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.

• DHHS salary cap may change annually

• PHS (Public Health Service)funds salary up to the level of the cap in effect on the award date

• Use a special expenditure type to capture difference between actual pay & what can be charged to a PHS award

Many other sponsors have salary caps. Read every solicitation carefully to determine whether a sponsor has a 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:

• 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.

• 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.

• 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.

• 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. 

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 NIH 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:

1. 10% effort on award PTA2222222-1-PABCD, with the salary cap, from 8/98 through 7/99
2. 15% effort on award PTA3333333-1-PAEFG, also with the salary cap, from 6/98 through 5/99
3. 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. Panels require 100% of the Stanford pay to be distributed and the calculations get complicated!

Download the NIH Salary Cap Worksheet located in the Related Items section below.

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.

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.