systems
Effective Date: 07/01/05

It is the policy of the State of North Carolina that certain types of pay will be utilized by the payroll system which differentiate between appointment type and years of service. To meet requirements of specific groups of employees, other categories of pay are processed as determined by the Central Payroll Division.

Policy Statement


It is the policy of the State of North Carolina that certain types of pay will be utilized by the payroll system which differentiate between appointment type and years of service. To meet requirements of specific groups of employees, other categories of pay are processed as determined by the Central Payroll Division.

Authoritative References


G.S. 126 State Personnel Payroll G.S. 143B-426.39 Powers and Duties of the State Controller State Personnel Manual

Explanation of Policy


Other categories of pay types include:
  • Law Allowance pay
  • Severance Salary Continuation pay
  • Personal Service Contract pay
  • Short Term Disability pay
  • Payroll splits
  • Nurses Incentive pay
  • Cost of Living supplements
  • Military Differential Pay
  • Dual Employment and Employees on loan

Law Allowance


The Law Allowance is used to pay special separation allowances to qualified retired law enforcement officers through the month in which the retiree reaches age 62.  Attributes of the Law Allowance include:
  • Subject to state and federal tax withholding
  • Subject to FICA taxes
  • Exempt from contributory and matching retirement
  • Disallowance of miscellaneous deductions except garnishments coded in the 900 series of deduction codes
Authorization for Law Allowances is received from the agency personnel office and must include the following:
  • Annual salary as of retirement date
  • Retiree birth date
  • Years of service
The calculation of the monthly allowance amount is: Annual Salary X Number of Years of Service X .0085/12 = Monthly Allowance All payments of the Law Allowance are processed on the monthly payroll and are recorded to the following account.

Law Allowance Account


Account
Description
535232 LEO Separation Allowance

Severance Salary Continuation Pay


An employee who has been reduced in force and who does not obtain another permanent job in state government by the effective date of the reduction in force shall be eligible for severance salary continuation when separated as follows:

Type of Appointment Is Employee Eligible?
Full-time or Part-time (1/2 or more) Yes
Permanent Yes
Trainee (6 months of service or more) No
Trainee (less than 6 months service) No
Probationary No
Time-limited permanent No
Temporary No
Intermittent No


Employees on Leave An employee on leave with pay or leave without pay shall be separated on the effective date of the reduction in force, the same as other employees, and shall be eligible to receive severance salary continuation on that date. This includes employees who are on leave without pay and are receiving workers' compensation or short-term disability payments.

Reemployment
To A Permanent Position - An employee who is re-employed in any permanent position with the State, or any other permanent position that is funded in part or in whole by the State, while receiving severance salary continuation, will no longer be eligible for such pay effective on the date of re-employment.  The re-employing agency shall be responsible for determining if the former employee is receiving severance salary continuation payments.

To A Temporary Position
- An employee who is re-employed in a temporary position with the State, while receiving severance salary continuation, may remain eligible to receive severance salary continuation.

To a Contractual Services Position
- Any employee separated from State government and paid severance wages shall not be employed under a contractual arrangement by any State agency, other than the constituent institutions of the University of North Carolina and the constituent institutions of the North Carolina Community College System, until 12 months have elapsed since the separation.

Effect of Retirement An employee who is eligible for early or service retirement may elect to delay retirement and receive severance salary continuation for the period prescribed.  However, an employee who is separated and receiving retirement benefits from early retirement, service retirement, long term disability or a discontinued service retirement as provided by G.S. 143-27.2 is not eligible for severance salary continuation.

