Layoff Resources- Guidelines for Employees

Topics Introduction/Overview Unemployment Insurance
Definition of Terms Transition Support Services
  Employee Rights FAQs: Preferential Rehire
  Benefits FAQs: Severance Pay
  Employee Assistance Program Resources

Topic- Frequently Asked Questions: Severance Pay

Questions:

  1. How is layoff seniority calculated?

  2. How are years of service calculated for the severance payment?

  3. How is the amount of severance calculated?

  4. How is service credit calculated when an employee’s appointment percentage varied throughout his or her career?

  5. How is severance calculated when an employee’s time is reduced indefinitely?

  6. Who is responsible for calculating the number of weeks of severance to be paid to an employee?

  7. When is the severance payment due to the employee?

  8. Are severance payments considered wages?

  9. When must the employee choose severance?

  10. What happens if a laid off employee does not make an election of either severance or the right to recall and preference for reemployment?

  11. Will a break in service occur if an employee elects severance rather than the right to recall and preference for reemployment?

  12. How is an employee’s service credit affected if he or she elects severance pay?

  13. Can an employee who receives severance and is rehired by the University buy back his or her service credit?

  14. Can a laid off employee who receives severance elect to retire?

  15. Can a laid off employee retire and also be entitled to the right to recall and preference for reemployment?

  16. If an employee applies for and is selected for another position with UC or another employer before the effective date of the layoff, will they receive severance pay?

  17. Does severance repayment apply to all rehires?

  18. Can a laid-off employee be rehired without first repaying the severance or signing a severance repayment agreement?

  19. Who determines whether a laid-off employee must repay severance?

  20. How is the severance repaid?

  21. How long does the employee have to pay back the severance?

  22. Who receives the severance that is paid back?

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Questions with Answers:

  1. How is layoff seniority calculated? [Top of Page]

    • The seniority calculation for employees not covered by a collective bargaining agreement is based on the number of straight-time hours on pay status, since the most recent break in service, up to a maximum of 40 hours per week.  Premium overtime does not count towards the calculation of seniority; extended sick leave and military leave are counted.

    • The calculation for employees covered by a collective bargaining agreement varies; therefore please refer to the appropriate Contract Articles for more information.

  2. How are years of service calculated for the severance payment? [Top of Page]

    • Each hour on pay status (up to 40 hours a week) without a break in service is counted.  Time on pay status prior to a break in service is not counted.

    • Service credit for purposes of calculating severance pay is calculated in full-time-equivalent years.  To calculate service credit, total the employee’s number of hours on pay status and divide by 2088 (the number of full-time working hours per year), then round down to whole years.  For example, an employee who has 30,935 hours on pay status will have 14.8 full years of service (30,935 hours divided by 2088 hours = 14.8 FTE years of service), so would receive 14 weeks of severance.

  3. How is the amount of severance calculated? [Top of Page]

    • Policy-covered employees shall be paid a lump sum amount of one week (five (5) workdays, based on 8 hour days) of salary for each full year of service from the most recent break in service, up to a maximum of sixteen (16) weeks of severance pay.

    • The calculation for employees covered by a collective bargaining agreement varies; therefore please refer to the appropriate Contract Articles for more information.

  4. How is service credit calculated when an employee’s appointment percentage varied throughout his or her career? [Top of Page]

    • Service credit would be calculated by reviewing pay records for the total number of hours on pay status (excluding overtime) and calculating as shown above.

  5. How is severance calculated when an employee’s time is reduced indefinitely? [Top of Page]

    • Policy-covered employees shall receive severance pay based upon the percentage of time reduced.  For example, an employee with a 100% appointment who was reduced to an 80% appointment would receive a severance payment equal to 20% of his or her weekly base salary multiplied by the number of weeks that represent his or her years of service.

    • The calculation for employees covered by a collective bargaining agreement varies; therefore please refer to the appropriate Contract Articles for more information.

  6. Who is responsible for calculating the number of weeks of severance to be paid to an employee? [Top of Page]

  7. When is the severance payment due to the employee? [Top of Page]

    • Severance is paid on the employee’s last day, or if the severance election is not known on the last day, within 72 hours of the employee’s election.

  8. Are severance payments considered wages? [Top of Page]

    • Yes, severance payments are considered wages and are taxed accordingly.  However, for unemployment insurance purposes, severance payments are not considered wages since they are provided by the University for termination assistance and as a supplement to unemployment insurance.  Thus, a laid off employee who receives severance may file a claim for unemployment insurance benefits.

