The diagram below uses a 24 month repay interval option. In order to include the employee’s final pay period on the diagram, the employee in this example separates from employment soon after completing the repay interval. The timing of the employee’s separation has no impact on the proposed payroll lag model.
- An existing full-time employee begins a new pay period under our existing “paid current” model.
- The employee works during pay period 1.
- Payday 1 arrives. The employee is paid for the work done in pay period 1.
- The employee works during pay period 2. A payroll lag of one pay period is introduced by the College.
- Payday 2 arrives. Instead of receiving no paycheck, the employee may request a transition payment. For bookkeeping purposes, the transition payment is classified as a no-interest loan. Loans are not taxable, do not appear on the employee’s W-2, and no benefits need to be deducted. The transition payment is repaid by the employee, who must choose one of several payback options offered by the College. The transition payment can be any amount from $0 up to a maximum of the net pay amount that would normally appear on their mid-month paycheck. (Note: Net pay, also called “take home pay” is the employee’s pay after all deductions have been removed from their wages.)
- Employee works during pay period 3.
- Payday 3 arrives. The employee receives a normal paycheck for the work done in pay period 2. If the employee chose to receive a transition payment on payday 2, a new deduction appears. The new deduction is the first installment toward repaying the transition payment. The amount of the deduction depends upon which payback option the employee selected and the amount of the transition payment.
- The employee works multiple pay periods during the repay interval. The diagram shows a repay interval of 24 months.
- Payday 51 arrives. The employee receives a normal paycheck for the work done in pay period 50. The employee’s final repay installment appears on this paycheck, and the transition payment has been fully repaid.
- The employee works during pay period 52.
- Payday 52 arrives. The employee receives a normal paycheck. The repay deduction no longer appears on the check.
- The employee works all of pay period 53 and then separates from employment.
- The employee’s final paycheck. Since the employee is on a standard payroll lag schedule now, this paycheck pays the employee for work done in pay period 53 along with their normal pay from pay period 52.