HENRY FORD COMMUNITY COLLEGE

Transcription

1 HENRY FORD COMMUNITY COLLEGE PAYROLL Process Improvement Plan Winter 2014

2 Table of Contents Process Improvement Team... 3 Team Sponsor... 3 Team Members... 3 Background... 4 Project Statement... 5 Glossary of Terms... 6 Contractual Language Regarding Pay Dates... 8 Current Process... 9 Reasons for Payroll Problems Payroll Dates May 2013 Pay Dates Force Field MCCBOA Survey Improvement Theory Biweekly Conversion Implementation Timeline Steering Committee Feedback Recommendation for Future Continuous Process Improvement Team Acknowledgement

3 Process Improvement Team Team Sponsor John Satkowski Vice President for Financial and Auxiliary Services Team Members Lynn Borczon Human Resources Assistant Director (Team Leader) Denise Ochs Payroll Associate Nancy Wade Payroll Accountant Sherry Morgan Adjunct Instructor, Business, Computer Technology 3

4 Background Payroll pay dates are a function of the College s various labor groups. Union contracts; and, in the absence of contractual language, College practice determines pay dates. Multiple pay cycles have been developed within Colleague, generally by labor group, to accommodate the resulting variety of pay dates. Segregating employees by pay cycle requires specific coding and setup within Colleague. Wage and payroll deduction setup are affected by an employee s pay frequency (biweekly or monthly). If an employee moves from one labor group to another, resulting in a change in the pay cycle that they are paid under, their setup in Colleague must be modified. During the year, 37 monthly pay cycles and 52 biweekly pay cycles are processed. These pay cycles may result in several groups being paid on the same date or spread throughout the month. Each pay cycle must be processed individually by the Payroll Department. The Colleague software limits the ability to finalize more than one pay cycle at a time, which can result in a workload bottleneck in Payroll when more than one pay cycle pay date falls on the same day. There are months when four separate pay cycles are all paid on the same date. 4

5 Project Statement Improve the efficiency of payroll processing by optimizing the utilization of the College s assets, both human and financial, as measured by a reduction in pay cycles and pay dates and deferring cash outflows. 5

6 Glossary of Terms Advance Wages paid before all services have been performed. Arrears Wages paid after services have been performed. Colleague The comprehensive, integrated software package used at the College, commonly referred to as Hank. Contractual Pay Salary of full-time employees Extra Contractual (EC)/Assignment Contracts Assignments in excess of contractual load for employees AFO assignments MPSERS The Michigan Public School Employees Retirement System ORS The Michigan Office of Retirement System that administers MPSERS Pay Cycle The code within Hank (Colleague) to define a particular group of employees that are to be included in a single payroll run. AD FA o Pay cycle which includes: Administrators (Local 71) Exempt employees o Pay dates are on the 15 th of the month o Paid in advance o Pay cycle which includes: Full-time faculty (Local 1650) Extra contractual/assignment contracts for Local 1650 and Local 71 Non AFO contracts o Pay dates are: The Friday following the beginning of the Fall semester The 15 th of the month October through April The last Monday of the Winter semester o Paid in advance 6

7 PT SS ST SU o Pay cycle which includes: AFO and extra contractual assignments for SSA union employees o Pay dates are on the 22 nd of the month o Some pays are paid in advance o Pay cycle which includes: SSA union members DSOEA union members (engineers) 18.5 hour employees o Pay dates are biweekly on Fridays o Paid in arrears o Pay cycle includes: Students o Pay dates are biweekly on Fridays o Paid in arrears o Pay cycle which includes spring and summer assignments for: Full-time faculty and administrators AFO employees Non-AFO employees paid on a contractual basis o Conflicts between 1650 and AFO contract language have required negotiated changes for the last several years TDP Tax deferred payments deducted from employee wages for the purchase of additional service credit used in the pension calculation of Michigan Public School Employees Retirement System members. Once a TDP agreement is initiated, it is binding and irrevocable. Deductions cannot stop until the agreement is complete or employment is terminated. 7

