Salary Caps
The Public Health Service (PHS) which includes the National Institutes of Health is governed by regulations establishing a maximum salary that may be awarded to a project participant (salary cap). Other non federal agencies also impose salary caps.
Stanford will comply with all agency requirements in this regard. Where an agency specifies a maximum rate amount at which an individual may be paid from that agency's funds, Stanford will ensure that any salary above that rate will not be charged to the agency.
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Salary Cap Overview
The DHHS salary cap limits the amount which can be charged to a DHHS project (or related cost sharing account) by limiting the maximum annual salary rate for a 100%, 12-month FTE. The rate is set annually and applies to all awards made that year.
DHHS establishes the funding limitation for salaries at the time that a competitive award is made. However, if subsequent (non-competing) funding is awarded during a year with a higher salary cap, NIH will allow existing funds to be re-budgeted to that level. Typically, no new funds will be awarded for this purpose.
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DHHS salary cap may change annually
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PHS funds salary up to the level of the cap in effect on the award date
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Use a special expenditure type to capture difference between actual pay & what can be charged to a PHS award
Note: other sponsors also may have salary caps, such as Juvenile Diabetes Research Foundation, CIRM, Alex's Lemonade Stand, American Institute for Cancer Research, Anesthesia Safety Foundation, National Multiple Sclerosis Society, Thrasher Foundation, Greenwall Foundation, PCORI, Ovarian Cancer Research Fund, Rheumatology Research Foundation and Susan B. Komen. This list is not exhaustive: read the solicitation carefully to determine if your sponsor has a salary cap.
Salary Cap by Fiscal Year
The dollar amount of the PHS cap is indexed to selected Executive Pay Levels, established by the Federal Government, and may vary for each Government Fiscal Year in which funds are awarded. The cap amount is the maximum annual rate of salary that the PHS will allow to be paid to an individual from their funds.
The current schedule of applicable salary caps for PHS awards is as noted below. Please note that, effective in FY12 13 and 14, the salary cap has been moved to a LOWER government pay level.
Patient-Centered Outcomes Research Institute (PCORI) requires a personal salary cap of $200,000 per individual not including fringe benefits.
Preparing a Proposal Using the Salary Cap
In preparing an NIH proposal budget, for example, when one of the key personnel to be paid on the project earns an annual salary above the PHS cap, keep the following general principles in mind:
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The salary cap applies to the total institutional salary paid to the individual. If a faculty member earning more than the cap will charge 50% of her salary to a project, the salary charge is 50% of the cap amount - not the full salary.
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An individual's total Stanford salary is defined as the pay which an individual receives upon which benefits are calculated. In the School of Medicine, for example, this includes base pay and clinical components. Sabbatical pay, however, is not included as part of base salary. Pay would also include administrative supplements, which incur benefits.
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Salary dollars above a salary cap level are unallowable costs, but they must be tracked and accounted for as part of Stanford's Organized Research Base. We accomplish this by using a special Expenditure Type 51190, "Regular Benefits Eligible (RBE) Unallowed Salary over a Cap," on the Oracle Labor Distribution Labor Schedule, which allocates salary costs.
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NIH will fund the salary cap at the level in effect at the time of the competitive award. If, during the period of that award, the salary cap is increased, you will normally be able to use rebudgeting authority to pay the salary to the higher level. NIH, however, will not award any additional funds for this purpose.
Example: Straight Forward Salary Cap, No Cost Sharing
Professor Leland Stanford earns a total base salary of $150,000 per year. The salary cap in this example is $125,000.
Note: Actual salary caps may fluctuate over time. Be sure to use the current correct applicable cap when calculating allowable and unallowable salary.
In this situation, Professor Stanford will be on sabbatical leave 1/1/99 - 3/31/99 and will work on three sponsored projects as follows during this period:
- 10% effort on award PTA2222222-1-PABCD, with the salary cap, from 8/98 through 7/99
- 15% effort on award PTA3333333-1-PAEFG, also with the salary cap, from 6/98 through 5/99
- 10% effort on award PTA4444444-1-SDDAB, which does not include a salary cap, from 1/99 through 12/99
Where the salary cap is applicable, calculate the maximum which can be charged per pay period by dividing the total capped salary ($125,000. in this example) by 24 (the number of pay periods in a year), and multiplying that by the percent of effort on the NIH project.
Professor Stanford's actual pay per pay period is $6250 ($150,000/24). The maximum allowed under the salary cap is $5208 ($125,000/24). The percent of effort on the NIH project multiplied by the difference between these amounts is an unallowable cost.
A Note about Oracle Labor Distribution:
The Oracle Labor Distribution Labor Schedules require percentages to be entered rather than dollar amounts. Templates are available in the Related Items section below to assist you in these calculations, as panels require 100% of the Stanford pay to be distributed and the calculations get complicated!
Don't forget to use the special "RBE (Regular Benefits Eligible) Unallowed Salary Over Cap" Expenditure Type 51190 to capture the salary percentage over the cap. The use of this Expenditure Type flags the dollars as unallowable. Stanford must include those dollars in its Organized Research or other applicable base.
Example: Salary Cap with Cost Sharing
Professor Leland Stanford earns a total base salary of $150,000 per year. The salary cap in this example is $125,000.
Note: Actual salary caps may fluctuate over time. Be sure to use the current correct applicable cap when calculating allowable and unallowable salary.