Amount of Severance Pay
Service Payment: The salary used to determine severance wages is the last annual salary unless the employee was promoted within the previous 12 months.  If the employee was promoted within the last 12 months, the salary used to calculate severance pay is the annual salary prior to the promotion plus any across-the-board legislative salary increases.  Severance salary continuation shall be based on total state service supplemented by an age adjustment factor as follows:

Amount of Salary Continuation

Years of Service Payment
Less than 1 year 2 weeks
1 year or more but less than 5 years 1 month
5 years or more but less than 10 years 2 months
10 years or more but less than 20 years 3 months
20 years or more 4 months


Payment Schedule Income Tax Rate
First payment Flat tax rate (see section D.02 Current Year Payroll Processing Rate Table for current rates)
Second through fourth payments Taxed according to employee withholding elections
* Severance pay is exempt from state tax for total payments that do not exceed $35,000 of pay for each severance occurence. Severance salary continuation is recorded against the following accounts:

Severance Salary Continuation Accounts

Account(s) Description
531620 Severance Salary Continuation - Universities
531621 Severance Salary Continuation - Appropriated
531622 Severance Salary Continuation - Receipts
531623 Severance Salary Continuation - Undesignated

Personal Service Contract Pay


Personal Service Contractors are individuals with whom an agency enters into a performance contract. These individuals are not entered into the State Personnel System and are not subject to any state benefits. They are paid through the Central Payroll System instead of Accounts Payable because they meet the criteria established by the Internal Revenue Service that identify them to be employees and not independent contractors. To determine whether a worker is an independent contractor or an employee under common law, the relationship between the worker and the agency is examined. All evidence of control and independence in this relationship is considered. The facts that provide this evidence fall into three categories - Behavioral Control, Financial Control, and the Type of Relationship itself. Behavioral Control covers facts that show whether an agency has a right to direct and control how the work is done through instructions, training, or other means. Financial Control covers facts that show whether an agency has a right to control the financial and business aspects of the worker's job. This includes:
  • The extent to which the worker has unreimbursed business expenses,
  • The extent of the worker's investment in the facilities used in performing services,
  • The extent to which the worker makes his or her services available to the relevant market,
  • How the business pays the worker, and
  • The extent to which the worker can realize a profit or incur a loss.
Type of Relationship includes:
  • Written contracts describing the relationship the parties intended to create,
  • The extent to which the worker is available to perform services for other similar agencies or businesses,
  • Whether the agency provides the worker with employee-type benefits, such as insurance, a pension plan, vacation pay, or sick pay,
  • The permanency of the relationship, and
  • The extent to which services performed by the worker are a key aspect of the regular business of the agency.
Personal service contract pay is subject to federal and state income tax withholding and FICA tax. It is processed as a non-repeating payroll that resets a contractor's gross pay to zero each time the payroll is run. Personal service contractors are paid on the mid-monthly payroll and are coded to the following accounts.

Personal Service Contract Accounts

Account Description
531320 Contract Employee Per IRS - Universities
531321 Contract Employee Per IRS - Appropriated
531322 Contract Employee Per IRS - Receipts
531323 Contract Employee Per IRS - Undesignated
531321001 Dentist
531321002 Nurse/Nurse Practitioner/Physician Assistant
531321003 Pharmacist
531321004 General Practice Physician
531321005 Psychologist

The requisite documentation and authorizations needed to pay a personal service contractor on the payroll system include the following:
  • PSC-1 Request for Payment of Personal Service Contractor form with appropriate approval signatures
  • W-4 Employee's Withholding Allowance Certificate form
  • NC-4 Employee's Withholding Allowance form (for North Carolina residents)
  • I-9 Employment Eligibility Verification form
  • Copy of documents verifying employment eligibility (see instructions for Form I-9)
  • Monthly invoice or timesheet with appropriate approval signatures (if applicable)
Note on I-9 Form:  Records for Personal Service Contractors are not maintained by the agency's Personnel Office.  Therefore, the agency Payroll Office is responsible for retaining completed I-9s for three years after the date of hire or one year after the date employment ends, whichever is later. For detailed information on how to determine whether a contractor is independent or an employee under the regulations defined by the IRS, refer to the following web site: http://www.ncosc.net/sigdocs/sig_docs/documentation/policies_procedures/
sigEmployee_Versus_Independent_Cont.html