8 Contractual Language Regarding Pay Dates Employee Group Local 1650 FT Faculty Local 71 Administrators HFCC-SSA Support Staff HFCC-AFO PT Faculty Contractual Language A teacher will receive 1/26 annual contractual pay beginning with the first College pay date on or after August 16 in a given contractual year. A teacher will receive another 1/26 of annual contractual pay each of the next 25 biweekly pay periods. Effective January 2, 2014, a teacher s contractual pay will be paid over twelve (12) months on a biweekly basis, and a teacher s extra-contractual pay will be paid biweekly on a current basis. (Delayed to August 2014) No contractual language. Practice has been to pay once a month on the 15 th of the month for the entire month. No contractual language. Practice has been to pay on a biweekly basis in arrears. The College shall distribute salary to employees employed for a full sixteen (16) week semester in four (4) equal installments during the Fall semester and in five (5) equal installments during the Winter semester. For employees employed in the Fall semester, the first pay date shall be on September 22. The last pay date of the Fall semester will be on December 22. For the Winter semester, the first pay date shall be on January 22. The final pay date shall be on May 22. There will be nine (9) pay dates altogether for employees employed both in the Fall and Winter semesters: September 22, October 22, November 22, December 22, January 22, February 22, March 22, April 22, and May 22. For employees employed for terms during the Fall and Winter that are shorter in duration than sixteen (16) weeks (eight (8) or twelve (12) week semesters), the following schedule shall apply: For employees employed for the first eight (8) week semester during the Fall, salary shall be distributed in two (2) equal installments. The initial pay date shall be on September 22. For employees employed for first eight (8) week semester during the winter, salary shall be distributed in three (3) equal installments. The initial pay date shall be on January 22. For employees employed for the second eight (8) week semester during the Fall or Winter, salary shall be distributed in three (3) equal installments. The initial pay date shall be on October 22 (Fall) and March 22 (Winter). For employees employed for the twelve (12) week semester during the Fall or Winter, salary shall be distributed in four (4) equal installments. The initial pay date shall be on September 22 (Fall) and February 22 (Winter). Effective with the Spring/Summer 2013 semesters, pay dates during the Spring will be on May 22 and June 22. Pay dates for the Summer semester will be July 22 and August 22. DSOEA Engineers Exempt Employees If the pay date falls on a scheduled day the College is closed (i.e. holiday or weekend), the pay date will be the last business day prior to the pay date. If the pay date falls on a day the College is closed for unscheduled reasons, the pay date will be not later than two (2) business days after the College is reopened. No contractual language. Practice has been to pay on a biweekly basis in arrears. N/A Practice has been to pay once a month on the 15 th of the month for the entire month. (Same pay schedule as Local 71.) 8

9 Current Process The faculty, administrator, and exempt contractual pays are currently paid in advance. The pay on the 15 th of the month, which is for that entire month, has led to employee overpayments. Employee terminations or unrecorded, unpaid absences occurring before month end but after the pay has been processed result in employee overpayments. Recovery of these overpayments is not assured. Paying in advance also prevents the possibility of the College implementing electronic absence approval. In addition to other system prerequisites, this Colleague feature requires that employees are paid in arrears. This feature updates an employee s leave bank automatically. Leave bank absence updates for this group of employees is currently done manually. The optimal timing is for the pay to occur 5-7 days after the pay period end. The variety and inconsistent occurrence of pay dates has led to employee confusion as to when they are to be paid. During the spring and summer semesters, teaching assignments are not paid on the same day of the month as fall and winter. Administrative, exempt, and support staff performing additional assignments may be paid under multiple pay cycles. Their contractual pay can be paid under one cycle while the additional assignment is paid under another. This can also lead to some unintended consequences, including potential errors, and complex additional system setup for payroll withholdings. The potential of paying under multiple cycles must be taken into account to assure that withholdings are only taken when intended. If not setup properly, a withholding only intended to be deducted from a contractual pay could also be deducted from the additional assignment paid on another pay cycle. Due dates of MPSERS retirement reports and related payments are controlled by the frequency of pay dates. Because the College has a combination of both biweekly and monthly pays, the current reporting and payment schedule is monthly. If a change is made to biweekly pays only, the MPSERS reporting and related payment schedule would also change to a biweekly frequency. However, ORS has indicated that they are considering requiring mandatory reporting by pay date, regardless of employee pay frequency. If this requirement is enacted and biweekly pays on alternating weeks is implemented, the College s reporting and payment frequency could become weekly. In addition to the difficulties noted, a survey of the College s peers reveals that Henry Ford Community College is the only college paying employees on a monthly basis. The majority of the colleges responding to the survey pay their employees on a biweekly basis; only three of the colleges are paying on a semi-monthly basis. 9

