Employees should anticipate that their January paychecks may look a little different from their December paychecks. Salary increases, insurance premium increases and more changes to state income tax policy all are contributors. Employees may compare their pay slips in Workday to verify the impact to their take-home pay.
The first piece, increases to employee premiums for medical and dental insurance for the 2025 plan year, showed up in December paychecks since those are paid in advance. This month, several other variables may influence employees' take-home pay:
- Performance-based salary increases, effective Jan. 1
- Lower flat tax rate on Iowa individual income for 2025
- New withholding formula for Iowa income tax for 2025
Salary increases
Performance-based pay increases for faculty, professional and scientific (P&S) and contract staff and postdocs, based on fall performance evaluations, took effect on Jan. 1. This is a timing shift from the previous spring performance evaluations and July pay increases. For employees with satisfactory performance evaluations this year, the salary adjustment range was 1%-3%. Higher increases were possible for exemplary performance.
For merit staff, the new timeline doesn't impact their positions. Their performance review window remained the same and their pay increases follow the state's collective bargaining agreement (PDF) with the Iowa Council of American Federation of State, County and Municipal Employees, and the Iowa Board of Regents' merit system rules. The most recent contract increase (3%) occurred on July 1, 2024. Merit employees not at the top of their pay grade could receive a 1% performance-based increase their anniversary date.
Income withholding
To accommodate a lower income tax rate and other directives in a 2024 law, the state Department of Revenue has issued new tax withholding tables for 2025 based on pay frequency, withholdings requested in an employee's Iowa W-4 form and, for the first time, which of three marital status options an employee selects on that form: head of household, married filing jointly or other (which includes single and married filing separately).
Employees who want to confirm enough Iowa income tax is being withheld to meet their tax liability may use the state revenue department's updated withholding estimator to calculate their 2025 state withholdings. If they need to make changes to align with that estimated amount, employees should update their Iowa W-4 form in Workday (select "Benefits and Pay," then "Withholding Elections" and "State Elections"). Employees may complete a new Iowa W-4 as often as needed; instructions are in a knowledge base article.
Staff in the ISU payroll office can't provide tax advice. Employees should contact a tax professional for help with their tax-related questions.