Short Term Disability


Eligible employees who become temporarily or permanently disabled and are unable to perform their regular work duties may receive partial replacement income through the Disability Income Plan of North Carolina (the Plan).  It is the responsibility of the employer and the employee's physician to determine if the employee is eligible. Amount of Benefit Employees that are certified for short term disability payments may receive a monthly benefit equal to:
  • Fifty percent (50%) of one-twelfth of their annual base rate of compensation last payable to the employee prior to the beginning of the short term disability period, plus
  • Fifty percent (50%) of one-twelfth of their annual longevity to which the employee may be entitled
The base rate of compensation is the regular monthly rate of compensation, not including pay for shift premiums, overtime, or other types of extraordinary pay.  For teachers, the base rate of compensation includes any salary supplements. Limitations to benefits:
  • Monthly benefits during the short term period cannot exceed $3,000. 
  • Monthly benefits are reduced by any workers' compensation benefit received
  • Monthly benefits are reduced by any monthly payments from the federal Veterans Administration or any other federal agency if these payments are the result of the same disability
  • Monthly benefits are reduced by any monthly payment under the provisions of G.S. 127A-108 to which the employee may be entitled if these payments are the result of the same disability
Short term benefits are available for up to one year and may be extended for up to one additional year if the disability is temporary and is likely to end within that additional year.   Eligibility An employee is eligible if the employee meets the following requirements:
  • Has at least one year of contributing membership service in the Retirement System during the 36 calendar months preceding the disability,
  • Is found to be mentally or physically disabled for the further performance of the employee's occupation, and
  • Has a disability that has been continuous and was incurred during the time of active employment.
There is a 60-day waiting period before benefits are paid by the Plan.  During this period, an employee may elect to exhaust any accumulated compensatory, sick, vacation, or shared leave, but the Plan does not require that an employee exhaust leave. The exhaustion of leave does not change the onset of the disability or the beginning of the waiting period. If the employee does not have leave to cover the waiting period, then the employee is considered to be in a leave without pay status. 60-Day Waiting Period The first day of the 60-day waiting period begins after the following:
  • The day after the last day worked, provided the physician certifies the employee to be disabled as of the last day of actual work.
  • The day the disabling event occurred, as certified by the physician, if the disabling event occurred on a day later than the last day worked, provided the employee was in a pay status by the exhaustion of leave through that date.  (If the employee was not in a pay status on the day of the disabling event, then the employee would not be considered to be in service and would not be eligible for short term disability payments.)
  • The day the disabling event occurred, as certified by the physician, if the disabling event occurred on a day other than a normal workday, for example, Saturday, Sunday, or a holiday.
  • The day succeeding at least 365 days after service as a state employee or teacher began.  For example, if an employee is first employed on January 1, 2004 and is certified disabled on December 20, 2004, the waiting period would begin January 1, 2005.
Trial Rehabilitation (Return to Work Status) An employee that returns to work on a trial basis during the disability period is subject to the following rules: Return to Work During the Waiting Period  If an employee returns to work in any capacity for any part of a given day for intervals of not more than five continuous workdays, the waiting period is extended by the number of days the employee worked during the waiting period. Return to Work During the Short Term Benefit Period An employee may return to work for a trial rehabilitation for periods of not more than 40 continuous days during the 365 day benefit period.  Trial rehabilitation is a return to service in the same capacity that existed prior to the disability.  The period of trial rehabilitation does not extend the short term disability period, however, if the employee returns to work in a full-time capacity, short term benefits cease for the period of return. Required Forms for Processing Short Term Disability Payments The agency personnel office is responsible for processing the required forms necessary for determining eligibility for short term disability benefits.  The agency payroll office must have the following forms to process the payments on the Central Payroll System: DIP-3 Employee Request for Payment & Certification of Disability The Personnel Office must submit this form to the Payroll Office each month of the disability benefit period unless the employee is pre-certified for long term disability by the Retirement System.  A letter from the Retirement System stating this determination must be attached to the DIP-E2 each month benefits are paid. This form contains the physician's certification of disability and is used to determine the number of days the employee is paid the disability benefit. Restrictions for payment are based on the physician's certification date and are applied as follows:
