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Furlough Salary Reduction (help with math)

Posted: Thu Apr 04, 2013 3:49 pm
by Rupert
I work for a quasi-government firm affected by sequestration. My colleagues and I have been told that we will be furloughed 12 days between April 1 and September 30. We've been instructed to take one furlough day per pay period during that time. We're paid twice a month, on the 15th day and last day of each month. We're all salaried employees. Our gross pay each pay period is determined by dividing each employee's annual salary by 24, not by the number of days in each pay period (which varies from 10 to 12 days). Assuming, for simplicity's sake, that I make exactly $100,000 per year, how much should my gross salary be reduced each pay period to account for the furlough days?

Re: Furlough Salary Reduction (help with math)

Posted: Thu Apr 04, 2013 4:08 pm
by mhc
You should ask you employer to see how they are going to handle this. Otherwise, it is just a guess. Here is my guess:

(365*(5/7)/24-1)/(365*(5/7)/24)=90.8% of pay or 9.2% reduction

Re: Furlough Salary Reduction (help with math)

Posted: Thu Apr 04, 2013 4:17 pm
by Random Poster
I'm not good at math, but I'll offer my suggested answer anyway:

$192.31*

To get there, I took 260 (being the number of workdays in a year [5 work days per week x 52 weeks]) and divided it into $100K (being the gross salary), which gave me $384.615 (being the amount you are paid for each workday). I then took $384.615 times 12 (being the number of furloughed days), which gives me $4,615.384. I then took that amount and divided it by 24 (being the number of pay periods in a year), which gives me $192.307.

* On reflection, I realize that my $192.31 assumes that the furlough pay cut is taken out of all paychecks in the entire year. Seeing as how you have (likely) already been paid for some portion of the year, I now revise my answer to be:

$256.41.

Same process as before, but I took the $4,615.384 amount and divided it by 18 (being the number of paychecks remaining in this year).

If the furlough pay cut is only to be charged to, and reflected in, those paychecks during the furloughed time period, the math would be different (giving you an answer of roughly $384.62 [being $4,615.384 divided by 12, which is the number of paychecks from April to September]).

Again, however, I'm bad at math, so this is more of just a guess than anything.

What does your HR department say (if anything)?

Re: Furlough Salary Reduction (help with math)

Posted: Thu Apr 04, 2013 5:40 pm
by Bill M
MegaCorp that I work for figures I work 2112 hours/yr, and uses that to convert annual salary to hourly rate. So for your $100K, that converts to $47.35/hr. One day (8 hrs) is $378.80. (And, I have no idea how 2112 is calculated).

Re: Furlough Salary Reduction (help with math)

Posted: Thu Apr 04, 2013 6:16 pm
by Marfer
If I read the question that was asked, we're looking simply for the amount that his gross pay will be reduced in each paycheck during the 6-months affected by the furlough policy:

One Day's salary = 100,000/260 [total annual work days] = $384.62 daily salary. That is the one-day furlough "penalty". Random Poster got it.

Taking this a step further:
Gross Income per pay period = 100,000 / 24 = $4166.67. Therefore, the reduced gross income per pay period will be $3782.05 after deducting the furlough day.

;-)

Re: Furlough Salary Reduction (help with math)

Posted: Thu Apr 04, 2013 7:08 pm
by MariaT
Standard work week at my company is 40 hrs/week for salaried employee for a total of 2080 hrs per annum. For a salary of $100K per hour rate = $48.076 ($100k/2080).
Standard 8 hour work day = $384.608

Let's say your company mimics my place of work then your expected gross payroll deduction per pay cycle will be $384.608 starting on your April 15 paycheck and ending on last paycheck in September.

Hope this helps.

All the best,
Maria

Re: Furlough Salary Reduction (help with math)

Posted: Fri Apr 05, 2013 9:03 am
by Rupert
Thanks guys. My "HR Department" consists of one lady who has no idea what the answer is. She said she'll let our payroll processor figure it out. But the payroll company has made mistakes on my paycheck in the past so I always check their math. They're supposed to run a dummy payroll for us before the checks are actually printed this pay period so we can do that.

