The salary reduction program is based on a set of progressive marginal reduction rates.  The “progressive” part means the rate of reduction increases with salary rate.  The “marginal” part means that the reduction are tied to brackets of salary ($0 to $50,000, $50,000 to $70,000, $70,000 to $90,000, etc. ) and each bracket has its own reduction rate (the marginal rate) applied only to the dollars in that bracket.  Some examples:

  • So, for an employee making $50,000 or less the reduction is 0%.
  • For an employee making $85,000 the reduction is applied in brackets.  The first $50,000 has no reduction applied to it.  The next $20,000 is reduced by 6.02% (the marginal rate for $50,001 to $70,000) or $1,204.  The final $15,000 is reduced by 7.52% (the marginal rate for $70,001 to $90,000) or $1,128.  The total reduction is $0 + $1,204 + $1,128 or $2,332.  The overall percentage reduction is $2,332 divided by $85,000 or 2.7%.
  • For an employee making $115,872 the reduction is applied in brackets.  The first $50,000 has no reduction applied to it.  The next $20,000 is reduced by 6.02% (the marginal rate for $50,001 to $70,000) or $1,204.  The next $20,000 is reduced by 7.52% (the marginal rate for $70,001 to $90,000) or $1,504.  The next $20,000 is reduced by 8.57% (the marginal rate for $90,001 to $110,000) or $1,714.  The final $5,872 is reduced by 9.62% (the marginal rate for $110,001 to $130,000) or $565.  The total reduction is $0 + $1,204 + $1,504 + $1,714 + $565 or $4,987.  The overall percentage reduction is $4,987 divided by $115,872 or 4.3%.

Because of the use of marginal rates applied to salary increments, the reduction percentage scale up continuously with salary.

*the examples have been corrected from the original example posted which was oversimplified.

 

 

 

 

 

 

Last Updated: 
06/17/2020