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Human Resource Manual

0815 - Deferred Salary Leave Plan

Contents

Introduction

  1. The Deferred Salary Leave Plan (DSLP) provides eligible employees the opportunity to take leave from the Territorial public service and to finance this leave through a deferral of a portion of their bi-weekly salary in the years immediately prior to the leave period.  When the leave period commences, the deferred portion of salary monies are repaid to the employee as an allowance on a bi-weekly basis.  The monies are non-taxable when being deferred but become taxable when paid to the employee.

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Application

  1. These guidelines and procedures apply to all indeterminate employees, except those employed by the NWT Power Corporation and Relief Workers.

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Definitions

  1. Deferral Period is the period of time during which participating employees defer a portion of their salary.

  2. DSLP means the deferred salary leave plan.

  3. Leave Period is the period of time, immediately following the deferral period, during which participating employees are on a leave of absence from work.

  4. Leave Without Pay (LWOP) means leave without pay.

  5. Allowance means the sum of the contributions made to the DSLP during the deferral period.

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Guidelines

  1. Participation in the DSLP is subject to operational requirements.  Deputy Heads must ensure that approved leave does not impair the future operation of their Department, Board, or Agency.  There is no maximum number of Union of Northern Workers (UNW), excluded and senior management employees allowed to enter the plan. 

    Divisional Education Councils determine the number of teachers entering the plan each year with consideration given to operational requirements.

  2. During the leave period, employees may engage in whatever activities they wish, subject to Deputy Head approval under the Code of Conduct, with the exception that during the leave period the employee is ineligible for employment with the Territorial public service.  Employment with the Territorial public service effectively terminates the leave, voids the self-funded leave plan and has income tax implications.  Deferred salary leave plan participants on LWOP must adhere to the Code of Conduct.

  3. Excluded, UNW and senior management employees are eligible to apply at any time and participation (deferral and leave periods) can begin at any time during the year.

  4. Teachers must have a minimum of four years continuous service with the Government of the Northwest Territories (GNWT) before being eligible to apply, and participation (deferral and leave periods) begins only at the start of a school year.

  5. Participating employees agree to defer a portion of their salary for four consecutive years.  The GNWT agrees to grant the employee leave without pay in the fifth year and use the amounts deferred in the previous four years to pay the employee an allowance during the leave period.  The individual plan for each participating employee is a period of six consecutive years consisting of the following:

    1. The first four consecutive years during which the employee draws 80% of salary earned and defers the remaining 20%;
    2. The fifth consecutive year in which the employee takes the LWOP, and is paid an allowance from the amounts deferred above;
    3. The sixth consecutive year in which the employee returns to employment with the GNWT for a minimum of one year. Teachers return to the Divisional Education Council with which they are employed and teach for a minimum of one year.
  6. Excluded, UNW and senior management employees may choose to have a portion of their salary deferred over a period of four and one half years, followed by six months leave.  This plan is a period of five and one half consecutive years consisting of the following:

    1. The first four and one half consecutive years during which the employee draws 90% of salary earned and defers the remaining 10%;
    2. The remaining six months of the fifth consecutive year in which the employee takes the LWOP, and is paid an allowance from the amounts deferred above;
    3. The first six months of the sixth consecutive year in which the employee returns to employment with the GNWT for a minimum of six months.
  7. Depending upon the plan selected, either a 10% or 20% deferral deduction is made from the employee’s gross salary earnings each pay.  This includes all regular time, overtime, retroactive payments and any payouts.  Income tax is based on the net amount after the deferral deduction has been made.

  8. The GNWT will place the deferred deduction portion of an employee's salary into a trust fund as per the following:

    1. The money held in trust will be pooled with other Government funds and the employee will be credited with the average rate of return on those funds.
    2. Investments will be restricted to those eligible under section 57(1) of the Financial Administration Act.
  9. Annual statements of the individual’s account will be provided to each participant in the DSLP for the end of each calendar year.  Statements will be sent out in December.

  10. Any investment income earned on the deferred portion of salary must be paid out each year as taxable income to the participant.  This interest is considered to be income from employment, and is subject to income tax for the year in which it was earned and will be included as employment income on the participant’s T4.  Interest will be paid out on the last cheque of December.

  11. During the deferral period the Employer shall provide employee benefits at a level equivalent to 100% of salary.

  12. During the leave period, a participant’s employment status will be that of LWOP. An employee's deferred salary leave allowance (gross annual salary) will consist of the sum of the contributions made to the DSLP during the deferral period.  The allowance will be provided through the normal GNWT payroll process.  During the leave period no loans, subsidiaries, allowances or salary will be made to the employee, except the money that was deferred on behalf of the participant.

  13. Benefits and premium recoveries for the leave year will be governed by the rules for LWOP. 

Superannuation (pension), Public Service Health Care Plan (PSHCP), Supplementary Death Benefits (SDB), Public Service Management Insurance Plan (PSMIP), Disability Insurance/Long Term Disability (DI/LTD) and dental coverage are still in effect during the leave period.