10 Both biweekly and semimonthly salaried pays have drawbacks. When paying biweekly, a year may contain 27 pays, one more than the normal 26 pays, every 11 years. There are two ways to address this issue: 1. Reduce the biweekly pay for each employee for that year so that the salary paid out over the 27 pays equals the contractual salary. This change can be completed through a batch process. In subsequent years, the wages are restored to 26 pays in the same manner. 2. Do not recompute the biweekly pay in the 27 pay year. Instead, absorb the additional cost of the extra pay. Using February 2014 full-time contractual wage expense, this additional cost, including Medicare and retirement, would amount to $1.1 million. Semimonthly pays can cause workload bottlenecks. There will be times when a semimonthly pay is scheduled near or at the same time as the current support staff and student biweekly pays. Also, when paying in arrears, semimonthly pays will result in a greater time lag between the time worked and when paid. Converting to a biweekly pay in arrears would defer cash outflows for at least 15 days. Using February 2014 as an example, monthly full-time contractual wages including FICA, Medicare, and retirement totaled $2.4 million. A biweekly pay in arrears would defer approximately half of that payment, $1.1 million, for at least an additional 15 days. 10

11 Reasons for Payroll Problems Adjunct Faculty Paid on the 22nd of the month Two pays in May, Winter and Spring Pay dates change for Spring and Summer Date set in Local 337 contract May be paid under multiples pay cycles Full-time Faculty Paid on the 15th of the month for the entire month Can result in over payment due to termination or unpaid leave Recovery not assured Prevents electronic absence approval Leave bank absence updates done manually May be paid under multiple cycles Local 1650 Contract, bi-weekly starting August 2014 but not in arrears Arrears will require more negotiations Problem Statement Paid bi-weekly in arrears Paid bi-weekly in arrears Paid on the 15th of the month for the entire month Additional assignments paid under multiple pay cycles Additional assignments paid under multiple pay cycles Problem when withholding are deducted under multiple pay cycles Can result in over payment due to termination or unpaid leave Recovery not assured Prevents electronic absence approval Multiple pay groups and cycles are a concern along with paying employees in advance. Support Staff Students Administrators and Exempt 11

12 2013 Payroll Dates January February March April May June July August September October November December Administrators, Exempt Faculty Adjunct Faculty Support Staff Pay 1 Students Pay 1 Support Staff Pay 2 Students Pay 2 Support Staff Pay 3 Students Pay 3 Spring/Summer Faculty & AFO 12