  9. When must the employee choose severance? [Top of Page]

    • For policy-covered employees, severance pay is provided unless the employee elects in writing, recall and preferential rehire rights within fourteen (14) calendar days of receiving notice of layoff.

    • For exclusively-represented employees, recall and preferential rehire rights are provided unless the employee elects in writing, severance pay within fourteen (14) calendar days of receiving a notice of layoff.

  10. What happens if a laid off employee does not make an election of either severance or the right to recall and preference for reemployment? [Top of Page]

    • For policy-covered employees, the default option will be severance pay.

    • For exclusively-represented employees. the default option will be the right to recall and preference for reemployment.

  11. Will a break in service occur if an employee elects severance rather than the right to recall and preference for reemployment? [Top of Page]

    • Yes, an employee who elects severance will have a break in service when laid off because the employee is considered to have separated from the University.  If the employee is rehired, a break in service has still occurred, regardless of the time period within which the rehire occurs.

    • In contrast, an employee who elects the right to recall and preference for reemployment retains continuity of service if reemployment occurs within the employee’s period of right to recall and preferential reemployment.  However, service credit and seniority accrue only when the employee is on pay status.

    • In addition, when rehired the employee does not have to serve a new probationary period, maintains vacation accruals at the same rate at the time of layoff, and maintains membership in UCRP (UC Retirement Program).

  12. How is an employee’s service credit affected if he or she elects severance in lieu of the right to recall and preference for reemployment? [Top of Page]

    • Service credit will continue to accrue up to the employee’s last day on pay status. As mentioned above, service credit, seniority and benefits only accrue when the employee is on pay status. 

  13. Can an employee who receives severance and is rehired by the University buy back his or her service credit? [Top of Page]

    • No, according to UC Retirement Plan (UCRP) buyback provisions, an employee is not eligible to buy back his or her service credit in this situation.

  14. Can a laid off employee who receives severance elect to retire? [Top of Page]

    • Yes. The employee can elect to retire, if eligible.  However, the employee must retire within 120 days of the separation date in order to retain full annuitant health coverage, if otherwise eligible.

  15. Can a laid off employee retire and also be entitled to the right to recall and preference for reemployment? [Top of Page]

    • Yes, subject to UCRP guidelines for reemployment.

  16. If an employee applies for and is selected for another position with UC or another employer before the effective date of the layoff, will they receive severance pay? [Top of Page]

    • No, if the employee elects severance pay, but resigns prior to his or her layoff date, they will not receive severance pay.

  17. Does severance repayment apply to all rehires? [Top of Page]

    • For policy-covered employees, severance repayment is required when the employee has accepted a career position at the same or higher salary and at the same percentage of time during the number of weeks for which the employee received severance pay.

    • The severance repayment criterion varies for employees covered by a collective bargaining agreement, therefore please refer to the appropriate Contract Articles for more information.

  18. Can a laid-off employee be rehired without first repaying the severance or signing a severance repayment agreement? [Top of Page]

    • No.  If a laid-off employee is to be rehired within the period of time equal to the number of weeks of severance pay, the former employee cannot be rehired without first repaying the severance or signing a severance repayment agreement.

  19. Who determines whether a laid-off employee must repay severance? [Top of Page]

    • The Staff HR Employment office determines the need for severance repayment. After receiving the selection documentation from the hiring unit, the Employment office reviews the severance pay report to see if the selected candidate received severance and is still within the pay-back period.

  20. How is the severance repaid? [Top of Page]

    • At the time of the formal job offer, the Employment Office notifies the selected candidate and the ELR Analyst of the repayment obligation.  The ELR Analyst then liaisons with the selected candidate and the Payroll Office to insure that either the remaining severance is repaid, a repayment agreement is signed, or the starting date is adjusted.

    • Once the ELR Analyst notifies the Employment Office that the repayment obligation has been met or that the starting date will fall outside of the repayment period, the Employment office proceeds with the rehire process and schedules the employment sign-up date.

  21. How long does the employee have to pay back the severance? [Top of Page]

    • The schedule to repay the severance is at the discretion of the Payroll Office.

  22. Who receives the severance that is paid back?

    • The severance repayment is credited by the Payroll Office to the department that initiated the layoff action.

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Revised October 2012: C.27