  1. PSHCP, SDB, DI/LTD, and PSMIP employee share premiums are automatically deducted from the allowance.
  2. Arrangements can be made to have deductions from the allowance for pension (employee and/or employer share), and the employer share of PSHCP and DI/LTD.  Employees should discuss these plans with a Benefits Leave Officer at the Department of Human Resources.
  3. Employees can review the Deferred Salary Leave Plan - General Information and Effects of Leave Without Pay On Employee Benefits and Contributions for more detail.
  4. During the leave period income tax will be deducted in accordance with the provisions of the Income Tax Act and its regulations.
  5. No annual leave, sick leave or special leave will be credited while employees are on the leave period.  The leave period will not be counted toward the requirements for service to achieve additional annual leave and will not be recognized for severance pay purposes.  The leave period, however, will not be considered a break in service.
  6. The salary review date of a UNW or excluded employee who has been on a leave of absence without pay in excess of six continuous months shall be moved to a date which provides for a total of twelve months of paid employment between anniversary dates.
  7. In the case of returning senior managers, they will not be entitled to a merit increase based on the period of leave.
  8. In the case of teachers, any absence greater than 25 days, with or without pay, will change their experience increment.  Sessional days will be counted from the last increment (excluding leave period) and must total 195 days to receive the next increment. 
  9. A one-time deferral of the planned leave is permitted and may be requested by the employee or by the GNWT in writing six months prior to the leave period commencing and will not be unreasonably refused by the other party where:
    1. operational requirements would not be met if the employee proceeded on leave;
    2. exceptional changes in personal circumstances make the leave unfeasible; or
    3. totally unforeseen or unanticipated circumstances or events have occurred which warrant postponement.
  10. The Employer will give the employee the choice of:
    1. withdrawing from the plan and taking a refund of the total in the deferred salary account; or
    2. postponing the leave period into the sixth consecutive year.
  11. Any postponement will not move the commencement of the leave beyond six years from the date of enrolment in the plan.  Income Tax Regulations state that a leave period must be of a minimum six months and maximum twelve months duration and must be completed by December 31 of the seventh year of enrolment in the Plan.  Otherwise, the balance of the investment will be paid out on that date and will require to be accounted for as income by the employee.
  12. The Employer will cancel participation in the DSLP and will refund, within 60 days, the total of the deferred salary plus interest from the plan, if:
    1. the employee dies;
    2. the employee has been dismissed; or
    3. the employee has resigned from the public service of the
      Northwest Territories.
  13. Upon withdrawal from the deferred salary leave plan, whether by resignation, death, dismissal or request, all monies deferred and the applicable accrued interest in the account will be refunded to the employee (or employee’s estate) within 60 days of the notification of withdrawal.  Withdrawal from the program may substantially affect an employee's personal tax status in the year in which the deferred salary leave funds are receive and entail a considerable tax burden for the employee.
  14. The GNWT shall be in no way responsible for any liability including any charges, costs or unforeseen expenses that an employee may incur as a result of participation in the deferred salary leave plan.
  15. An employee who withdraws from the deferred salary leave plan is required to wait a minimum of 12 months before applying again.
  16. An employee who completed participation in the deferred salary leave plan is eligible to reapply for deferred salary leave upon return to work.  When operational circumstances permit, such leave may be approved on more than one occasion.
  17. Income Tax Regulations require that at the end of the leave period employees return to the Employer under whom they participated in the DSLP for at least the same amount of time as the leave period.  As such, the DSLP cannot serve as an early retirement program.

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Procedures

  1. Employees must make written application to their Deputy Head at least 10 weeks prior to the start date of the deferral period or in the case of teachers the application must be made by January 15th to enter the plan in the upcoming school year.  Employees complete one of the following:

    1. Deferred salary leave agreement – one year (UNW, excluded and senior management employees);
    2. Deferred salary leave agreement – teachers; or
    3. Deferred salary leave agreement – six months (UNW, excluded and senior management employees).
  2. The Deputy Head will review the application and the requirements of the Department, Board, Council or Agency and notify the employee’s manager/principal and the Department of Human Resources at least six weeks prior to the start of salary deferral period.

  3. The Department of Human Resources initiates the salary deduction pay action, updates the employee's record and processes the information for payment.

  4. Upon return from leave, the Deputy Head will, wherever possible, place the employee in either their former position or an agreed upon equivalent position.  If an employee’s position is deleted while the employee is on deferred salary leave, the Staff Retention Policy will apply.

  5. After completion of the leave period, employees are required to return to their regular work with the Department, Board, Council or Agency for a period equivalent to the period of leave.  If the employee fails to complete the return to service commitment, they will repay all Employer contributions made on their behalf during their leave period.

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Authorities and References

Main Collective Agreement with the UNW

Article 24.10, Application of Salary Review Date

Article 49, Deferred Salary Leave Plan

Excluded Employees’ Handbook

Leave – Self-Funded Leave Plan

Senior Managers' Handbook

Leave – Self-Funded Leave Plan

Memorandum Of Understanding

Between the GNWT and the NWTTA

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