What you need to know about how faculty contracts align with the fiscal year and the general ledger
It is the time of year for faculty and student faculty contract renewals and new contract entries. Some faculty with nine-month academic year contracts may choose to be paid over more than nine months. How do these pay arrangements affect the fiscal year budget and post to the general ledger?
Contract Begin and End Date
Between the contract begin and end dates during the same fiscal year, the entire nine-month contract is divided across the monthly pay periods (i.e., from mid-August to mid-May or September to May). The full nine-month contract amount, including all the taxes and deductions, post to the general ledger using the position funding distribution.
Payment Begin and End Dates
If an employee chooses to be paid over a longer period (i.e., 12 months), a portion of their nine-month contract pay is subtracted from each of the employee’s monthly paychecks during the nine-month term and the “earnings not paid” (ENP) posts to a campus ENP SpeedType as a liability.
At the end of the contract period, usually during the summer months, the ENP is paid out from the ENP SpeedType over the remaining payment period.
This way, the full contract amount is charged to the department in the fiscal year in which it occurred, yet the employee can receive a consistent pay amount over an entire academic year (crossing fiscal years).
Accruals for ENP Taxes and Deductions
But what about the taxes and deductions? When the ENP pays out during the summer months, there are taxes and retirement costs (401(a) or PERA) associated with the ENP payment to the employee.
The employer portion of the taxes and deductions was already “collected” when the original nine-month contract pay posted. When the nine-month contract pay processed ENP during the contract pay period, it also took the ENP portion of the taxes and deductions and processed an accrual which posted as a liability to a system SpeedType. You may notice the deduction code ACCRUL for the anticipated ENP tax and retirement portion on the HCM paycheck distribution report.
As the ENP pays out over the summer, the associated taxes and retirement deductions post with the actual pay using position funding distribution. A batch PET created by the System HRGL team will reallocate the summer taxes and retirement costs back to the system liability SpeedType where the accrual originally posted.
Since contracts can now begin and end mid-month in August and May, they can be less intuitive to calculate. Use the Contract Payment Details page or query to help faculty anticipate the monthly contract pay and ENP amounts. At the end of the payment period, use the data to review how the contract pay and ENP posted across the months and confirm that all ENP was paid.
Remember that contracts are set up using the employee record. The position that is active on the same employee record at the end of the pay period will be used to post funding and account codes. If there was a mid-month contract change on the same employee record, both contracts will use the same position data and funding effective on the pay period end date even if a different position was entered for the earlier contract.
Summer benefit costs
What about summer benefits for faculty? Benefits for contract faculty post following the active position funding distribution(s). For those faculty who do not receive pay during the summer months, the employee cost goes into arrears and will be paid from the first fall paycheck.