Salary Cap

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Salary Cap establishes a maximum annual rate of pay at which an individual’s full time effort over a twelve-month period can be charged. This page serves as guidance to assist departments in complying with these requirements.

Salary Cap is not intended to limit the actual salary paid by an institution and an institution may pay an individual in excess of the salary cap. Any excess salary over the cap must be paid from non-sponsored funds. While the cap is a limitation that not only applies annually, it dictates the amount that can be charged to an award on any given month. Expenditures should be monitored on a monthly basis.

No grant, cooperative agreements, or contract funds may pay the salary of an individual at a rate in excess of the applicable salary cap. If the employee’s salary exceeds the sponsor’s cap, their effort is comprised of the allowable charge up to the cap on the sponsored award, and the institution must cover anything exceeding the cap. The funds covered by the institution cannot be reported as cost share to any sponsor.

Departments are responsible for ensuring compliance with any salary limitations imposed by sponsors.

Institutional Base Salary

Institutional Base Salary or IBS is annual compensation paid for an individual’s appointment (9 or 12 months), whether that individual’s time is spent on research, teaching, administration, or other activities. Academic Salary and Endowments are included.

IBS does not include supplemental payments (one time or recurring), administrative supplements and/ or compensation for special programs and activities. Additionally, IBS does not include payments from other organizations or income that individuals are permitted to earn outside of their institutional responsibilities, such as consulting.

Salary Cap Tool

SPAA developed the Salary Cap Tool as a resource for departments when managing projects with salary caps. The tool provides assistance with budgeting salaries over the cap, identifies common salary caps, and should be used when processing a cost transfer of personnel expenses.

Applications / Proposals

Proposals Requiring Detailed Budget

Award applications that include a detailed budget in the proposal should reflect the actual institutional base salaries for all individuals for whom funding is requested. Alternatively, applicants may provide an explanation indicating the actual IBS exceeds the current salary cap, and request dollars calculated on the capped amount (as described for modular budgets).

Proposals Using Modular Budgets and SNAP Applications

For modular applications, and streamlined non-competing continuation applications (SNAP), use the current cap rate for calculating salary for any individual whose IBS exceeds the cap. For instance, if Professor Longhorn has an IBS of $200,000, and proposes that he spend 50% of his effort on the project proposed to begin during federal fiscal year 2021, he should refer to the NIH summary page to find that the FY21 cap is $199,300 and request 50% of $199,300, or $99,650 plus fringe benefits for that position.

Also, be aware when budgeting at time of proposal the amount exceeding the cap needs to be paid from a non-sponsored source. In the example above, at least $350 of Professor Longhorn’s salary will need to be paid from a non-sponsored source and the amount will be identified as over the cap salary for the project.

Audit Implications

UT has the obligation of being good stewards of sponsored awards. UT cannot be reimbursed for salary above the salary cap on any sponsored award, including awards when UT is a sub-recipient. If UT is found to have charged salary above the limitation, the sponsor can disallow the charges and require the amount to be refunded. Noncompliance with the salary cap could result in audit findings and could negatively affect future funding opportunities.

In the event a department or PI is contacted by a sponsor regarding an audit, please reach out to The Office of Sponsored Projects at SPAA serves as the main point of contact for all research related audits.

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