  • If the physician certifies the employee disabled beyond the physician's signature date, the Payroll Office can only pay benefits for the period through the date of the signature.  Physicians cannot pre-certify the employee's disability.
  • If the date of the physician's signature is after the last day to key the monthly payroll on the Central Payroll System, then the Payroll Office cannot process the disability payment.  Physicians cannot pre-certify the disability beyond a current date.
  • If the Retirement System has pre-certified the employee for long term disability (see form DIP-E2), then the Payroll Office can pay the employee benefits through the end of the current month.
DIP-E1 Employer Master Worksheet for Determining Eligibility for Short Term Benefits The Personnel Office submits this form to the Payroll Office with the initial payment request.  It does not need to be resubmitted each month. DIP-E2 Employer's Monthly Calculation & Authorization for Payment The Personnel Office submits this form to the Payroll Office each month of the benefit, even if the employee is pre-certified for long term disability.  It is used to determine the amount of pay the employee is eligible to receive for that month.  If the employee has been pre-certified for long term disability, then the letter stating this determination by the Retirement System must be attached each time the form is sent to the Payroll Office. W-4 Employee's Withholding Allowance Certificate form The employee must complete the W-4 form for federal tax withholding.  Employees that fail to provide a W-4 form will be added with the maximum withholding amount, single with no exemptions (S-00). NC-4 Employee's Withholding Allowance form The employee must complete the NC-4 form for state tax withholding.  Employees that fail to provide a NC-4 form will be added with the maximum withholding amount, single with no exemptions (S-00). Employees that have five or more years of state service as of August 12, 1989, are not subject to North Carolina State income tax.  The Personnel Office is responsible for informing the Payroll Office of the employee's eligibility for state tax exemption. Miscellaneous Deduction Forms Miscellaneous deductions can be made from short term disability payments except for tax-deferred items and credit union payments.  Hospitalization insurance may also be deducted but is not processed as a tax deferred deduction. always'> Garnishments and Levies Short term disability is a benefit and not wages.  No garnishments can be withheld from the benefits except the following:
  • Internal Revenue Service (IRS) Levies - Deduction Code 901
  • Court Ordered Child Support - Deduction Code 903
Status of Mandatory Deductions The following rules about mandatory deductions apply to short term disability payments: Federal Income Tax Withholding All short term disability compensation is subject to federal tax withholding.  Employees that do not submit a W-4 form will be withheld at the maximum rate, single with no exceptions. State Income Tax Withholding Employees that have five or more years of state service as of August 12, 1989, are not subject to North Carolina State income tax.  Employees that did not complete five years of service as of August 12, 1989 are subject to state income tax.  Employees that do not submit a NC-4 form will be withheld at the maximum rate, single with no exemptions. FICA Taxes Any benefits actually paid during the first six months of disability are subject to FICA taxes.  Payments made more than six months after the last calendar month in which the employee worked are not subject to FICA taxes.  For example, if an employee last worked in December 2004, any short term disability payments made prior to June 30, 2005 would be subject to FICA taxes.  If for some reason, no payment was actually made to the employee until July 2005, no FICA taxes should be withheld. Retirement Contributions No state retirement contributions are withheld from the short term disability benefit. Medical Insurance An employee in receipt of short term disability benefits can continue their medical insurance coverage on a contributory or non-contributory basis.
  1. The state will continue to pay the employee's health insurance premiums if the employee has at least five years of contributory service with the Retirement System.
  2. For an employee with less than 5 years of service, medical insurance premiums are paid during the time the employee is on FMLA.  Following the exhaustion of FMLA, no medical insurance premium is paid by the state.  If the employee does not have five years of contributory service and is not covered under FMLA, the employee can elect to have the full cost of the health insurance premium deducted from the benefits payment.  Health insurance deductions are not tax deferred under short term disability payments.
If the employee is eligible for state maintained health insurance premiums, then the appropriate deduction codes associated with the short term disability payments are the following:

