Salary Caps
Dealing with Salary Limitations
A salary cap is a maximum rate of UM salary for full-time effort that can be charged to a sponsored award.
The salary cap is not on the number of dollars that can be charged to a sponsored project. Rather, the cap is on the rate of pay that can be charged to a sponsored project. For example, the 2021 PHS salary cap for 12 months is $199,300. For personnel whose annualized salary is greater than $199,300 we can charge the grant for their (level of effort) x (the salary cap). NOTE: If current funding was awarded prior to the effective date of a salary cap, the unit must use the rate in effect on the issue date of the current funds. When the next year of funding comes in the new cap can be applied at that time if there are funds available in the budget to do so.
The balance of funds not covered by the sponsored project [(level of effort) x (actual annualized salary)] - [(level of effort) x (the salary cap)] is the responsibility of the department. The department should work with their Sponsored Projects Accounting and Compliance (SPAC) accountant to have a cap account created and linked to the sponsored account.
Below are some sample calculations based on the PHS rate to show how this could affect a department.
12-month faculty
| Actuals | Monthly Amount | 100% effort | 50% effort | 10% effort | |
| Capped Salary | 212,100 | 17,675 | 212,100 | 106,050 | 21,210 |
| Faculty Salary | 225,000 | 18,750 | 225,000 | 112,500 | 22,500 |
| Difference (paid by dept) | -12,900 | -1,075 | -12,900 | -6,450 | -1,290 |
9-month faculty
| Actuals | Monthly Amount | 100% effort | 50% effort | 10% effort | |
| Capped Salary | 159,075 | 17,675 | 159,075 | 79.538 | 15,908 |
| Faculty Salary | 168,750 | 18,750 | 168,750 | 84,375 | 16,875 |
| Difference (paid by dept) | -9,675 | -1,075 | -9,675 | -4,838 | -968 |
Summer Salary
| Actuals | Monthly Amount | 100% effort | 50% effort | 10% effort | |
| Capped Salary | 53,025 | 17,675 | 53,025 | 26,513 | 5,303 |
| Faculty Salary | 56,250 | 18,750 | 56,250 | 28,125 | 5,625 |
| Difference (paid by dept) | -3,225 | -1,075 | -3,225 | -1,616 | -323 |
Note that in all these scenarios, where the faculty member's base annualized salary exceeds the cap, there is an amount over the cap regardless of level of effort. A department cannot lower an individual's level of effort to get under a certain dollar threshold as it is the rate of pay, not the amount, which is governed by salary limitations.
Federal Agencies with Salary Caps:
- Federal Trade Commission
- Public Health Service (which includes CDC, HRSA, NIH, SAMHSA, FDA, and others)
- National Institute of Justice
- United States Agency for International Development (USAID)
- National Park Service
Salary caps are not limited to federal sponsors, either. Below are some non-federal agencies with salary limitations:
- American Institute for Cancer Research
- Michael J. Fox Foundation
- Patient-Centered Outcomes Research Institute (PCORI)
- Susan G. Komen Foundation
Current NIH Salary Cap information can be found here.
General Guidelines and Recommendations
National Institutes of Health:
- Modular: keep in mind the legislatively mandated salary cap when calculating your budget. When preparing a modular budget (NIH only), you are instructed to use the current cap when determining the appropriate number of modules.
- Detailed: "NIH will not pay requested salary above the annual salary cap. If salary is requested above the salary cap, NIH will reduce that line item to the salary cap, resulting in a reduced total award amount. In future years, if the salary cap increases, recipients may rebudget to pay investigator salaries up to the new salary cap, but NIH will not increase the total award amount,. If you are preparing a detailed budget, you are instructed to base your request on actual institutional base salaries (not the cap) so that NIH staff has the most current information in hand at the time of award and can apply the appropriate salary cap at that time."
- Understanding the Out Years: "We do not expect your budget to predict perfectly how you will spend your money five years down the road. However, we do expect a reasonable approximation of what you intend to spend."
- Note: This is the language BSOS leans on to justify budgeting the same base salary each year of the NIH grant by using a figure that is equal to the average anticipated base salary during the entire performance period. By using the same base salary each year, we minimize the risk of an award reduction for salary escalation.
Department of Justice (notably National Institutes of Justice and Office of Justice Programs):
- DOJ grant funds may not be used to pay cash compensation (salary plus bonuses) to any employee at a rate that exceeds 110% of the annual maximum salary payable to a member of the Federal Government's Senior Executive Service (SES) at an agency with a Certified SES Performance Appraisal System for that year.
- SES rates can be found on the OPM website.
- For OJP awards specifically: the Assistant Attorney General for OJP may waive this limitation. We must include in the proposal a waiver request to the limitation including a detailed justification in the budget narrative including the particular qualifications and expertise of the individual, the uniqueness of the service the individual will provide, their specific knowledge of the program or project being undertaken, and a statement explaining that the individual's salary is commensurate with the regular and customary rate for an individual with their qualifications and expertise, and for the work to be done.