Executive Committee

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Nine-month over twelve-month worksheet Requires Adobe Acrobat Reader

Service Request - Summary
Some nine-month faculty have an interest slowing down their payment schedule to spread it out over 12 months. This change would help them with their personal financial budget, as it would give them more money available in the summer to pay bills. It is unknown how many nine-month faculty have this need.

The current payroll system does not allow NDSU to spread out the nine-month faculty contracts over 12 months as a salary payment; however, NDSU can either direct a part of employee net pay to another savings account (for later withdrawal during summer months by the employee) or a credit union deduction is available. These two currently available options are explained in more detail below.

The NDSU Payroll Office is investigating the need for another alternative that is similar to the two current options. Under this alternative, NDSU holds a portion of the employee's monthly net pay in a fund during the academic year, to be paid out in agreed upon monthly installments over the summer. This new payroll deduction proposal is further explained below.

While the NDSU Payroll Office is not satisfied that this new alternative will meet customer needs more than the two options currently available, if there is reasonable interest in the proposal, the Payroll Office will implement the program.

Background
Under current practice, nine-month faculty contracts begin Aug 15th each year. This employee group currently receives a one-half month installment in August, equal installments from September through April, and a one-half month installment in May. In summary, nine-month faculty are currently paid in 10 of the 12 calendar months, leaving no payment in the months on June and July. Under the current model, faculty are paid at the end of each month, as soon as the appropriate share of the salary is earned.

Since the university cannot legally make a salary payment in advance, in order to pay nine-month faculty over 12 months NDSU would need to slow down the schedule to spread out the payments on the "back end" (i.e., paying them in the following June and July).

HECN Payroll System can't do it as a Salary Payment
Unfortunately, the payroll system used by the North Dakota University System does not allow NDSU to spread the payment of gross salary over 12 months, as the system will not allow crossing fiscal years with salary payments. In early July, the new fiscal year's employee contract is setup on the payroll system. This setup process does not allow the Payroll Office to include unpaid amounts from a previous fiscal year. This capability is being requested through the ERP (Enterprise Resource Planning) system and may be available in two or three years.

Employees can do it through a self-imposed direct deposit savings plan
The option currently available to nine-month faculty is to direct a portion of their net pay to another bank account to personally save their money for the summer months. The current payroll system does have electronic direct deposit capability to split the employee's net pay between two bank accounts (even at different institutions). If an employee wants to slow down their payment schedule, they can estimate the amount of net pay, during August through May, that they would like directed to some other personal bank savings account (i.e., an account of their choosing). The employees just pay themselves at the end of June and July (or May and August, if they choose).

Employees can do it using a credit union deduction
Another very similar option that is currently available is for nine-month faculty to sign up for a payroll deduction to the Northland Educators Federal Credit Union. The monthly payroll deduction is sent to the employee's credit union account, where the money can earn interest and be withdrawn as the employee needs it during the summer months.

These are the best two options for the employees wanting more control over their money, flexibility, and a good monthly accounting of their money from their bank (i.e., monthly bank statement). Employee can earn interest on their money under this option, although interest rates are currently quite low. Employees can use the bank of their choice and they can access their money sooner in an emergency without completely withdrawing from the savings plan.

New Payroll Deduction Proposal
Under a new option being investigated by the NDSU Payroll Office, employees could sign an elective payroll deduction authorization and have an estimated amount deducted from their net pay each month. (The same estimate as noted above.) NDSU would act somewhat like a bank and hold the employee's money in an NDSU agency fund. The employee's money would be paid out using accounts payable checks (similar to travel or Flexcomp payments) during the summer months, according to an agreed upon schedule (see attached worksheet). This plan would be intended for those employees who do not plan to receive any summer salary payments from NDSU.

This may be a good option for employees who want to have less access to their money so they would not be as tempted to spend their money during the academic year and not personally save enough for the summer months.

Under this plan, the employee's paycheck stubs would need to serve as their monthly accounting for the money held by NDSU. NDSU does not have banking software to provide monthly customer account statements showing beginning and ending balances. Also, employees would not receive any interest earned on their money held by NDSU. Current rates are quite low, so this may be a trivial point for some people.

Employees considering this option should be aware that, unlike a bank, NDSU would need to discourage employees from making withdrawals during the academic year. If periodic withdrawals before summer begins are needed, one of the other two currently available options may be a better choice for the employee.

For internal accounting purposes, the NDSU Payroll Office would use spreadsheets to track the employee's money held in the agency fund and would then process accounts payable payments to the employees at the end of May, June, July and August. Since this financial activity is processed through the books of NDSU, it is subject to audit by the North Dakota State Auditors Office.

Other Alternatives
There may be other creative alternatives that would involve changes to policy and/or employment contracts that would allow nine-month faculty to be converted to twelve-month faculty on the payroll system, so they could be paid each month. For example: if the employment contracts were changed to begin July 1st each year, then we could begin paying their contract in July before school starts.

After briefly checking other institutions, we could not find any other good alternatives. Institutions effectively addressing the issue have a modern ERP software solution, similar to what the State of North Dakota is acquiring.

The NDSU Payroll Office wants to provide great customer service. The Payroll Office would gladly take part in discussing other possible alternatives to better address this service request.