University Human Resource Services
Q & A for PAO and PAU Staff Transitioning to Bi-weekly Pay Cycle
Please note: This is a working document and as information becomes available we will update this document accordingly. A copy will be posted on the FMS website at www.fms.indiana.edu . Please check the website periodically for the most up to date information regarding the transition. You can also check the UHRS website for current information regarding the bi-weekly PTO accrual rates, supplemental retirement instructions and other information regarding the move to a bi-weekly pay schedule at www.indiana.edu/~uhrs/flsa/compliance.html.
Why is this change to the bi-weekly pay cycle occurring?
Fair Labor Standards Act (FLSA) regulations require employees to track their time worked by the hour and require that overtime be paid for work in excess of 40 hours in a work week, except for certain job duties and salary levels that are “exempt” from these provisions. These regulations are monitored by the U.S. Department of Labor (DOL), which can impose fines on entities that do not ensure these regulations are carefully followed.
A review of timesheets by Internal Audit found significant FLSA compliance issues for PAO and PAU Staff employees. One finding was a 39 percent error rate in timesheets for such inconsistencies as employees not recording all hours worked or recording hours worked that were not actually worked.
To address the above audit findings and to install a more effective system that tracks hours worked and overtime pay, as required by FLSA regulations, PAO and PAU Staff employees will be switched from the University’s monthly payroll cycle to the bi-weekly cycle. The bi-weekly payroll cycle and the TIME system are specifically designed to track hours worked and overtime, whereas the monthly payroll cycle focuses on “monthly salary” for positions exempt from above FLSA regulations.
Will this change affect both PAO and PAU staff?
Yes, across all campus locations.
Why not develop a new system to manage the process of tracking hours worked and overtime pay, while keeping the PAO and PAU staff on a monthly pay schedule?
It is not cost effective to have a separate time tracking system for the following reasons:
- A monthly system may not satisfy FLSA and state of Indiana requirements for the payment of overtime in a timely manner.
- The system will need to be built. In addition to the cost to actually build the system, there would be ongoing maintenance and support costs associated with running it.
- It would take time to get the system up and running thereby delaying our compliance with DOL and FLSA regulations.
- We would have to add 12 additional payrolls per year. The departments would have 12 additional payrolls to manage each year so the additional work would be shared with the departments. By using TIME, the departments have two separate processes merged into one which creates an efficiency for them. This also helps the departments reduce the risk of error.
- Furthermore, there are additional tasks that would need to be handled centrally: Adding all the cutoffs to the pay calendar, running separate batch processes, running the actual payrolls, etc.
What is the timing of the transition?
All PAO and PAU staff will move to a bi-weekly pay cycle starting on August 23, 2009 at midnight. At that time, they will begin using the TIME timekeeping system to track their time worked, PTO, sick time, etc.
Departments will need to initiate an e-doc to create a TIME assignment for each employee prior to August 23, 2009. More detail will be forthcoming regarding this process.
How does the TIME system work?
Required usage of the system in either a synchronous or asynchronous fashion is based on your campus’ decision for recording time. Synchronous means recording time worked in real time. Asynchronous means recording time using an electronic timesheet. Each campus will be responsible for training its users as needed.
What are important pay dates that I should know?
The final monthly payroll payment will be received on August 31, 2009. It will include time worked for August 1-August 22. The timing of the transition would have caused a cash flow shortage equivalent to 6 days. Because the University would like to minimize any adverse impact on its valued employees, each employee affected by this change will receive a one-time transition supplemental payment for 6 days. This payment will be included on the August 31, 2009 paycheck, effectively making it a regular payroll payment. This transition supplemental payment does not need to be repaid to the University.
The first bi-weekly paycheck will be received on September 18, 2009 for the pay period August 23, 2009 through September 5, 2009. The second bi-weekly payment will be received one day earlier than usual on October, 1, 2008. Again, this change is being made in order to minimize any adverse impact on employee cash flow. Payroll payments will be received every other Friday thereafter.
What is the effect on my gross payroll?
There is no change to the employee’s annual salary. However, payroll payments will be based on 26 bi-weekly pay cycles per year rather than 12 monthly pay cycles. In ten months of the year there are 2 bi-weekly payroll payments per month. In two months of the year, one in the spring and one in the fall, there are 3 bi-weekly payroll payments.
In order to calculate gross bi-weekly payroll, annual salary should be divided by 26. Multiply this resulting amount by 2 to calculate new monthly gross.
Example of Monthly Gross:
Although the new monthly gross is less than the current gross, there are 2 additional bi-weekly payroll payments per year. The monthly gross for those months using the example above is: $4,153.86. This additional payment can be used to manage cash flow throughout the year. The first month that this happens is in April 2010.
What is the effect on my net payroll?
There is no change to the employee’s annual net payroll. See example below.
12 x $2,339.79= $28,077.48
26 x $1,079.90= $28,077.40
When do the bi-weekly pay periods begin and end?