13 May 2013 Pay Dates

14 Force Field DRIVING FORCES 1. To reduce redundancy by decreasing number of pay cycles. 2. Less confusion for employees on how and when being paid. a. By combining pays, extra contractual (EC) will be paid with contractual pay. b. Examples: i. Administrators EC is paid on the faculty pay (2 checks/month). ii. Support staff EC is paid on the parttime AFO pay (3 checks/month). iii. Employees with multiple positions can be paid on FA, PT and/or SS pay (up to 4 checks/month). 3. Defer Cash Flow. 4. Time savings. 5. Reduce system complexity. a. Deduction and direct deposit setup affected by multiple pay cycles. 6. Avoid paying in advance. 7. Potential implementation of electronic leave approval. 8. Streamline workflow. a. Software limits finalizing pay cycles to one at a time. 9. Employee overpayments. RESTRAINING FORCES 1. Tax Deferred Payments (TDP) - Agreements are binding and irrevocable for the duration of the tax-deferred service credit purchased. Switching frequency from monthly to biweekly may increase the frequency of deductions and double the total monthly amount. a. Administrators/Exempt - 9 participating b. Full-time Faculty - 16 participating c. Part-time Faculty - 8 participating 2. Contractual agreements and past practices determine when employees are paid. Payroll processing implications not taken into consideration when negotiating contracts. 3. System Changes. a. Modify or create new pay classes for new pay cycles. b. Update positions and assign new wage records. c. Change all benefits, deductions and cost records. 4. Current HR staffing levels inadequate to accommodate the necessary system changes in a timely fashion. 5. Conflicts with current implementation of web time entry for support staff and students. 6. Frequency of retirement reporting may be affected by changes in pay frequency. This may be a moot point if ORS requires reporting by pay date regardless of pay frequency. 7. Compressed workload for department secretaries (i.e. shorter timeframe to enter EC contracts). 8. Employees may be resistant to change. 9. Communication between departments. 10. Receiving paperwork in a timely manner for payroll processing. 14

15 MCCBOA Survey Community College How often do you pay your contractual (Administrators, FT Faculty) employees? (Biweekly, Monthly etc..) Are they paid current or in arrears? If in arrears, what is the lag time between pay ended period and check date? Alpena Community College Bay De Noc Community College Delta College Glen Oaks Community College Biweekly Current Gogebic Community College Grand Rapids Community College Biweekly Arrears 12 days Henry Ford Community College Monthly In advance Jackson Community College Biweekly; Faculty 20 or 26 Faculty current; Staff & Admin 7 days arrears Kalamazoo Valley Community College Semimonthly Admin & exempt in advance, faculty deferred, hourly arrears Kellogg Community College Biweekly Current Kirtland Community College Biweekly Current Lake Michigan College Biweekly Hourly arrears, all others Hourly 1 wk.in arrears current Lansing Community College Biweekly Arrears Pay period ends Sat., pay the following Friday Macomb Community College All Biweekly; Faculty 20 or 26 Hourly arrears, all others Hourly 2 wks. in arrears pays, EC 7 or 10 pays current Mid Michigan Community College Biweekly Admin current, faculty arrears Faculty 1 wk. in arrears Monroe County Community College Biweekly; Faculty 20 or 26 pays Admin current, faculty arrears Faculty pay period ends Sat., pay the following Friday Montcalm Community College Biweekly Current Mott Community College Biweekly Admin current; all others in 1 week arrears Muskegon Community College 15

16 MCCBOA Survey Community College How often do you pay your contractual (Administrators, FT Faculty) employees? (Biweekly, Monthly etc..) Are they paid current or in arrears? If in arrears, what is the lag time between pay ended period and check date? North Central Michigan College Biweekly; Faculty 20 or 26 pays Admin current, faculty arrears Faculty pay period ends Sat., pay the following Friday Northwestern Michigan College Biweekly; Faculty 20 or 26 pays Hourly arrears, all others current Hourly pay period ends Saturday, pay the following Friday Oakland Community College Biweekly; Faculty spread over 10 or 12 months Current Schoolcraft College Biweekly; Faculty 18 or 26 pays Hourly arrears, all others current Southwestern Michigan College St. Clair County Community College Biweekly Current Washtenaw Community College Wayne County Community College Biweekly; Faculty semi mthly Current West Shore Community College Biweekly Admin current; faculty arrears 1 week Oakland Community College Biweekly; Faculty spread over Current 10 or 12 months Faculty, admin & clerical pd on Thurs for pay period ending the following Saturday; 2 wk lag for OT Hourly pay period ends Sun., pay the following Friday Faculty, admin & clerical pd on Thurs for pay period ending the following Saturday; 2 wk lag for OT Schoolcraft College Biweekly; Faculty 18 or 26 pays Hourly arrears, all others current Hourly pay period ends Sun., pay the following Friday Southwestern Michigan College St. Clair County Community College Biweekly Current Washtenaw Community College Wayne County Community College Biweekly; Faculty semi mthly Current West Shore Community College Biweekly Admin current; faculty arrears 1 week 16

