NIH Salary Cap
Purpose: This outlines the process to apply the National Institutes of Health (NIH) salary cap for
faculty who are paid over the cap on a Department of Health and Human Services award.
Departments follow this process to account for effort over the salary cap. Also, salary costs over the
cap are not considered cost sharing and must be tracked for development of the indirect cost study
proposal.
For Questions Contact: Cindy Perry, Director, Grants Accounting ATTN: perryc@ohio.edu or
740-593-1871.
What is the NIH Salary Cap?
A legislatively-mandated provision limiting the direct salary (also known as institutional base salary, but excluding any fringe benefits and F&A costs) fort individuals working on NIH grants, cooperative agreements awards, and extramural research and development contracts. The salary limitation rate applies to any individual whose salary is charged directly to awards from NIH and its agencies (such as Health Resources Service Administration, Centers for Disease Control, etc) including pass through funds.
Who Sets the Rate?
The rates are set by Congress as part of the annual federal budget appropriations process. The
Federal Executive Pay scale changes in January each calendar year and is published on the NIH
website.
How is the Salary Cap Applied?
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.
There are four variables in the salary cap calculation for an individual:
- Salary Cap at time of project period.
- Institutional Base Salary (IBS) for project period. This is an individual’s total compensation for activities for which they were hired over a 12-month period. See University Policy 41.005.
- Amount of direct salary charged to the sponsor.
- Amount of salary cost shared for the period.
Appointment Type 9 Months
Salary Cap: $192,300
IBS:$175,000
Effort: 10% (NIH uses person months (PM) = 9 months x .10 = .90 PM)
$192,300/12=$16,025*.90 PM = $14,423 .90 PM Capped salary
$175,000/9 = $19,444*.90 PM = $17,500 PI’s .90 PM actual salary
Cost Share Calculation:
$17,500 -$14,423 = $3,077 This is your cost share amount.
Appointment type 12 months
Salary Cap: $192,300
IBS: $225,000
Effort: 10% (NIH uses person months (PM) = 12 months x .10 = 1.20 PM)
$192,300/12=$16,025*1.20 PM = $19,230 1.20 PM Capped salary
$225,000/12= $18,750*1.20 PM = $22,500 PI’s 1.20 PM actual salary
Cost Share Calculation: $22,500 -$19,230 = $3,270 This is your cost share amount.
Can Salaries Subject to the NIH Salary Cap be Supplemented?
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
institutional funds.
How Does the NIH Salary Cap Relate to Effort?
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, mult plied 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 salary 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.
Is rebudgeting allowed with the NIH salary cap?
Yes, rebudgeting is allowable. If NIH increases the cap during the life of a grant, an 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: NIH will not provide additional funding to cover the difference in salary.