Medical Insurance Description Central Payroll Post Tax Deduction Code
NC HEALTH BENEFIT PLAN 800
NC HEALTH PLAN-MEDICARE 801
NC HEALTH BENEFIT PLAN -0- 803
NC HEALTH PREPAID INS 804
TRICARE HOSP PLAN 805
TRICARE HOSP PLAN -0- MATCH 807
TRICARE PREPAID INS 808


Medical insurance coverage at the end of the short term disability period falls under the following rules: Filing for Short Term Reimbursement and Granting Service Credits Upon completion of the short term disability, the agency must file form DIP-E4 to grant appropriate service credits to employees in receipt of short term disability benefits.  If the payments extend beyond six months, the agency should apply for reimbursement of medical insurance costs.  If the disability lasts less than six months, the following forms should be filed immediately with the Retirement System to grant service credits:
  • Form DIP-1 Application for Short Term Disability Benefits
  • Form DIP-3 Employee Request for Payment & Certification of Disability or Form RET-7A Medical Report
  • Form DIP-E1 Employer Master Worksheet for Determining Eligibility for Short Term Benefits
  • Form DIP-E4
If the disability benefits extend beyond the first six months, the agency should submit the above referenced forms at the conclusion of the short term disability period or upon termination of short term disability, if earlier, to grant service credits and request reimbursement of medical insurance costs. Note:  If an employee returns to service in the same capacity that existed prior to the disability, there is no short term benefit due and, therefore, no reimbursement is due for a period of trial rehabilitation. Reimbursement of Medical Insurance Premiums Reimbursement of the medical insurance premium costs during the second six months of the short term disability period is subject to the following:
  • If the second six months of the short term disability period begins between the 1st and the 14th of a calendar month, reimbursement is the amount of the premium in that month for the following month's coverage.
  • If the second six months of the short term disability period begins between the 15th and the 31st of a calendar month, reimbursement will be the amount of the premium paid in the next month for the following month's coverage.  The premium costs for subsequent months are reimbursed on the same basis.
When requesting reimbursement of medical premiums, it is not necessary to prorate any portion of the premium cost during the second six months of the short term disability period. Reimbursement of Benefits A full benefit reimbursement is due when the employee is paid short term disability in excess of six months from the date of disability using the following calculation (assuming there are no complicating factors such as part time earning, trial rehabilitation, Workers' Compensation benefits, exhaustion of leave, etc.):
  • Reimbursement begins the first day of a month and continues through the end of that month.
  • Reimbursement begins on a day other than the first day of a month and continues through the day before that date in the following month.
A short term benefit reimbursement is prorated using the following calculation (assuming there are no complicating factors such as part time earning, trial rehabilitation, Workers' Compensation benefits, exhaustion of leave, etc.):
  • Beginning of the second six months:
    1. Number of days in the first month of the second six months that the employer is responsible for paying times the daily rate.
    2. Subtract the total in #1 above from the monthly benefit amount.
    3. The difference from #2 above is the amount due to be reimbursed for the month.
  • End of the second six months (this is the end of the short term disability period or the last date the short term disability benefit is payable due to a release from the disabling condition, whichever comes first):
    1. Multiply the number of days a benefit is payable during the month times the daily benefit rate.
    2. The total from #1 above is the amount due to be reimbursed for the month.
Conclusion of Benefits The rules for conclusion of short term disability benefits include the following:
  • Short term benefits are payable by the employer through the 365th day of the short term period.
  • Short term benefits are payable by the employer through the end of the month in which the employee dies.
  • Short term benefits are payable by the employer through the end of the month when an employee applies for full service retirement benefit.
Accounting for Short Term Disability Benefits Short term disability benefits are recorded against the following accounts:

Short Term Disability Benefits Pay

Account(s)
Description
531625 Short Term Disability Payments - Undesignated/Universities
531627 Short Term Disability - Appropriated
531628 Short Term Disability - Receipts


