Notice Number: NOT-OD-14-052
Key Dates
Release Date: February 10, 2014
NOT-OD-14-053
Issued by
National Institutes of Health (NIH)
Purpose
This Notice provides information regarding the salary limitation for NIH grant and cooperative agreement awards and extramural research and development contract awards (referred to here as grants). For FY2014, the Consolidated Appropriations Act, 2014 (Public Law 113-76) signed into law on January 17, 2014, restricts the amount of direct salary to Executive Level II of the Federal Executive Pay scale. The Executive Level II salary has increased to $181,500 effective January 12, 2014.
Background
Every year since 1990 Congress has legislatively mandated a provision limiting the direct salary that an individual may receive under an NIH grant. For FY 2012 the Consolidated Appropriations Act, 2012 (Public Law 112-74) signed into law on December 23, 2011, restricted the amount of direct salary to Executive Level II of the Federal Executive Pay scale. The Executive Level II salary was $179,700. This information was published January 20, 2012 in the NIH Guide for Grants and Contracts (NOT-OD-12-035). Per NIH Notice NOT-OD-13-064, this salary limitation was continued in FY2013.
For the purposes of the salary limitation, the terms "direct salary," "salary," and "institutional base salary" have the same meaning and are exclusive of fringe benefits and facilities and administrative (F&A) expenses, also referred to as indirect costs. An individual's institutional base salary 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. Base salary excludes any income that an individual may be permitted to earn outside of the duties to the applicant organization.
NIH grant/contract awards for applications/proposals that request direct salaries of individuals in excess of the applicable RATE per year will be adjusted in accordance with the legislative salary limitation and will include a notification such as the following: None of the funds in this award shall be used to pay the salary of an individual at a rate in excess of the applicable salary cap. Please see the salary cap summary and the time frames associated with salary caps at https://grants.nih.gov/grants/policy/salcap_summary.htm.
Implementation of salary limitation for NIH grant and cooperative agreement awards and extramural research and development contract awards:
- No adjustments will be made to modular grant applications/awards or to previously established commitment levels for non-competing grant awards issued with FY 2014 funds.
- NIH competing grant awards with categorical budgets reflecting salary levels at or above the new cap(s) that are issued after the January 12, 2014 effective date, will reflect adjustments to the current and all future years so that no funds are awarded or committed for salaries over the limitation.
- For awards issued in those years that were restricted to Executive Level II (see Salary Cap Summary, FY 1990 FY 2014), including competing awards already issued in FY2014, if adequate funds are available in active awards, and if the salary cap increase is consistent with the institutional base salary, grantees may rebudget to accommodate the current Executive Level II salary level and contractors may charge at the higher level. However, no additional funds will be provided to these grant awards and the total estimated cost of the contract will not be modified.
- An individual's base salary, per se, is NOT constrained by the legislative provision for a limitation of salary. The rate limitation simply limits the amount that may be awarded and charged to NIH grants and contracts. An institution may pay an individual's salary amount in excess of the salary cap with non-federal funds.
- The salary limitation does NOT apply to payments made to consultants under an NIH grant although, as with all costs, those payments must meet the test of reasonableness and be consistent with institutional policy.
- The salary limitation provision DOES apply to subawards/subcontracts for substantive work under an NIH grant or contract.
Competing grant applications and contract proposals that include a categorical breakdown in the budget figures/business proposal should continue to reflect the actual institutional base salary of all individuals for whom reimbursement is requested. In lieu of actual base salary, however, applicants/offerors may elect to provide an explanation indicating that actual institutional base salary exceeds the current salary limitation. When this information is provided, NIH staff will make necessary adjustments to requested salaries prior to award.
Questions & Answers
1. If a grant award (competing or non-competing) has already been issued in FY 2014, will an adjustment be made? No adjustments will be made. However, rebudgeting is allowable.
2. Can I rebudget grant funds or charge contracts issued in prior years (see Salary Cap Summary (FY 1990 FY 2014) funds to allow for the 2014 salary cap increase? Yes, provided funds are available and the increase is warranted. Prorated figures should be used for the applicable months, i.e., the $181,500 level is effective beginning January 12, 2014.
3. If an application/proposal fails to provide needed salary information, will an adjustment be made based on the new rates? No adjustment will be made if an application fails to provide adequate information regarding the individual's actual salary level.
4. Does the NIH appropriation language link the salary cap to a Federal Executive Level or to a dollar level? The link is to the Federal Executive Level pay scale (i.e., Executive Level I for FYs 2001-2011, Executive Level II for FYs 2012-2014).
5. As the cap is linked to Federal Executive Levels, can grantees/contractors with ongoing awards rebudget/charge up to the various salary caps, based on the fiscal year of the award and the time the salary expense is incurred? Yes, salary may be charged in accordance with the FY cap(s), as long as the levels are consistent with the individual's institutional base pay. Please refer to the salary cap summary with times frames for existing salary caps, at https://grants.nih.gov/grants/policy/salcap_summary.htm.
