General Information
Some federal agencies have limitations on the allowable salary that can be directly charged to federal funding. The three primary federal agencies with these limitations are:
- The U.S. Department of Health and Human Services (HHS)
- The Small Business Administration (SBA)
- United States Department of Agriculture – National Institute of Food and Agriculture (NIFA)
Other federal sponsors may at times apply one of these salary cap limitations to specific funding. The award document for sponsored programs should be reviewed carefully to determine if there is a salary cap limitation for that specific award based on the sponsor or additional terms and conditions within the agreement. The salary cap limitation also applies when USU is a subrecipient on federal flow-through funds from these agencies.
The salary cap does not limit the amount of compensation paid to an employee, but it does limit the amount that can be charged directly to a sponsored program for that individual’s effort. As a result of the salary cap, a portion of the individual’s salary must be charged to an effort tracking index to accurately reflect that the sponsor was not charged above the salary cap limitation and to reflect full effort for the individual. The direct charges of salary and the effort index should be charged in the same month/pay period.
Salary Charged to Award
Salary Charged to Effort Index
Total Effort on Award
The portion of salary charged to an effort tracking index cannot be counted towards required cost share. If the project has a cost share requirement, the cost share salary will also need to be split to avoid counting more than the allowable amount as a part of USU’s cost share commitment to the sponsored program.
HHS Salary Cap
The U.S. Department of Health and Human Services has a legislatively mandated restriction on salary expenses charged to grants, cooperative agreements and contracts. This restriction or limitation of salary costs is known as the HHS Salary Cap. The salary cap applies to both direct and indirect salary costs and sub-awards/subcontracts. The salary cap limitation must be followed for all HHS agencies including, but not limited to:
- National Institutes of Health (NIH)
- Center for Disease Control and Prevention (CDC)
- Health Resources and Services Administration (HRSA)
- Substance Abuse and Mental Health Services Administration (SAMHSA)
- Centers for Medicare and Medicaid Services (CMS)
- Food and Drug Administration (FDA)
- Administration for Children and Families (ACF)
- Administration for Community Living (ACL)
- Indian Health Services (IHS)
- Advanced Research Projects Agency for Health (ARPA-H)
- Administration for Strategic Preparedness and Response (ASPR)
- Agency for Healthcare Research and Quality (AHRQ
HHS Applicable Salary Cap Limits
The table below outlines the applicable salary cap limit (Executive Level II) based on when the HHS funded project was awarded to USU. If your project was awarded prior to the dates in the table, refer to this webpage for additional applicable salary cap limits. If you are unsure of the award date for your sponsored program, reach out to your SPO Post-Award Contact for assistance.
| Dates | Salary Cap – Fiscal Year Base | Salary Cap – Academic Year Base |
|---|---|---|
| Jan 5, 2020 – Jan 2, 2021 | $197,300 | $147,975 |
| Jan 3, 2021 – Jan 1, 2022 | $199,300 | $149,475 |
| Jan 2, 2022 – Dec 31, 2022 | $203,700 | $152,775 |
| Jan 1, 2023 – Dec 31, 2023 | $212,100 | $159,075 |
| Jan 1, 2024 – Dec 31, 2024 | $221,900 | $166,425 |
| Jan 1, 2025 – Dec 31, 2025 | $225,700 | $169,275 |
| Jan 1, 2026 - Sept 30, 2026 | $228,000 | $171,000 |
If the project has adequate funding, a re-budget can be processed to adjust the portion of salary to the new applicable cap rate. PIs should work with their SPO Post-Award Contact to request this change.
The HHS and SBA salary cap limitations do not have any flexibility and must be applied to all funding from these agencies. The NIFA salary cap limitation can be waived with prior approval from NIFA. It is important to understand these differences and whether prior approval has been granted or not.
HHS Salary Cap Impact on Indirect Costs
Effective October 1, 2024, the salary cap now applies to individuals with salary directly charged to a sponsored program and to individuals whose salary is included in the base for indirect cost calculations. Depending on the type of project, USU may not be able to use our standard negotiated rate for HHS funded awards. The allowable rates for HHS funded sponsored programs are:
| Project Type | On/Off Campus | USU's Negotiated Rate | HHS Allowable Rate |
|---|---|---|---|
| Research | On-Campus | 46.00% | 45.80% |
| Research | Off-Campus | 21.30% | 21.10% |
| Instruction | On-Campus | 50.20% | 50.20% |
| Instruction | Off-Campus | 26.00% | 26.00% |
| Other Sponsored Activity | On-Campus | 27.80% | 27.60% |
| Other Sponsored Activity | Off-Campus | 21.80% | 21.60% |
SBA Salary Cap
The Small Business Administration has a legislatively mandated restriction on salary expenses charged to grants, cooperative agreements and contracts. The salary cap applies to direct salary costs and salary charged to sub-awards/subcontracts.