Nurses Incentive Pay


Nurses that sign a contract agreeing to work a specific shift other than first shift for six months are paid an incentive pay rate of $1.00 for RN's and $.50 for LPN's. The maximum number of hours against which the incentive can be paid is 1,040 hours and is payable at the end of the six month contract period. Nurses only receive incentive pay for regular hours actually worked. Sick leave, vacation, compensatory time taken, holidays, and overtime pay are excluded from the calculation of incentive pay. Nurses that do not complete the entire six month period due to resignation, transfer, etc. automatically forfeit the right to incentive pay. Incentive pay is processed at the end of the contract period on the monthly payroll and is coded to one of the following accounts:

Account
Description
531431 Shift Premium Pay - Appropriated
531432 Shift Premium Pay - Receipts
531433 Shift Premium Pay - Undesignated

Cost of Living Supplements


The cost of living supplement is solely provided to accommodate an employee's assignment to a duty station where increased rent, real estate costs, utilities, food, transportation and other costs essential to living in an out-of-state location is for the convenience and by assignment of a state agency in North Carolina. Cost of living supplements are subject to federal and state income taxes and FICA taxes, but are not subject to retirement. While these supplements are not considered to be part of compensation for purposes of administering fringe benefits, they are coded to the employee's regular salary account. The agency personnel office is responsible for submitting to the agency payroll office a PD-105 indicating the amount of supplement payable. Cost of living supplements are not included as part of the employee's history in the Personnel System except as reflected in the remarks section.

Military Differential Pay


The State Budget Manual, Personnel Policies and Regulations Section, governs the State's policy on paying employee military pay. Full time employees of the State of North Carolina who serve in the Uniformed Services and National Guard are granted military leave with pay for a maximum of 120 hours each Federal fiscal year (October 1 through September 30).  The allowable leave amount is prorated for part-time (minimum half-time) employees. In addition to the 120 hours of military leave, for a military employee that is ordered to State or Federal active duty, or is an intermittent disaster-response appointee upon activation of the National Disaster Medical System, the following applies for each period of involuntary service:
  • Members receive up to thirty (30) calendar days of pay based on the employee's current annual state salary. This includes special activities of the National Guard, usually not exceeding one day, when so authorized by the Governor or his authorized representative.
  • After the thirty-day period, members receive differential pay for any period of involuntary service.  This pay is calculated as the difference between the military basic pay and the employee's annual state salary, if military pay is the lesser.
The agency personnel office is responsible for notifying the agency payroll office by submitting a PD-105 that indicates the reason for separation as LWOP - Reserve Active Duty.  The separation date must be the last day of the thirty (30) days of full pay with a notation that the employee is entitled to differential pay thereafter. Required documentation for processing military pay includes the following:
  • PD-105
  • DD214 Military Orders
  • Military Leave and Earnings Statement

These payments continue until notification is received from the Personnel Office to terminate the payments.

Longevity

If eligible, the employee continues to be paid longevity payments during the period of reserve active duty.

Retirement

Beginning in 2009, Military Differential Pay is subject to retirement contributions. Additionally, the employee does receive retirement service credit for periods of service up to the time the employee was first eligible for discharge if the employee returned to state employment within two years; or any time after discharge if the employee completed at least ten years of membership service in the Retirement System.  (See Retirement System Handbook for further details.)

Health Insurance

When on state duty, the State continues to pay for health coverage for members of the National Guard. When on Federal active duty, the State pays for coverage in the State Health Plan for at least 30 days from the date of active service pursuant to the orders. Partial premiums are not accepted; therefore, if a full premium is paid to cover a partial month, coverage will also continue to the end of that month.  After that, the employee may choose to continue coverage in the State Health Plan by paying the full premium.  If a military employee elects to exhaust vacation leave, the State continues the insurance coverage while the employee exhausts the leave balance.

Payment

Military Differential Pay is charged to the employee's normal accounting distribution and processed on the monthly payroll cycle. It is subject to federal and state income tax withholding using the employee's W-4 and NC-4 exemptions but is exempt from FICA tax. Beginning in 2009, it is also subject to retirement contributions.  Voluntary deductions can be applied against military pay.

