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TO: Iredell-Statesville Schools – Board of Education FROM: Kay L. Fulp, Chief Financial Officer SUBJECT: Payroll Changes DATE: April 30, 2007 In January 2007, we formed a Payroll Task Force Committee whose purpose was to consider four suggestions for making payroll more effective and efficient. The Committee was composed of a cross section of employees, including but not limited to: Teacher of the Year, local NCAE President, teacher assistants, bus drivers, transportation personnel, custodians, clerical, classroom teacher, two principals, finance officer, assistant finance officer, payroll supervisor, human resource director, and school bookkeepers. There were seventeen voting members. Our NCAE area representative was invited to the final meeting. She did attend and offered comments as to NCAE’s perspective. The items under consideration were as follows: 1. Mandatory Direct Deposit 2. Direct Deposit Vouchers not being printed by the Payroll Department 3. Installment pay through Financial Institutions rather than through the Payroll Department. 4. Switching all Dual Employees (i.e., teacher assistant/bus driver) from salaried pay for their primary position and hourly pay for their bus position to hourly pay for both positions. Thirteen voting members were present at our final Task Force meeting on March 30, 2007. Listed below are the results of the voting. 1. Mandatory Direct Deposit 12 for – 1 against 2. No Printing of Direct Deposit Vouchers 12 for – 1 against. 3. Installment pay through Financial Inst. 12 for – 1 against 4. Converting Dual Employee pay to hourly 13 for = 0 against. Mandatory Direct Deposit In 2002, ISS required that all employees enroll for direct deposit. Currently, 80% of our employees are on direct deposit. What we have required is that all new employees must be on direct deposit but we have not forced former employees who initially never filed paperwork to be on direct deposit. Lina Drinkard, NCAE area representative, told the payroll task force that NCAE's opinion of requiring employees to be on direct deposit was illegal. I have not been able to get concrete verification of whether this is in fact true. I can tell you that most LEAs require employees to be on Direct Deposit. Mrs. Drinkard’s suggestion is that we grandfather in those former employees who have never enrolled and require this as a condition of employment with new employees. Costs savings from Mandatory Direct Deposit = $1000 annually. Direct Deposit Pay Vouchers will not longer be printed by Payroll Department TimeKeeper is the software package which we use for employees to sign in and out for payroll purposes. Timekeeper has the ability for all employees to look up their current paycheck and the eleven past paychecks. In other words, this software stores one year of pay vouchers per employee. The employee can look up the check which is an exact replica of what we print, fold, and stuff into envelopes. This pay voucher also includes leave balances. It is a very simple process to access the check and then print. However, should an employee have problems printing their check the school bookkeepers will help them get a copy of their check. Cost Savings = $16,332.12 annually. Installment Pay Through Financial Institutions Ten month employees can receive their normal 10 checks for the year. They can also elect to receive 12 checks instead of 10, with the same annual pay. When an employee signs up for 12 checks they must do so by the first day they return to work in August and this only applies to 10 month employees. Eleven month employees do not have this option nor do employees who are hired after the first day of the new school year. For employees who choose 12 checks, those funds are held in Raleigh at the Office of Budget and Management until we pay their installment pay in June and July. Therefore, neither the employee nor ISS earns the interest on these dollars even though the employee has actually earned more than they are being paid. We determined that last year our employees lost interest ranging from approximately $40 per person to $240 per person. As a system, all of our employees in total lost approximately $157,000 in interest. Approximately 1168 ten month employees participate in installment pay through ISS payroll. Currently 42 LEAs offer installment pay through financial institutions. In April of 2003, Wake County Schools received the State Treasurer’s Award for Excellence in Accounting and Financial Management from State Treasurer Richard Moore. This award was given for the implementation of a privatized alternative to the twelve-month pay option. The State Treasurer determined that this method was efficient, effective and saves costs. At that time the State Department of Public Instruction approved the State Employees Credit Union as an approved alternative to the traditional installment pay. Since that time, LEAs have added other banks to this alternative. Lina Drinkard, our local NCAE area representative, spoke to the Task Force at the March 30 meeting and emphasized that NCAE believes that to require employees to request installment pay through financial institutions is illegal. However, I have contacted Ken Soo with Tharrington, Smith, PLLC. My understanding from our conversation is that having financial institutions handle installment pay is legal. He is currently researching General Statute 115C-302.1 (b). I will have a written legal opinion from him at our May 7, 2007 meeting. There have been approximately four Boards of Education which have elected not to do this once NCAE has spoken with them. Estimated Cost Savings based on current interest rates = $157,000 annually to employees. Switching Dual Employees to Hourly Pay This potential change offered the most challenges to the task force committee. The Committee asked the payroll staff to hold area meetings to talk with dual employees, explain what we hoped to accomplish, answer their questions and concerns, and bring back to the group any suggestions they might have. We met with the ISS Teacher Assistant Association on March 5, 2007 and discussed these changes with them and obtained their support to continue discussions with other groups. We held mandatory area meetings with all dual employees on March 20, 2007. All issue bin items (88 just for payroll) were answered and returned to employees via email. In addition, we asked the dual employees at these meeting to vote as to whether they were in support of us making this change or were not in support of. The vote resulted in 128.5 being in support of hourly pay and 78.5 not in support. Fifty additional employees’ votes indicated that they were neither in support of or against being paid hourly. Our purpose of looking at doing this is that Dual Employees don’t understand their paycheck. They can’t tell if they have been paid correctly. The reason is that their primary position (for example teacher assistant) is paid as salaried. Their second position, bus driver, is paid at an hourly rate. All overtime is paid at a weighted combination of the two rates. It is a very complicated computation and therefore hard to explain to employees. To complicate matters even further, they are prepaid for part of the teacher assistant position and paid in arrears for all of the bus driving position. Switching these employees to hourly rates for both jobs and not prepaying solves all of these problems. Therefore, the only problem remaining is that these employees will not be paid on August 30, like all other 10 month employees. Their first actual paycheck for time worked will not be until September 30. In order to alleviate some of the problems this will create for our employees, we propose the following. 1. In August, we will offer them an option of a salary advance up to $600.00. They will need to pay this back September through February at $100 per month. 2. In August of 2007, we will prepay their bus supplement which will be 6.6% of their income. This would normally be paid in June of 2008. So in effect we are moving up this payment. The bus supplement prepayment is for this year only. 3. Also, in November of 2007 we will, for this year only, continue to pay them one- half of their primary job supplement. The other one-half will be paid in June. In the future, this supplement will be paid as earned, with what has been earned by November being paid in November and the remainder in June. Cost Savings = $45,468 annually in labor, overtime and overpayments not collected Administration’s Recommendation Dr. Terry Holliday will meet with NCAE Representative(s), prior to the May 14 Board of Education meeting, to discuss these changes. Administration will make a final recommendation to the Board on May 14, 2007. Thank you for your time and consideration of these matters.
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