The bi-weekly pay period begins on Sunday at 12:00 am and runs for two weeks, ending at midnight on the second Saturday. Payment for that pay period is paid on the second Friday following the end of the pay period. See payroll calendar for all the bi-weekly pay cycles in 2008: www.fms.indiana.edu/payroll/pay_advice/payschedule2009.asp
Example: Pay period begins: August 23, 2009 at 12:00 am Pay period ends: September 5, 2009 at midnight Pay date: September 18, 2009
Will these changes affect the tax bracket that I am in now?
The employee will earn the same gross amount on a bi-weekly and monthly pay schedule. However for 2009, there is a chance that the employee might move to a higher bracket for a portion of their income. The income that could be taxed at a higher rate is only the additional amount received in 2009, not the employee’s entire income. This is due to the fact that the monthly payroll for December 31, 2008 was paid in January 2009. That paycheck is not deferred to January 2010 for the bi-weekly pay schedule in December 2009. Please see the comparison of wages for a sample employee for 2009 versus 2010 in order to understand the difference in income between the two years.
Salary Annual gross salary $36,000 Monthly salary $ 3,000 Bi-weekly salary $ 1,384.62 2009 Gross W-2 Wages Monthly pay dates:
1/2, 1/30, 2/27, 3/31, 4/30, 5/29, 6/30, 7/31, 8/31= 9 paymentsBiweekly pay dates:
9/18, 10/2, 10/16, 10/30, 11/13, 11/25, 12/11, 12/24= 8 payments
$27,000 $11,076.96 $38,076.96
*If this employee were to finish out the year as a monthly their total gross would be $36,000 ($3,000 x 12), a difference of $2,076.962010 Gross W-2 Wages
There are 26 biweekly pay dates in 2010.Biweekly pay: 26 x $1,384.62 = $36,000.12
Will the “transition supplemental” payment be taxed at the current supplemental tax rate of 25% ?
No, the transitional payment equal to 6 days worked will not be taxed at the current supplemental rate tax of 25%. We are currently researching options to process this payment so that it is taxed as closely to regular wages as possible. When more information is available, we will certainly relay that information to each affected employee.
Will there be a contribution to my IU Retirement Savings plan for the “transition supplemental” payment?
Yes, there will be a contribution at your current rate.
Will there be an impact on my IU TDA and IU Retirement Savings plans?
Please contact Michelle White in UHRS with any specific questions that you have regarding contributions to these plans. She can be reached at .
What is the effect on my paid time off (PTO) accruals?
Employees will continue to accrue PTO at the same annual equivalent rate. Those annual rates will accrue on a bi-weekly schedule under the bi-weekly pay schedule. These accruals will be updated with the closing of each bi-weekly payroll and will be reflected in the employee’s PTO balances in the TIME system.
Bi-weekly accrual rates Up to 60 months of IU service Annual equivalent accrual 240 hours per year Bi-weekly accrual 9.24 hours per pay period x 26 pay periods = 240 hours On and after 60 months of IU service Annual equivalent accrual 288 hours per year Bi-weekly accrual 11.08 hours per pay period X 26 pay periods = 288 hours
What do employees impacted by the change need to do?
Most of the work to ensure the smooth transition to the bi-weekly pay cycle will be done in the central UHRS and payroll offices. There will also be some work done by the departmental payroll processors.
Will I need to make any changes to my payroll deductions?
Employees may receive notification to consider changing their Federal or State tax withholding if they are identified as somebody who has a flat amount taken out. They may also need to consider changing their direct deposit allocations if a flat amount is being designated to one or more financial institutions. Other flat amount deductions may need to be changed as well: For example, the deduction to purchase US Savings Bonds. The central payroll office will identify those individuals potentially impacted by the transition and notify them to review and modify their elections. This notification will occur closer to the date of the transition.
Will there be ongoing communication?
Ongoing communication will be shared with impacted staff regarding the transition. Information will also be distributed to campus payroll and human resources offices and departmental payroll processors. If any questions arise that you need immediate assistance with, please contact FMS payroll. We are happy to help.
Please contact:
FMS Payroll
You may also contact me directly:
Mary Byrde
University Director, Payroll
812.855.3274
How will my Digital Communication and/or Internet Access Allowance payments be converted to the Bi-weekly Pay Cycle?
Due to the scheduled August 23, 2009 transition of PAO and PAU employees to the bi-weekly pay cycle, any ongoing Digital Communication and/or Internet Access Allowance payments current as of August 23, 2009 will be ended as of August 22, 2009. In order to continue the allowance, the department/campus will need to initiate an E-Doc after the monthly payroll closes on August 20, 2009, using the updated job record with an Effective Date of August 23, 2009. Provided the E-Doc is approved within the time frame for the bi-weekly pay period closing for August 23, 2009 through September 5, 2009, the employee will continue receiving Allowance payments with the September 18, 2009 paycheck. Future Digital Communication and/or Internet Access Allowance payments will be paid on the bi-weekly pay cycle and the pay period amount received will be calculated based upon pay period begin and end dates (26 pay periods in a fiscal or calendar year).
An example:
As a PAO or PAU – Monthly pay cycle - Total annual amount of $600/12 months = $50 per monthly pay period.
As a PAO or PAU – Bi-weekly pay cycle - Total annual amount of $600/26 pay periods = $23.07 per bi-weekly pay period.
Page updated: 18 June 2009
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