Dual Employment and Employees on Loan


The dual employment policy is a state-wide uniform policy to be followed when one state agency secures the services of an employee of another state agency on a part-time, consulting or contractual basis. All payments for services must be made by the borrowing department directly to the parent department of the employee borrowed, and not to the employee.  Employee's travel and/or subsistence expenses, if any, incurred in the performance of services for the borrowing department, will be paid directly to the employee by the borrowing department. (Commuting expenses are excluded.) Subject to negotiation between the two departments, payments may include an amount for the overhead expenses of the lending department to cover administrative and other indirect costs; payments may also include amounts for direct costs incurred by the parent department, agency, such as identifiable related expenses for clerical and duplicating services. Payments to the parent agency may not be made from salary and wage line items. If funds for part-time services are presently budgeted in salary and wage line items, the Office of State Budget and Management will give favorable consideration to requests to transfer these budgeted amounts to the appropriate accounts if needed. The same would apply to transfer of funds budgeted for temporary wages.

Employee on Loan


If the work (including preparation) is performed during the employee's regular work schedule (normally 8:00 to 5:00, Monday through Friday), and the employee is not on leave, the employee may not under any circumstances receive additional pay. All payments to the parent department for an employee on loan must include the following:
  • Payment for employee's services.
  • Employer's Social Security contributions computed on the payment for services.
  • Employer's retirement contribution computed on the amount of payment from above.
Form OSCPXA03, CP-30 - Dual Employment Certification Form, must be completed by the borrowing agency and submitted with payment to the parent agency. All payments for employee on loan services by the borrowing agency and receipts by the parent (lending) agency are recorded as follows:

Agency Activity Account
Borrowing Agency Payment of Services

532194 Employees on Loan Payments

Parent or Lending Agency Receipt of Payment

538210 Reimbursements – Employee on Loan


If the payment falls under the employee on loan status, then no additional payment above the employee's regular salary is due to the employee. Therefore, the section of the CP30 form called Certification by Parent Agency should show no additional payment amount. The agency payroll office must code that portion of the employee's regular salary that is paid as a borrowed employee to one of the following accounts:
  • 531450  Dual Employment Wages - Universities
  • 531452  Dual Employment Wages - Receipts
  • 531453  Dual Employment Wages - Undesignated
Dual employment wages, by definition, are receipt supported and cannot be coded to an appropriation funded account.

Dual Employment


Compensation must be in accordance with the minimum wage and overtime pay provisions, which require overtime payments of time and one-half the employee's regular rate of pay for the hours worked in excess of 40 in the week. However, if during any given work week the employee does not perform any work for the parent department; no overtime payment will be required unless the employee works more than 40 hours for the borrowing department. If a straight-time employee is on authorized leave from regular duties with the parent department, the employee may be paid for the extra work on the same basis as in the paragraph above.  In all cases of additional payment to an employee, the parent (lending) department must make the payment to the employee as an addition to the employee's regular pay. This is necessary to maintain the integrity of the retirement, social security, and federal and state income tax records. All payments to the parent department for dual employment must include the following:
  • Payment for employee's services.
  • Employer's Social Security contributions computed on the payment for services.
Form CP-30, Dual Employment Certification Form, must be completed by the borrowing agency and submitted with payment to the parent agency.  All payments for dual employment and receipts by the parent (lending) agency are recorded as follows:

Agency Activity Account
Borrowing Agency Payment of Services 532191 Dual Employment Payments to State Agencies
Parent or Lending Agency Receipt of Payment 538220 Reimbursement - Dual Employment

If the payment falls under the dual employment status, then additional payments above the employee's regular salary is due to the employee.  The section of the CP30 form called "Certification by Parent Agency" should show only the additional payment amount.  The Payroll Office must code the additional payment amount as overtime under one of the following accounts: Overtime - 1.5% Pay for Permanent Employees
  • 531410  Overtime Pay - Universities
  • 531412  Overtime Pay - Receipts
  • 531413  Overtime Pay - Undesignated
Overtime - Straight Time Pay for Permanent Employees
  • 531410001  Straight-Time Overtime - Universities
  • 531412001  Straight-Time Overtime - Receipts
  • 531413001  Straight-Time Overtime - Undesignated
Overtime payments related to dual employment are receipt supported and cannot be coded to an appropriation funded account. Employees working under a dual employment agreement will not be paid until the parent agency receives a Form CP-30 and reimbursement from the borrowing agency.

