December Monthly Pay FAQs
Monthly paid employees receive their December payroll payments on the first business day of January the following year. Please review the frequently asked questions below and contact email@example.com with any additional questions you may have.
Why does Indiana University pay its monthly employees their December salaries in January?
The university pays its monthly faculty and staff on the last business day of every month, except December. December salaries are paid on the first business day of January pursuant to a policy implemented in 1981. The policy was implemented to take advantage of certain tax law changes passed at the time. Since then, monthly employees have continued to receive twelve paychecks per calendar year, with two issued in January, and none issued in December.
Does the university plan to change its pay schedule?
In 2018, the university planned to move the December monthly payroll from the first business day in January to the last business day of December to simplify employee finances, to increase consistency, and to simplify benefit deduction processing and tax withholdings. In reviewing this decision, however, we found that it may adversely affect some faculty and staff. Therefore, the university decided to leave the pay calendar unchanged.
Why must the university maintain this pay schedule?
Changing the pay schedule would result in monthly faculty and staff receiving an additional payment during the current tax year. This would make their gross and taxable income for the current year higher than it would be otherwise, even though they would not be receiving raises. This could result in some employees being adversely impacted in the following areas:
Means-tested benefits. The higher gross and taxable income in the current year could result in some employees losing eligibility the following year for means-tested government benefits.
Student loan repayment. Employees with income-driven student loan repayment plans could see higher loan payments in the following year because their repayment amounts would be calculated using their inflated current year wages.
Tax liability. Employees could experience lower net pays in the current year and increased tax bills in following year because of their higher current year wages.
Based on our review of these issues, we concluded the benefits of paying December salaries a couple of days earlier did not outweigh the financial cost some of our employees would have to bear to accomplish the pay calendar change. Therefore, we left the pay calendar unchanged.