17 Improvement Theory The Payroll CPI team is recommending the following: 1. Pay all employees on a biweekly basis. 2. Combine the current monthly pay cycles into one biweekly pay cycle paid on alternate weeks from the support staff and student pays. 3. Contractual pays to be in arrears, a minimum five day delay after services have been performed. The following factors, in order of importance, must be in place before implementing the improvement: 1. Agreement from Local 71, Local 1650, AFO, and exempt employees to change to a biweekly pay frequency. 2. Testing biweekly pay in Colleague to verify that assignment contracts will schedule pays at the proper time and to assure that the change to biweekly processing will perform as expected. 3. College commitment to allocate the additional personnel needed to implement the improvement. The implementation will require a tremendous amount of system changes which are labor intensive. Inadequate staffing can lead to disastrous implementation results which directly impact employees. Once the above factors are in place, improvement should be implemented as follows: 1. The transition to biweekly pays is to be done gradually by labor group. The implementation should start with the smallest group of employees; and, after successful implementation of that group, progress to the next smallest group and so on until all employees have been transitioned. 2. Each labor group is to transition at the beginning of their contractual year. 3. An optional, one-time payroll advance, which will be repaid through payroll deductions, may be offered to full-time contractual employees to alleviate the financial impact of changing to paying in arrears. Benefits of implementing recommendations include: 1. The number of pay cycles processed annually would be reduced by Biweekly pays in arrears will defer $1.1 million of cash expenditures by 15 days each month. 3. Services are paid for after they are rendered, reducing the potential for overpayments. 17

18 Costs of implementing recommendations: The College currently has over 1,500 active positions in Hank; over 1,000 of these positions are paid on a monthly basis. While all current staff in Human Resources will work on the conversion, given the number of positions and benefits that will need to be created and/or modified, as well as the number of employees requiring position modifications, the Payroll CPI team is recommending that a minimum one (1) additional full-time HR Assistant be hired effective January The following are the costs associated with this additional position: Academic Year Salary Fringe Total $20,500 $11,162 $31, $43,082 $23,458 $66, $47,219 $25,711 $72,930 18

19 Biweekly Conversion Implementation Timeline Responsible Activity Area Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Negotiate pay cycle changes with affected employee groups HR Refresh HANK test account IT Create sample of current monthly pay positions in HANK test HR account. Begin communicating changes to employee groups HR/Payroll Test sample employee group HR/Payroll Hire additional HR Assistant HR Communicate changes to Exempt/Local 71 employees HR/Payroll Create positions, pay cycles, etc. for Exempt/Local 71 employees HR in HANK Live account. Exempt/Local 71 employees move to biweekly pay cycle HR/Payroll Create Local 1650 positions, benefits, etc. in HANK live HR account Communicate changes to Local 1650 employees HR/Payroll Local 1650 employees move to biweekly pay cycle HR/Payroll Create AFO positions, benefits, HR etc. in HANK live account. Communicate changes to AFO employees HR/Payroll AFO employees move to biweekly pay cycle HR/Payroll 19

20 Steering Committee Feedback Team Name: Payroll Date: April 2014 Sponsor: John Satkowski, Vice President for Financial and Auxiliary Services Idea for Improvement Support 1. Pay all employees on biweekly basis 2. Combine all monthly pays into one biweekly pay cycle 3. Pay on alternate weeks from support staff and student pays 4. Pay on a minimum 5 day arrearage 20

21 Recommendation for Future Continuous Process Improvement Team Explore the feasibility of implementing electronic absence approval in Colleague 21

22 Acknowledgement We would like to express our thanks to Barb Eisterhold for her assistance in gathering data and her valuable insights into the practical aspects of the proposed implementation. 22