Universal Payroll Deduction Method Employers must use the universal payroll deduction method to calculate required contributions and contributory service weeks for all HOOPP members.
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The six-step universal payroll deduction method calculates contributions based on a member’s annualized earnings, and then prorates contributions to reflect the hours worked during the payroll period in question. When calculating contributory service, the figure should be rounded to two decimal places to avoid distorting a member’s annualized earnings and related pension.
Examples
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The following examples demonstrate how employee required contributions are calculated using the universal payroll deduction method for regular pensionable earnings. As noted above, contributions for pensionable bonuses are treated the same as retroactive pay, discussed in section 4.5 Retroactive Pay (Retro) (Click Here).
Example 1: Full-time Member Paid Bi-weekly
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This example is for a full-time employee who is paid bi-weekly however, the calculation method can be used for any HOOPP member, regardless of hours worked or salary received, and any payroll frequency.
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Step 6: Calculate contributory service
A member's earnings per pay and annualized earnings are used to calculate contributory service.
The figure is calculated by converting pay into weeks and rounding off the figure to two decimals.
Contributory service = [earnings per pay × 52 weeks in a year] ÷ annualized earnings = [$2,400 × 52 weeks] ÷ $62,400 = 2 weeks
In this example, the member worked full-time during the two-week pay period, therefore, the contributory service credit is two weeks.
Example 2: Part-time Member Paid Bi-weekly
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The member in this example works part-time, is paid bi-weekly, and works a total of 15 hours each week. The member's current hourly rate of pay is $33. The normal full-time work week or full-time equivalent (FTE) for the member's job is 37.5 hours per week or 1,950 hours per year. HOOPP annualizes earnings on a 52-week basis. The example uses the 2021 contribution rates and the 2021 YMPE of $61,600.
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[$990 × 52] ÷ $64,350 = .80 weeks
The final figure (.80) is the contributory service the member earned during the two week pay period.
Example 3: Full-time Member Receiving Sick Pay
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The member in this example is on an employer-approved health leave, is receiving 80% of their regular bi-weekly salary of $2,400, and has decided not to top up contributions to their pre-leave level. The normal full-time work week or full-time equivalent (FTE) for this position is 37.5 hours, or 1,950 hours a year and the hourly rate of pay is $32. The example uses the 2021 contribution rates and the 2021 YMPE of $61,600.
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Step 4: Calculate contributions at the high rate
The formula is:
Contributions at 9.2% = [earnings per pay × (annualized earnings - YMPE) × 9.2%)] ÷ annualized earnings
= [$1,920 × ($62,400 - $61,600) × .092)] ÷ $62,400 = $2.65
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Step 6: Calculate contributory service
Contributory service = (earnings per pay × 52 weeks in a year) ÷ annualized earnings
= ($1,920 × 52) ÷ $62,400
= 1.6 weeks for the pay period
Example 4: Member Works Two Different Jobs Concurrently
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A member may work two different jobs at an organization at the same time, often at two different rates of pay. To calculate the member's contributions, use blended annualized earnings.
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Step 2: Calculate the blended annualized earnings (AE) for the pay period
Blended AE = [(hours worked in job A × AE for job A) ÷ total hours worked] + [(hours worked in job B ×
AE for job B) ÷ total hours worked]
= [(45 × $55,575) ÷ 55] + [(10 × $68,250) ÷ 55]
= $45,470 + $12,409*
= $57,879*
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