 1 to March 31, 2016) The prorated performance pay and full ABI are applied to the employee’s base salary upon the employee’s return from his/her earned deferred leave. The manager completes the Pay for Performance Form and sends it to Payroll for processing upon the employee’s return.
The employee returns from leave on April 1, 2017, and sets objectives with the manager for nine months (April to December). A review is held in the first quarter of 2018 and any performance pay increase is prorated for nine (9) months. The full ABI is applied from January 1, 2018.
The employee receives his/her usual benefits during the enrolment period of the plan and the leave period. Most employee benefits are not related to level of income. There are some exceptions:
- Group Life Insurance
- Long Term Disability
Contributions and premiums for these programs during the enrolment period will be based upon full (100%) salary. During the leave period benefits related to salary shall be at the salary level (100%) at the time the leave started.
During the leave period an employee may elect to maintain any optional life insurance coverage that he/she has and pay the appropriate premiums. If the employee declines to maintain this coverage, upon return from the leave it may be necessary to provide proof of insurability to re-instate optional coverage.
Under the OMERS Plan, the leave period is considered broken service. When the employee returns from leave if he/she wishes to buy back pension service he/she must pay both the employee and the employer's contribution to the pension plan, for the period of the leave. If the employee elects to purchase this period of broken service, the city will make a one-time lump sum payment equal to the employer's contribution to the employee. This lump sum is a taxable benefit.
The Income Tax Act restricts the number of broken service periods for which an employee can purchase pension credit to a lifetime maximum of 5 years plus up to an additional 2 years for periods of parental leave.
- Employees do not earn vacation while on leave.
- Any vacation that is owing to employees when they begin the leave will be available to them when they return from leave.
- The period of the leave counts towards service requirements for calculating increases in vacation entitlements.
For example: On January 1st 2002 an employee begins his 7th year of employment and has 15 days entitlement in his vacation bank when he goes on leave on January 1st 2002. He takes 6 months leave. He still has 15 days entitlement when he returns to work on July 2nd 2002. However, in 2002 he works for 6 months only and therefore earns 7.5 days of vacation, which is made available to him on January 1st 2003. On January 1st 2004, in the employee's 9th year he is entitled to 20 days of vacation.
Canada Pension and Employment Insurance
Employment Insurance premiums are deducted during the enrolment period on the full salary. During the leave an employee does not contribute to employment insurance and the leave period is not counted as insurable employment. If this is of concern to an employee he/she should check the implications of his/her particular situation by contacting the local Employment Insurance Commission office. Canada Pension Plan deductions are calculated on the reduced salary during the enrolment period and during the leave CPP is calculated on the deferred amount.
No sick pay is accrued during the leave. Any sick credits owing to employees when they begin the leave will be available to them when they return from leave.