Calendar quirk will cost U of M $41M in payroll

Because of a once in a decade quirk in the calendar, employees at the University of Minnesota will receive an extra pay check in the next fiscal year, and it could cost the university upward of $41 million.

Employees at the University of Minnesota usually receive 26 paychecks a year. But in fiscal year 2011, which starts this summer, 14,804 of them will get 27 paychecks.

It's a phenomenon that pops up in the payroll calendar every 11 years for organizations that pay bi-weekly, and the U's chief financial officer Richard Pfutzenreuter knew it was coming.

"I'm surprised it hasn't been on people's radar here," Pfutzenreuter said. "We've talked about it on numerous occasions over the last couple of years, but we're a complicated place and I think the communication isn't always as good as it could be. We knew it was coming."

Here's the real problem for the U; the 14,000 extra checks will cost the school $41 million in fiscal year 2011.

Pfutzenreuter said the cost comes just as the U faces declining funding from the state.

"It is unfortunate that hit exactly now," he said. "If I could somehow alter the calendar and push this problem out I would."

It's a problem Jim Medlock at the American Payroll Association knows all about. Medlock helps the group's 30,000 members with payroll education.

He's heard from plenty of companies over the years dealing the extra paycheck dilemma. His advice, don't make any big changes to your payroll system.

"If you do make big changes you want to make sure you've notified the employees well in advance so that they can start planning for those changes," Medlock said.

Medlock said one of the potential changes could mean dividing an employee's yearly salary into 27 checks for one year, instead of the usual 26. But that means workers would get 27 slightly smaller checks, and he said companies that have done that had to give employees plenty of warning.

"Those had to start planning two years in advance to make that change in the salary process, as well as notifying the employees that it was going to happen," he said.

The University of Minnesota doesn't have two years to plan for such a change; the new fiscal year is less than four months away.

At this point the U plans to pay employees that 27th check, at least that's what the university's general counsel has recommended.

And with an eye to the future, U leaders are already planning how to pay for the extra check in the year 2021, so they're not caught off guard by a quick in the calendar in another 11 years.

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