SBA Applicable Salary Cap Limits
The table below outlines the applicable salary cap limit (Executive Level II) based on when the SBA funded project was awarded to USU. If your project was awarded prior to the dates in the table, refer to this webpage for additional applicable salary cap limits. If you are unsure of the award date for your sponsored program, reach out to your SPO Post-Award Contact for assistance.
| Dates | Salary Cap – Fiscal Year Base | Salary Cap – Academic Year Base |
|---|---|---|
| Jan 5, 2020 – Jan 2, 2021 | $197,300 | $147,975 |
| Jan 3, 2021 – Jan 1, 2022 | $199,300 | $149,475 |
| Jan 2, 2022 – Dec 31, 2022 | $203,700 | $152,775 |
| Jan 1, 2023 – Dec 31, 2023 | $212,100 | $159,075 |
| Jan 1, 2024 – Dec 31, 2024 | $221,900 | $166,425 |
| Jan 1, 2025 – Dec 31, 2025 | $225,700 | $169,275 |
| Jan 1, 2026 – Sept 30, 2026 | $228,000 | $171,000 |
If the project has adequate funding, a re-budget can be processed to adjust the portion of salary to the new applicable cap rate. PIs should work with their SPO Post-Award Contact to request this change.
NIFA Salary Cap
The United States Department of Agriculture – National Institute of Food and Agriculture (NIFA) has a legislatively mandated restriction on salary expenses charged to grants, cooperative agreements and special projects.
This restriction limits the amount of allowable salary unless prior approval is received from NIFA. Prior approval would require specific disclosure in the budget justification of the proposal that shows that an employee(s) is compensated above the allowable salary range or a request for approval after an award is received.
NIFA Applicable Salary Cap Limits
The table below outlines the applicable salary cap limit (Executive Level IV) based on when the sponsored program was awarded to USU. If your project was awarded prior to the dates in the table, refer to this webpage for additional applicable salary cap limits. If you are unsure of the award date for your sponsored program, reach out to your SPO Post-Award Contact for assistance.
| Dates | Salary Cap – Fiscal Year Base | Salary Cap – Academic Year Base |
|---|---|---|
| Jan 1, 2021 – Dec 31, 2021 | $172,500 | $129,375 |
| Jan 1, 2022 – Dec 31, 2022 | $176,300 | $132,225 |
| Jan 1, 2023 – Dec 31, 2023 | $183,500 | $137,625 |
| Jan 1, 2024 – Dec 31, 2024 | $191,900 | $143,925 |
| Jan 1, 2025 – Dec 31, 2025 | $195,200 | $146,400 |
| Jan 1, 2026 - Sept 30, 2026 | $197,200 | $147,900 |
If the project has adequate funding, a re-budget can be processed to adjust the portion of salary to the new applicable cap rate. PIs should work with their SPO Post-Award Contact to request this change.
Salary Cap Calculations
To determine the portion of salary that would be unallowable under the salary cap limit, you need to determine the portion of salary that is above the limit. Once that is determined, you use that percentage to split salary between the sponsored project and an effort index.
Fiscal Year Employee Example:
Applicable Salary Cap Limit: $228,000
PI Annual Base Salary: $245,000
The allowable salary payment ratio is calculated by taking the applicable salary cap and dividing it by the institutional base salary. For this example, 93.06% ($228,000/$245,000) of the PI’s salary can be charged directly to the award. The remaining 6.94% will need to be charged to an effort tracking index. If the PI indicates their total effort on the award this fiscal year is 15%, their salary should be split as follows:
Direct Charged to the Award: $34,199.55 [((.15*$245,000)*.9306)]
Charged to an effort index: $2,550.45 [((.15*$245,000)*.0694)]
Salary Charged to Award $34,199.55
Salary Charged to Effort Index $2,550.45
Total Effort on Award $36,750 (15%)
Academic Year Employee Examples:
Applicable Salary Cap Limit: $171,000 (75% of Salary Cap Limit at $228,000)
PI Institutional Base Salary: $183,750
The allowable salary payment ratio is calculated by taking the applicable salary cap and dividing it by the institutional base salary. For this example, 93.06% ($171,000/$183,750) of the PI’s salary can be charged directly to the award. The remaining 6.94% will need to be charged to an effort tracking index.
