Salary Over the Cap
The Department of Health and Human Services (DHHS) Salary Cap applies to an individual's Institutional Base Salary (IBS). An individual's IBS is the annual compensation that the applicant organization pays for an individual's appointment, whether that individual's time is spent on research, teaching, patient care, or other activities.
The Congressional Act that appropriates funds for the Department of Health and Human Services (including the NIH, AHRQ, SAMHSA, HRSA, and CDC, among others) states that none of the funds may be used to pay an individual (via a grant, agreement, or other award mechanisms) in excess of a specified level on the Federal Executive Pay Scale, i.e., the Salary Cap.
For FAQs and calculations specific to the NIH, consult the NIH website.
Salary Cap Overview
The Salary Cap limits the amount of salaries and wages for an employee that can be charged to an award. The limitation is legislatively mandated each year by Congress and is currently tied to the Executive Level II salary level. The Salary Cap does not limit the amount of compensation paid to an employee, but it does limit the amount that the funding agency will reimburse for that individual’s effort on the project.
All grants and cooperative agreements funded by DHHS agencies are subject to the Salary Cap. Some private foundations and non-DHHS federal agencies also have salary limitations. Many other sponsors have salary caps. Read every solicitation carefully to determine whether a sponsor has a salary cap.
An annual notice is provided by NIH stating the salary limit (expressed as a maximum institutional base salary) and the period that the salary limitation is effective. For all DHHS awards, the applicable Salary Cap is determined by the Award Issue Date stated in the Notice of Award. The applicable cap takes effect on the Project Start Date for new and competing awards, and the Budget Start Date for non-competing awards.
How to Account for Salary Cap?
If an investigator’s salary is over the salary cap, the overage is considered an institutional commitment (cost share), and a non-federal source accounting for this overage will need to be identified at the time of award set up. Principal investigators (PIs) should work with their department administrators to accurately account for salary when the PI’s salary exceeds the cap.
How is NIH Salary Cap Calculated?
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. When an investigator’s pay rate exceeds the salary cap, the cap is applied proportionally to any level of effort the investigator charges to the grant.
The 2024 NIH salary cap is $221,900/12 months ($18,492/month). This means that if you were to commit 100% effort during a given month to an NIH grant, the maximum amount of salary that could be charged to the grant is $18,492. This maximum decreases proportionally with decreasing effort levels.
To determine the percentage of salary that can be charged to NIH, multiply the % effort by the monthly max. For example, if you were to commit 25% effort during a given month to an NIH grant, the maximum amount of salary that could be charged to the grant is:
- Maximum capped monthly salary x Effort Committed to Project = Maximum monthly salary
paid by NIH
$18,492 x 25% = $4,623
Many faculty PIs are paid on 9-month, rather than 12-month, appointments. The NIH salary cap still applies to PIs paid on 9-month appointments. Using the above example, if your salary is $250,000 for a 9-month appointment you would identify your monthly rate as follows:
$250,000 / 9 = $27,777.78 per month. $27,777.78 is your monthly Institutional Base Salary (IBS).
If you are committing 25% effort, your monthly salary for this percent effort would be:
$27,777.78 x 25% = $6,944.45
This represents the amount of salary that would be owed to you for your effort.
Since your monthly IBS of $27,777.78 is over the cap, you would identify the amount of institutionally paid salary as follows:
- Actual salary cost - Maximum allowed on NIH award = Institutional commitment required
$6,944.45 - $4,623 = $2,321.45
In this example you would need to identify an alternate source of funds for $2,321.45.
In general, faculty with a 9-month appointment and receiving summer compensation from a sponsored project are not compensated by the University of North Dakota (UND) for salary over a sponsor-imposed cap. Salary for a 9-month appointment reflects the academic year salary only (even when paid out over 12 months) with no obligation to provide summer salary support.
Cost Share Addendum
A salary cap is not considered cost share as the salary over the cap is an unallowable expense on the award. Variations in salary and annual changes in the salary cap affect (change) the amount of department funds needed to cover the salary cap. As a result, "after the fact" calculations may be required to determine the correct salary cap percentage.
Sponsors Applying Salary Caps
The matrix below reflects the known sponsors who are applying a salary cap and the caps they apply.
| Sponsor (Federal) | Cap Applied |
|---|---|
| Nationa lnstitutes of Health | DHHS Salary Cap |
| Administration for Children and Families | DHHS Salary Cap |
| Administration for Community Living | DHHS Salary Cap |
| Agency for Health Care Research and Quality | DHHS Salary Cap |
| Center for Disease Control | DHHS Salary Cap |
| Health Resources and Services Administration | DHHS Salary Cap |
| Substance Abuse and Mental Health Services | DHHS Salary Cap |
| Food and Drug Administration | DHHS Salary Cap |
| Sponsor (Non-Federal) | Cap Applied |
|---|---|
| Anesthesia Safety Foundation | DHHS Salary Cap |
| Cystic Fibrosis Foundation | DHHS Salary Cap |
| Michael J. Fox Foundation | DHHS Salary Cap |
| Edward P. Evans Foundation | DHHS Salary Cap |
| Juvenile Diabetes Research Foundation | DHHS Salary Cap |
| Anesthesia Patient Safety Foundation | DHHS Salary Cap |
| Multiple Sclerosis Society | $199,700 |
| Patient Centered Outcomes Research Institute | $200,000 |
| Susan G. Komen Foundation | $250,000 |