6. Will grantees be permitted to submit revised categorical budgets reflecting higher base salaries? Not as a general rule. NIH policy for categorical budgets states that grantees should always reflect actual base salaries in the requested budgets or provide an explanation indicating that actual institutional base salary exceeds the current salary limitation. As a general rule, NIH will use the information available in the existing application and make adjustments for the salary cap based on information available at the time of award.
The following are examples of the adjustments that NIH will make when salaries exceed the current salary limitation:
Example 1. Individual with Full-Time Appointment (based on grant award/contract issued on or after January 12, 2014 with salary limitation of $181,500)
Individual's institutional base salary for a FULL-TIME calendar year appointment |
$ 200,000 |
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Research effort requested in application/proposal - 6 months (50%) |
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Direct Salary requested |
$ 100,000 |
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Fringe benefits requested (25% of salary) |
$ 25,000 |
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Subtotal |
$ 125,000 |
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Applicant organization's F&A (indirect) costs at a rate of 45% of subtotal |
$ 56,250 |
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Amount requested - salary plus fringe benefits plus associated F&A (indirect) costs |
$ 181,250 |
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If a grant/contract is to be funded, the amount included for the above individual will be calculated as follows: |
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Direct salary - restricted to a RATE of |
$ 181,500 |
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Divided by 12 months multiplied by 6 months (50%) |
$ 90,750 |
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Fringe benefits (25% of allowable salary) |
$ 22,688 |
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Subtotal |
$ 113,438 |
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Associated F&A (indirect) costs at 45% of subtotal |
$ 51,047 |
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Total amount to be awarded due to salary limitation |
$ 164,485 |
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Amount of reduction due to salary limitation |
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($181,250 requested minus $164,485 awarded) |
$ 16,765 |
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Example 2. Individual with Half-Time Appointment (based on a grant award/contract issued on or after January 12, 2014 with salary limitation of $181,500)
Individual's institutional base salary for a HALF-TIME calendar year appointment |
$ 100,000 |
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Research effort requested in application/proposal - 1.8 months (30% of 6 months) |
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Direct Salary requested |
$ 30,000 |
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Fringe benefits requested (25% of salary) |
$ 7,500 |
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Subtotal |
$ 37,500 |
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Applicant organization's F&A (indirect) costs at a rate of 45% of subtotal |
$ 16,875 |
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Amount requested - salary plus fringe benefits |
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plus associated F&A (indirect) costs |
$ 54,375 |
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If a grant/contract is to be funded, the amount included in the award for the above individual will be calculated as follows: |
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Direct salary - restricted to a RATE of |
$ 90,750 |
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Divided by 6 months multiplied by 1.8 months (30%) |
$ 27,225 |
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Fringe benefits (25% of allowable salary) |
$ 6,806 |
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Subtotal |
$ 34,031 |
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Associated F&A (indirect) cost at 45% of subtotal |
$ 15,314 |
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Total amount to be awarded due to salary limitation |
$ 49,345 |
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Amount of reduction due to salary limitation |
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($54,375 requested minus $49,345 awarded) |
$ 5,030 |
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Example 3. Individual with a Nine-Month Appointment (based on a grant award/contract issued on or after January 12, 2014 with salary limitation of $181,500)
Individual's institutional base salary for a nine-month calendar year appointment |
$ 150,000 |
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Research effort requested in application/proposal - 2.7 months (30% of 9 months) |
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Direct Salary requested |
$ 45,000 |
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Fringe benefits requested (25% of salary) |
$ 11,250 |
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Subtotal |
$ 56,250 |
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Applicant organization's F&A (indirect) costs at a rate of 45% of subtotal |
$ 25,313 |
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Amount requested - salary plus fringe benefits |
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plus associated F&A (indirect) costs |
$ 81,563 |
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If a grant/contract is to be funded, the amount included in the award for the above individual will be calculated as follows: |
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Direct salary - restricted to a RATE of 75% of $181,500 |
$ 136,125 |
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Divided by 9 months multiplied by 2.7months (30%) |
$ 40,838 |
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Fringe benefits (25% of allowable salary) |
$ 10,209 |
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Subtotal |
$ 51,047 |
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Associated F&A (indirect) cost at 45% of subtotal |
$ 22,971 |
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Total amount to be awarded due to salary limitation |
$ 74,018 |
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Amount of reduction due to salary limitation |
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($81,563 requested minus $74,018 awarded) |
$ 7,545 |
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Inquiries
Questions concerning this notice or other policies relating to grants or contracts should be directed to the grants management or contracts management office in the appropriate NIH Institute or Center.
and Human Services (HHS)
