Spread Pay – Deferred Pay
Currently Faculty and Staff who have official appointments of less than 12 months can elect to have their pay spread over 26 paychecks received over the full 12 months of the year. This has been referred to as “Spread” pay.
However, to be in compliance with Federal Grants and Contracts and other financial arrangements, the University must fully expense the individual’s salary within the time period of their official appointment. This has been referred to as “Deferred” pay.
An example of spread and deferred pay would be a nine month faculty member who elects to receive “spread” pay. This individual would receive 26 paychecks over 12 months but to be in compliance we are required to fully expense that faculty member’s salary over only the nine months he/she is working.
Managing this difference between paychecks being sent out and salary being expensed against university accounts is a very complex process and requires additional calculations outside of our payroll/accounting systems in order to carry out the proper book keeping.
When changes occur to the appointment of an individual on spread/deferred pay (i.e. changes to their FTE or salary), very complex calculations are required to assure that the individual receives the proper pay and that university accounts are properly billed. This is currently a very time consuming personnel activity.
The University is still not fully compliant with Federal requirements because our systems do not properly account for the fringe benefits for individuals on Spread pay – that is, the employer benefit expenses related to individuals on spread/deferred pay continue to be expensed to university accounts over the full 26 pay periods rather than over the time frame of the individual’s appointment.
We currently fund a full time staff member whose job is to correct all fringe benefit charges to Federal grants and contracts to maintain Federal compliance. A long term solution to the benefit issue would be to invest additional university funds in developing the appropriate software to manage benefits in the same manner as we currently manage salaries. This would be another significant expense to the institution and the resulting system would even more complex to manage in terms of appointment changes for employees on Spread/Deferred pay.
An alternative to continuing the labor intensive work related to salaries and the additional investment related to benefits is to eliminate spread/deferred pay. Faculty and staff would be paid on a bi-weekly basis during the months of their appointment contract. They would not receive paychecks during those months that they are not on appointment. This change would currently impact about 530 faculty, 10 exempt employees and 21 classified staff.
If we were to eliminate spread pay, then individuals on this plan would continue to receive paychecks for FY13 through the last pay of FY13, payday 7/05/13, and then would need to have prior arrangements established in order to cover their expenses over, approximately, the next six weeks until new paychecks would start for their new academic year appointment – generally these checks would start late August (depending on the individual’s contract time.)
If we can make this cost saving/cost avoiding change for the University – cost saving because of the reduced staff time to manage it and cost avoiding because of the elimination of the need to develop new, more extensive programming to manage the benefits – then we would like to announce it as soon as possible in the 2013 calendar year in order to give individuals the maximum amount of time to plan for this year’s six week transition period.
Once the change is made, individuals on a 9 month appointment would have a 3 month period without paychecks for which they would have to financially plan each year. Exempt and Classified who are on deferred and spread pay have varied schedules so they would need to financially plan for the time period where they wouldn’t be receiving checks. Our credit union has provided planning assistance in the past that would enable individuals, who need financial planning help, to set up appropriate payroll deductions and savings accounts to see them through their period without paychecks.