Why HR in Higher Ed needs to offer cost-scenario planning

Human Resources in Higher Education

Anyone not in HR may think that HR roles are fairly similar from organization to organization. While this can be true when it comes to daily to-dos, like managing payroll, overseeing hiring plans, and more, there are certain industries that face very specific challenges when it comes to managing their workforce. The higher education space is one of those industries—the challenges faced in higher ed are quite unique, giving HR teams much more to consider when it comes to managing employee benefits specifically.

Some challenges facing HR teams in higher ed are:

• There's a very wide variety of employees in education. Especially in higher education, you have everything from professors, to support staff, to administrators, campus maintenance, and more. Each of those groups has very different needs.
• For larger colleges and universities, there are often many different types of institutions that are geographically distributed. Take Rutgers for example, there’s Rutgers University–New Brunswick, Rutgers University–Newark, Rutgers University–Camden, and Rutgers Biomedical and Health Sciences.
• Then there's the issue of tenure. The career path for educators is long and arduous, with many challenges along the way, but once a professor makes it to tenure, they have a pretty solid job for life.
• Finally, universities and colleges close over the summer. For employees, this means that they have a few months off every year, which adds complexity to pay schedules. For HR, it's an additional complexity to manage.

All of these factors make managing human resources in higher education less straightforward than you would think, and HR will often need to take a different approach to managing related processes. Let's dive into the issue around unique payment schedules.

Education's Unique Payment Schedule

As the 1972 hit will remind us on a yearly basis, Schools Out for Summer! This is sometimes also true when it comes to payroll. For about two months of the year, there are no classes, and most professors take this opportunity to do research, travel, or just enjoy their extended holiday time.

With this seasonal time off, payroll can be managed in one of two ways:

1. Employees can choose to be paid a salary during the entire year. This means that their annual pay is divided into 12 monthly payments, so their pay is the same whether they are working that month or on summer leave. The advantage of this system is that it's predictable and easy to budget for from an HR point of view, as well as being simpler for the employee, as they will have a consistent stream of cash coming in.
2. Employees can also choose to be paid only the months that they are working. In this case, an employee can choose to have their annual pay divided into ten payments, which they will receive only during the months that they are teaching. The advantage of this system is that the employee gets higher monthly payments when they are working, but the downside is that their income is more irregular. This means they will have to do some planning to make sure that they can cover their expenses during the months when they are not receiving a paycheck.

There are pros and cons to both systems, and ultimately the choice of which system to use is up to the employee. However, HR managers should ensure that employees are aware of both options and that they understand the implications of each before making a decision.

Supporting Employee's Benefits Decisions

It's very common for employees to opt into the 10-month payment calendar, as it maximizes their cash in hand every month. However, this can be a risky proposition, as it leaves them without an income for two months of the year.

This can be a problem if they have any unexpected expenses, such as a car repair or an unforeseen medical emergency during the months when they don't have any incoming cash flow from their salary. And this is more common than you may think—our research found that 65% of employees have had a medical emergency and 63% have experienced debt as a result.

For this reason, HR managers need to ensure that employees are fully educated about their benefits and the implications that unexpected medical events may have on their finances throughout the year, especially during the months where they’re not seeing that cash flow.

A benefits decision support tool that can provide real-life Scenario Planning is a great way to do this.

Nayya for Employee Benefits Education

In short, Nayya is a decision support tool that provides personalized benefits recommendations for employees and educates them throughout the enrollment process. Via a short survey, employees can input key information such as location, family size, salary, existing health conditions, and more. From there, Nayya provides personalized suggestions of the best benefits plans for them to choose for their needs.

One of the ways Nayya educates employees is through scenario planning. Employees can see exactly how much each plan will cost them, and how much their contributions to retirement and savings accounts will build throughout the year. If employees know that they aren’t getting paid in the months of July and August, for example, they can ensure ahead of time that the percentage of their pay that they’re putting into their FSA or HSA account will be enough to cover any medical bills, copays, or pricey prescriptions that arise for themselves or their families during those months.

HSA vs. FSA

Health Savings Accounts (HSA) and Flexible Spending Accounts (FSA) are two savings options that employees can contribute to with pre-tax funds. These can be counted on for medical bills, copays, prescriptions, or any other costly medical related procedure. The differences between these accounts are:

• An HSA is a tax-advantaged savings account that can be used to cover qualified medical expenses. The money in the account is yours forever, even if you leave your job, and it can be used to cover deductibles, copayments, and some other out-of-pocket expenses. These can only be used in conjunction with high deductible health plans (HDHPs), to offload some of the costs that add to that high deductible.
• An FSA is a similar account. The main difference is that the money in an FSA is not yours to keep, but rather it is forfeited and reverts back to your employer at the end of the year if it's not used. These accounts do not need to be paired with HDHPs.

In either of these cases, as the contributions to these funds are tax-deductible, paid out of the pre-tax salary, they can help reduce both the employer’s and employee's taxable income, thus saving everyone money.

If you’re an HR manager looking for ways to support your higher education employees in choosing the best benefits for them, a decision support tool can help educate and empower employees when it comes to benefits—while ensuring they have a safety net during those two months of the year when they’re not seeing cash flow. With Nayya, you will be able to ensure your employees are not caught off guard by any medical events that might occur during the months when they're not receiving a paycheck. This way, they can concentrate on enjoying their summer break without having to worry about how they will cope if something goes wrong.