NIH Guide: SALARY LIMITATION ON GRANTS AND CONTRACTS

SALARY LIMITATION ON GRANTS AND CONTRACTS

Release Date:  February 12, 1998

P.T.

National Institutes of Health

The purpose of this notice is to provide updated information regarding the
salary limitation as it relates to NIH grant and cooperative agreement awards. 
This information also applies to extramural research and development contract
awards.  The last notice in the NIH Guide for Grants and Contracts regarding
the salary limitation was contained in Vol. 24, No. 2, January 20, 1995.  In
addition, this notice reiterates the way that NIH Institutes and Centers (ICs)
are treating salaries in excess of the limit for any FUTURE years in competing
grant awards.

Fiscal Year (FY) 98 is the ninth consecutive year for which there is a
legislatively mandated provision for the limitation of salary.  Specifically,
the Department of Health and Human Services (HHS) Appropriations Act for FY
98, Public Law 105-78, restricts the amount of direct salary of an individual
under a grant or cooperative agreement (hereafter referred to as grant) or
applicable contract to a RATE of $125,000 per year.  Direct salary is
exclusive of fringe benefits and indirect costs/general and administrative
expenses.  The salary limit of $125,000 has not increased from the FY 97
level.  NIH will continue to apply the limitation to all grant and applicable
contract awards, and to all funding amendments to existing awards, made with
FY 98 funds.  Therefore, NIH grant and applicable contract awards for
applications/proposals that request direct salaries of individuals in excess
of a RATE of $125,000 per year will be adjusted in accordance with the
legislative salary limitation and will include a notification such as the
following:

According to the HHS Appropriations Act, "None of the funds appropriated in
this title for the National Institutes of Health and the Substance Abuse and
Mental Health Services Administration shall be used to pay the salary of an
individual, through a grant or other extramural mechanism, at a rate in excess
of $125,000 per year."  The term "salary" has been interpreted by HHS Legal
Counsel to mean "direct salary", which is exclusive of fringe benefits and
indirect costs/general and administrative expenses.  "Direct salary" has the
same meaning as the term "institutional base salary".  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 duties to the applicant organization.

The following are examples of the adjustments that NIH will make when salaries
exceed the limitation:

EXAMPLE 1.  INDIVIDUAL WITH FULL-TIME APPOINTMENT.

Individual's institutional base salary for a
FULL-TIME (twelve month) appointment                $150,000
Research effort requested in application/proposal    50%

Direct Salary requested                             $75,000
Fringe benefits requested (25% of salary)           $18,750
Subtotal                                            $93,750

Applicant organization's indirect costs at a
rate of 45% of subtotal                             $42,188

Amount requested - salary plus fringe benefits
plus associated indirect costs                      $135,938

If a grant/contract is to be funded, the amount included in the award for the
above individual will be calculated as follows:

Direct salary - restricted to a RATE of $125,000
multiplied by effort (50%) to be devoted to project  $62,500
Fringe benefits (25% of allowable salary)            $15,625
Subtotal                                             $78,125

Associated indirect costs at 45% of subtotal         $35,156

Total amount to be awarded due to
salary limitation                                    $113,281

Amount of reduction due to salary
limitation ($135,938 requested minus
$113,281 awarded)                                    $22,657

EXAMPLE 2.   INDIVIDUAL WITH HALF-TIME APPOINTMENT.

Individual's institutional base salary for a
HALF-TIME appointment (50% of  a full-time
twelve month appointment)                            $65,000

Research effort requested in application/proposal     30%

Direct Salary requested                              $19,500
Fringe benefits requested (25% of salary)            $ 4,875
Subtotal                                             $24,375

Applicant organization's indirect costs at a rate
of 45% of subtotal                                   $10,969

Amount requested - salary plus fringe benefits
plus associated indirect costs                       $35,344

If a grant/contract is to be funded, the amount included in the award for the
above individual will be calculated as follows:

Direct salary - restricted to a RATE of $125,000
multiplied by 50% appointment by 30% effort
to be devoted to project                             $18,750
Fringe benefits (25% of allowable salary)            $ 4,688
Subtotal                                             $23,438

Associated indirect costs at 45% of subtotal         $10,547

Total amount to be awarded due to salary
limitation                                           $33,985

Amount of reduction due to salary limitation
$35,344 requested minus $33,985 awarded)             $ 1,359

Other important points relating to both NIH grants and contracts are:

o  An individual's base salary, per se, is NOT constrained by the legislative
provision for the limitation of salary.  The rate limitation simply limits the
amount that may be awarded and charged to NIH grant and applicable contract
awards.  An institution may supplement an individual's salary with non-federal
funds.

o  The salary limitation does NOT apply to payments made to consultants under
an NIH grant or contract although, as with all costs, such payments must meet
the test of reasonableness.

o  The salary limitation provision DOES apply to those subawards/subcontracts
for substantive work under an NIH grant or contract.

In addition, the following three paragraphs apply to GRANT applications/awards
only:

o  COMPETING grant applications submitted to the NIH may continue to request
funding at the regular/actual rates of pay of all individuals for whom
reimbursement is requested, even when these rates exceed the salary
limitation.  NIH staff will make necessary adjustments to requested salaries
prior to award.

o NIH competing awards issued in FY 98 will reflect adjustments to all years
of a project, including future years, so that no funds are awarded or
committed for salaries over the limitation.

o Budgets submitted with non-competing continuation grant applications should
reflect funds for salaries at rates of pay that DO NOT exceed the salary
limitation.  Note:  Grants subject to SNAP do not routinely require the
submission of budgets.

INQUIRIES

Questions concerning this notice or other policies relating to grants or
contracts should be directed to the grants management or contracts management
offices in the NIH institutes or centers.
	Office of Extramural Research (OER)			National Institutes of Health (NIH) 9000 Rockville Pike Bethesda, Maryland 20892			Department of Health and Human Services (HHS)