Q.  What is the Salary Cap?

A.  A legislatively-mandated provision limiting the direct salary (also known as salary or institutional base salary, but excluding any fringe benefits and F&A costs) for individuals working on NIH grants, cooperative agreement awards, and extramural research and development contracts. The salary limitation rate applies to any individual whose salary is charged directly to awards from these agencies.

Q.  Who sets the rate?

A. The rates are set by Congress as part of the annual federal budget appropriations process.  The Federal Executive Pay scale changes January 1st, each calendar year.

Q.  How is the salary cap applied?

A. The cap establishes a maximum annual rate of pay at which an individual’s full time effort over a twelve-month period can be charged for a federal contract, grant or cooperative agreement. It is not intended to limit the actual salary paid by the institution.  An institution may pay an individual in excess of the salary cap.

The cap is not on the number of dollars that can be charged to an NIH grant. Rather, the cap is on the monthly pay rate that can be charged to an NIH grant.

For example, the 2011 NIH salary cap for 9 months appointment is $149,775 (16,641.67*9 months), the maximum of $12,481.25/mo). If a PI's nine month salary is $185,000 ($20,555.56/mo) and the PI commits 10% effort on an NIH grant, the salary cap is determined as follows:

• 90% effort will be charged against the individual’s IBS=$18,500 (90% of 20,555.56/mo)

• 10% effort will be charged against the NIH award=$ 1,248.13 (10% of $12,481.25/mo)

• Amount in excess of the salary cap $ 807.43(20,555.56-(18,500+1,248.13)

• Total monthly $20,555.56

The excess amount above the salary cap can be covered using non-federal or non-sponsored funds.

Q.  Can a nine-month appointee receive compensation from a source subject to the salary cap during the academic year and also receive compensation from the same source or another source subject to the cap during the summer?

A.  Yes. 9 and 10 months appointees are eligible for summer salary

Q.  What if my salary is above the salary cap

A.  Salary above the salary cap is considered as mandatory cost sharing and must be tracked by department and certified on an annual basis.

Q.  Can salaries subject to the NIH cap be supplemented?

A. Yes. Actual salary paid to an individual is not constrained by the salary cap. Only the salary charged to sources that are subject to the cap are affected. Federal regulations permit institutions to supplement salary paid under awards that are subject to the salary cap using non-federal or non-sponsored funds.

Q.  How does the salary cap relate to effort?

A.  Ordinarily, the salary chargeable to a sponsored project is the employee's rate of pay multiplied by the employee's level of effort on the project. However, salary charged to an award subject to the salary cap cannot be paid at a rate that exceeds the capped annual rate of pay in effect, multiplied by the level of effort being devoted to the project.

Higher levels of effort mean proportionately more salary can be charged to the grant, cooperative agreement or contract. Under no circumstances, whether or not an employee is working on an award that is subject to the NIH cap, can the percent of full-time salary charged to a contract, grant or cooperative agreement exceed the level of effort devoted to the project.

Q: Is rebudgeting allowed with NIH salary limitation/cap?

A. Yes rebudgeting is allowable. If NIH increases the cap during the life of a grant, individual salary can be increased up to the new salary cap level if there are sufficient funds in the budget and the change is within the allowable re-budgeting parameters.  Please note: sponsor will not provide additional funding to cover the difference in salary

Q.  Should proposal budgets reflect the rates at which those subject to the salary cap will be paid?

A.  For traditionally formatted competitive applications, actual salaries should be used in calculating salaries and preparing budgets, and should be shown on the budget form.

For streamlined applications, including NIH Modular grant proposal submissions and all non-competing (continuation) submissions, the full-time rate in effect (e.g. $199,700 for 2011) should be used for calculating salary over the cap.  The Budget Justification must include a statement that the actual institutional base salary exceeds the NIH salary cap limitation.  This statement will include the individual’s actual institutional base salary, appointment period and actual effort.