Example based on percentage of effort:
Assuming the PI will fill all three summer months, if the PI indicates their total effort on the award this fiscal year is 15%, their salary should be split as follows:
Direct Charged to the Award: $34,199.55 [((.15*$183,750/.75)*.9306)]
Charged to an effort index: $2,550.45 [((.15*$183,750/.75)*.0694)]
Salary Charged to Award $34,199.55
Salary Charged to Effort Index $2,550.45
Total Effort on Award $36,750 (15%)
Example based on # of months:
If the PI indicates their total effort on the award this fiscal year is 1.5 summer months, their salary should be split as follows:
Direct Charged to the Award: $28,499.62 [($183,750 / 9 months *1.5 months)*.9306]
Charged to an effort index: $2,125.38 [($183,750 / 9 months *1.5 months)*.0694]
Salary Charged to Award $28,499.62
Salary Charged to Effort Index $2,215.38
Total Effort on Award $30,625 (1.5 months)
Example based on # of weeks:
If the PI indicates their total effort on the award this fiscal year is 6 weeks, their salary should be split as follows:
Direct Charged to the Award: $26,307.35 [($183,750 / .75 / 52 weeks* 6 weeks)*.9306]
Charged to an effort index: $1,961.88 [($183,750 / .75 / 52 weeks * 6 weeks)*.0694]
Salary Charged to Award $26,307.65
Salary Charged to Effort Index $1,961.88
Total Effort on Award $28,269.23 (6 weeks)
Calculator Tool
A calculator tool has been developed to assist with calculating the amount of salary that should be charged to the award and to the effort tracking index.
Proposals
HHS Proposals: Depending on the sponsor instructions, there may be times when actual salary costs are proposed even if the salary exceeds the applicable salary cap limitation. There are other times when the salary should be adjusted to comply with the salary cap limitation. The Request for Proposals (RFP) should provide details of how to address salary cap limitations in the proposal budget. If the RFP indicates that the salary cap limitation should be applied to the proposed budget, the individual’s base salary in Kuali should be listed at the salary cap amount. This will limit the proposed salary to the allowable amount while preventing a calculation of cost share in the Kuali budget. If you have questions about how to include salary, reach out to your SPO Pre-Award Contact for assistance.
SBA Proposals: The salary cap limitation should be applied to the proposed budget. The individual’s base salary in Kuali should be listed at the salary cap amount. This will limit the proposed salary to the allowable amount while preventing a calculation of cost share in the Kuali budget. The budget justification should explicitly state the employee’s true Institutional Base Salary and indicate that the salary cap limitation has been accounted for in the proposed budget.
NIFA Proposals: If an employee’s rate of pay is above the salary cap limitation, this should be explicitly disclosed in the budget justification of the proposal to show that the employee is compensated above the Executive Level IV salary range. If this is disclosed at the time of proposal, it can serve as the prior approval required by NIFA to allow salary above the direct cost limitation. If the department/PI would prefer to apply the salary cap limitation, the individual’s base salary in Kuali should be listed at the salary cap amount. This will limit the proposed salary to the allowable amount while preventing a calculation of cost share in the Kuali budget.
Argos Reports
An Argos report has been created to help identify individuals who are subject to the HHS, SBA, and NIFA salary cap limitations based on their institutional base salary and the source(s) of their salary funding. The Argos reports are only available to Business Services and can be located by going to Argos -> Finance -> DPBSVS -> Grants -> Salary Cap. A month end calculation summary email will be sent to business managers and Sponsored Programs Accountants for applicable employees. For an example of the Argos report information download the Argos Example Report.
Salary Cap FAQs
Does the salary cap limit apply to flow-through funding from HHS, SBA, and/or NIFA? Yes, the salary cap limit applies to all HHS & NIFA funding received by USU even if those funds flow to USU through another entity. The NIFA salary cap limitation can be waived if prior approval is received from NIFA.
Can the portion of salary above the cap limit be used towards a mandatory cost share requirement? No, the portion of salary above the salary cap limit cannot be used as cost share on the project. If the project has a cost share requirement, the salary cap limitation will also apply to the cost share portion of salary.
How do I know what salary cap limit applies to my award? The applicable rate is based on the issue date of your award and the applicable salary cap limit at that time for the specific sponsor. If the project has adequate funding, a re-budget can be processed to adjust the portion of salary to the new applicable cap rate. PIs should work with their SPO Post-Award Contact to request this change.
Does the salary cap limit need to be applied over the fiscal year or to each pay period? The salary cap limit should be applied to the salary charged per pay period. Each time salary is charged to the sponsored program the portion over the salary cap limit should be charged to an effort tracking index in the same pay period.
How often does the salary cap limit change? The salary cap limit is usually changed around January 1st of each year.
How does the salary cap limit relate to Time & Effort Certification? Individuals who are subject to the salary cap limit are also still required to complete an annual Time & Effort Certification. This allows them to verify that their total effort on the award is reflected and that the split between the project and the effort tracking index has been calculated correctly.
Does the allowable Time & Effort 5 percent variance apply to the salary cap? No, the salary cap limitation must be followed when showing the split between salary charged directly to the project and the cost share index. The 5% variance can then be applied to the total effort to ensure an accurate percentage of effort has been applied. If the total effort percentage is incorrect, the corrections should be made proportionately to the award and cost share indexes to maintain adherence to the salary cap limitation.