Re: Furlough Salary Reduction (help with math)

Posted: Fri Apr 05, 2013 12:19 pm
by rocket
Salary reduction goal is to reduce cost by 20%, so I think HR would chose a method which will result in a 20% reduction.

Furlough plan is to go from 5 workdays a week to 4 workdays week. You will earn 4/5 as much after furlough. In other words, 20% temporary reduction in pay. Also, every weekend is a 3 day weekend, YEA !!

Re: Furlough Salary Reduction (help with math)

Posted: Fri Apr 05, 2013 12:27 pm
by jjg247
The govt frequently uses 2087 as the # of work hours in a year. There is a chart on OPM that depicts that exact # for any given year. I believe leap year may have something to do with the fluctuation, but don't quote me on that.

Edit: https://www.opm.gov/policy-data-oversight/pay-leave/pay-administration/fact-sheets/computing-hourly-rates-of-pay-using-the-2087-hour-divisor/

Re: Furlough Salary Reduction (help with math)

Posted: Fri Apr 05, 2013 12:33 pm
by TravelforFun
MariaT wrote:Standard work week at my company is 40 hrs/week for salaried employee for a total of 2080 hrs per annum. For a salary of $100K per hour rate = $48.076 ($100k/2080).

This is true if he works 2,080 hours a year but he doesn't. You have to subtract out the holidays and thus his hourly rate is much higher than $48.07.

Re: Furlough Salary Reduction (help with math)

Posted: Fri Apr 05, 2013 3:51 pm
by MariaT
This is true if he works 2,080 hours a year but he doesn't. You have to subtract out the holidays and thus his hourly rate is much higher than $48.07.


I don't think it works that way. As a salaried (exempt) employee you have a based or fix wage amount and set standard work hours per week - commonly used is 40 hrs/week. It does not matter if one is paid weekly, bi-weekly, semi-monthly or monthly. Some people work more than 40 hrs or even 80 or more per week. Some even less than 40 but the gross pay and hourly rate do not change. Most pay stubs show hourly rate and standard hours. Holidays are part of the package as a salaried employee. You get paid for not working the hours on those days. Vacations are accrued (earned) and different companies have varying policies on how they calculate vacation accrual. Some firms calculate earned vacation after six month or less and some after 12 months of employment. There are also generous companies out there that start accruing your vacation hours on your first day of work but you have to find them, I guess.

All the best,
Maria

Re: Furlough Salary Reduction (help with math)

Posted: Fri Apr 05, 2013 9:07 pm
by grabiner
jjg247 wrote:The govt frequently uses 2087 as the # of work hours in a year. There is a chart on OPM that depicts that exact # for any given year. I believe leap year may have something to do with the fluctuation, but don't quote me on that.


An average year has 365-97/400 days=52-71/400 weeks, and there are 40 hours in a workweek, which gives 2087.1 as the average number of payable hours in a year. (These are not all work hours; they include holidays and paid leave.)

The way the government handles pay for salaried employees is to divide salary by 2087 (ignoring that tenth), and then convert the salary to the number of payable hours in a two-week pay period (80 for full-time employees, and a lower fixed number for part-time employees). Some years have 26 pay periods, and some have 27; in a year with 26, a government employee with a designated salary of $20,870 will receive $20,800 in base salary.

Re: Furlough Salary Reduction (help with math)

Posted: Thu Apr 11, 2013 2:59 pm
by Rupert
Update: Just got my first furlough paycheck. mhc got it right: it was a 9.2% reduction in gross pay.

Re: Furlough Salary Reduction (help with math)

Posted: Fri Apr 12, 2013 9:28 am
by mhc
Rupert wrote:Update: Just got my first furlough paycheck. mhc got it right: it was a 9.2% reduction in gross pay.


Thank you for the update. I hope you are enjoying your one day off per pay period.