In this situation, Professor Stanford will be on sabbatical leave 1/1/99 - 3/31/99 and will work on three sponsored projects as follows during this period:
- 10% effort on award PTA2222222-1-PABCD, with the salary cap, from 8/98 through 7/99
- 15% effort on award PTA3333333-1-PAEFG, also with the salary cap, from 6/98 through 5/99
- 10% effort on award PTA4444444-1-SDDAB, which does not include a salary cap, from 1/99 through 12/99
Where the salary cap is applicable, calculate the maximum which can be charged per pay period by dividing the total capped salary ($125,000. in this example) by 24 (the number of pay periods in a year), and multiplying that by the percent of effort on the NIH project.
Professor Stanford's actual pay per pay period is $6250 ($150,000/24). The maximum allowed under the salary cap is $5208 ($125,000/24). The percent of effort on the NIH project multiplied by the difference between these amounts is an unallowable cost.
A Note about Oracle Labor Distribution:
The Oracle Labor Distribution Labor Schedules require percentages to be entered rather than dollar amounts. Templates are available in the Related Items section below to assist you in these calculations, as panels require 100% of the Stanford pay to be distributed and the calculations get complicated!
Don't forget to use the special "RBE (Regular Benefits Eligible) Unallowed Salary Over Cap" Expenditure Type 51190 to capture the salary percentage over the cap. The use of this Expenditure Type flags the dollars as unallowable. Stanford must include those dollars in its Organized Research or other applicable base.
Example: When Salary Caps Change During a Budget Period
NIH will fund salaries up to the level of the funding limitation in place at the time of the competitive award. If, during the period of that award, the salary cap is increased, you will normally be able to use rebudgeting authority to pay the salary to the higher level. NIH, however, will not award any additional funds for this purpose.
The following examples illustrate how rebudgeting can be used to adjust salary levels affected by the NIH cap.
"GFY" = Government Fiscal Year
A 5-year competitive award was made on 4/20/98 (GFY98) with a salary funding limitation of $125,000. The project period for this award is 5/1/98 - 4/30/03.
On 5/1/99 (GFY99) and 5/1/00 (GFY00), non-competing funding for this project is awarded. In both of those Government Fiscal Years, a higher salary cap threshold exists. Although dollars will not be awarded above the original funding limitation level of $125,000, awarded funds may be rebudgeted so that salaries can be paid up to the level of that year's salary cap.
The details below illustrate how this rebudgeting could take place. Rebudgeting depends on the availability of project funds and the discretion of the Principal Investigator.
YEAR 2 funded in GFY99 |
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| Period | Funding Limitation | Applicable Salary Cap |
| 5/1/99 - 12/31/99 | $125,000 | $125,900 |
| 1/1/00 - 4/30/00 | $125,000 | $130,200 |
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In GFY99, non-competing funding is awarded for the Year-2 budget period that will span from 5/1/99 - 4/30/00. For that budget period, you may rebudget with existing project dollars to pay salaries up to a higher level. No additional funds will be provided from NIH for this purpose. For the period 5/1/99 - 12/31/99, salaries can be rebudgeted to an annual rate of $125,900. From 1/1/00 to the end of the budget period on 4/30/00, salaries can be rebudgeted up to an annual rate of $130,200. |
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YEAR 3 funded in GFY00 |
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| Period | Funding Limitation | Applicable Salary Cap |
| 5/1/00 - 4/30/01 | $125,000 | $141,300 |
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When the next year's funding is received (GFY 2000 funding), you may rebudget salaries up to the annual rate of $141,300. |
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YEAR 4 funded in GFY01 |
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| Period | Funding Limitation | Applicable Salary Cap |
| 5/1/01 - 4/30/02 | $125,000 | $161,200 |
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When the GFY 2001 funding is received, you may rebudget salaries up to the annual rate of $161,200. Remember that the NIH will not award any additional funds to pay salaries at these higher levels. |
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Example: Salary Cap when Performing Research on Sabbatical
Professor Leland Stanford earns a total base salary of $150,000 per year. The salary cap in this example is $125,000.
Note: Actual salary caps may fluctuate over time. Be sure to use the current correct applicable cap when calculating allowable and unallowable salary.
In this situation, Professor Stanford will be on sabbatical leave 1/1/99 - 3/31/99 and will work on three sponsored projects as follows during this period:
- 10% effort on award PTA2222222-1-PABCD, with the salary cap, from 8/98 through 7/99
- 15% effort on award PTA3333333-1-PAEFG, also with the salary cap, from 6/98 through 5/99
- 10% effort on award PTA4444444-1-SDDAB, which does not include a salary cap, from 1/99 through 12/99
Where the salary cap is applicable, calculate the maximum which can be charged per pay period by dividing the total capped salary ($125,000. in this example) by 24 (the number of pay periods in a year), and multiplying that by the percent of effort on the NIH project.
Professor Stanford's actual pay per pay period is $6250 ($150,000/24). The maximum allowed under the salary cap is $5208 ($125,000/24). The percent of effort on the NIH project multiplied by the difference between these amounts is an unallowable cost.
A Note about Oracle Labor Distribution:
The Oracle Labor Distribution Labor Schedules require percentages to be entered rather than dollar amounts. Templates are available in the Related Items section below to assist you in these calculations, as panels require 100% of the Stanford pay to be distributed and the calculations get complicated!
Don't forget to use the special "RBE (Regular Benefits Eligible) Unallowed Salary Over Cap" Expenditure Type 51190 to capture the salary percentage over the cap. The use of this Expenditure Type flags the dollars as unallowable. Stanford must include those dollars in its Organized Research or other applicable base.