Payroll Splits


The Central Payroll System allows an employee to be paid from multiple financial sources by the use of payroll splits. There are currently thirty (30) splits available for each employee, but it is recommended that only ten (10) splits be used for the employee's base pay. The premium and longevity pay are programmatically merged into the monthly payroll and at that time are also treated as splits on the system. Supplemental payments merged into the monthly payroll prorate the payments using the same percentages of pay as the base pay.  For example, an employee paid from five splits and receiving both longevity and premium pay will process with fifteen splits (primary pay: 5 splits + longevity: 5 splits + premium pay: 5 splits = 15 splits). The purpose of a split is to allow an employee's salary and employer matching costs to be charged to multiple financial sources, which are interfaced into the state's financial accounting system, the North Carolina Accounting System (NCAS). Expenditures post to the NCAS using a specific accounting distribution. This distribution is comprised of three elements: Company-Account-Center. The Company defines the agency's financial reporting entity and the Account describes the purpose of the expenditure. The Center details the type of funds used to pay the costs, including information about funding sources, RCC's, FRC's, and/or organizational codes.  The structure of the accounting distribution can vary, depending on the level of detail required by an agency. The basic structures are:
  • Company - The company must always be four-digits in length
  • Account - The account must be at least six digits but no more than eleven digits in length
  • Center - The center must be at least four digits but no more than twelve digits in length
An example of a split funded position is shown below: An employee is paid 50% from state appropriations, 30% from federal programs, and 20% from special revenue funds.  The monthly salary of the employee is $3,000.  The payroll split is keyed into the payroll system as follows:

Payroll Split % of Base Amount Accounting Distribution
Company-Account- Center
Primary Subhead 50% $1,500 1401-531211-11001284
Second Subhead 30% $900 1401-531212-3000
Third Subhead 20% $600 1401-531212-2604
Total All Subheads 100% $3,000  

It is important that the appropriate account be used when keying payroll transactions into the system.  With the exception of Law Allowance payments, all payroll costs should be coded to an account that begins with "531". Any payroll costs coded to an account that does not begin with "531" is not correct. For a detailed listing of all payroll accounts, access the statewide Chart of Accounts at the following website: http://www.ncosc.net/sigdocs/sig_docs/data_elements/account/sigExpenditure_Accounts.html

Scope


This policy applies to all state entities using the Central Payroll System.

Exceptions


There are no exceptions to this policy.

Glossary of Terms

  • Dual employment - occurs when one State agency secures the services of an employee of another State agency on a part-time, consulting or contractual basis, and the services are provided to the borrowing agency in addition to the employee's regular 40-hour work week.
  • Employee on Loan -   occurs when one State agency secures the services of an employee of another State agency and the services are provided to the borrowing agency during the employee's regular work schedule and while the employee is not on leave.
  • Parent Department - the State department, agency, or institution having control over the services of the employee, and from which the employee receives his/her regular pay check.
  • Borrowing Department - the State department, agency, or institution seeking on a temporary or part-time basis the services of an employee of another state agency.
  • Straight-time employee - normally, an employee with a 40-hour per week work schedule, including employees on rotating shifts and those with split shifts. Permanent employees filling positions subject to the State Personnel Act, with perhaps extremely rare exceptions, are straight-time employees for the purposes of this policy statement. Such persons, except when working odd or split shifts, are considered to be on their own time between 5:00 p.m. and 8:00 a.m. and on Saturdays, Sundays, holidays, and while on vacation leave.
Adopted: July 1, 2005 Version:  2005-0701.01