Public Health Service Salary Cap

The Public Health Service (PHS) salary cap applies to grants, cooperative agreements, and applicable contracts (sponsored awards) issued by PHS agencies including the National Institutes of Health (NIH).

The salary cap limits the direct and indirect salary costs that can be charged to a sponsored award with a PHS agency.

The HS direct salary cap applies to senior personnel, which includes the principal investigator (PI), co-investigators, and other key personnel working on the project. It applies to sub-awardees and subcontractors as well.

The cap is set annually, and the Executive Level II of the Federal Executive Pay Scale.

To make sure all PHS salaries are within the cap, see the below examples assuming a $225,700 cap.

A principal investigator (PI) with a $240,000 annual salary ($20,000/month) working 50% on a project:

• Salary Requested: $20,000/month × 50% = $10,000/month
• Salary Allowed: $18,808.34/month × 50% = $9,404.17/month
• Unallowable Costs: $10,000 - $9,404.17 = $595.83/month

The unallowable portion of the salary, $595.83 per month, cannot be charged to the grant. It is an unallowable cost and the effort above the cap is voluntary uncommitted cost share that does not require tracking.

Calculating Allowable Salary for 9-Month or Non-Standard Appointments

• Faculty appointments are typically based on a 9-month contract. The maximum allowable salary for a 9-month appointment is $169,275, calculated as $225,700 × 9/12 or $18,808.34 per month for 9 months.

To Calculate The Allowable Salary For A 9-Month Appointment

 FTE Rate = (Salary Earned ÷ Months Worked) × 12

Example One

A PI with a 9-month appointment and a base salary of $150,000:

• Converted FTE Rate: ($150,000 ÷ 9 months) × 12 months = $200,000
• Alternatively: $150,000 ÷ 9 months = $16,666.67/month
• Since the FTE rate ($200,000) does not exceed the PHS salary cap for the fiscal year, no adjustment is required.

Example Two

A team member with a 6-month appointment and a salary of $150,000:

• Converted FTE Rate: ($150,000 ÷ 6 months) × 12 months = $300,000
• Alternatively: $150,000 ÷ 6 months = $25,000/month
• Since the converted FTE rate and the monthly salary exceed the PHS salary cap, the requested effort will be budgeted at the salary cap amount ($225,700 annual) or $18,808.34 per month, whichever is applicable.
• If the PHS salary cap for the fiscal year is lower than the FTE rate, NIU will adjust the salary to comply with the cap and update payroll accordingly.

General Rule for 9-Month Appointments and Summer Compensation

Faculty with a 9-month appointment who receive summer compensation from a sponsored project are not eligible for additional salary payments from NIU if their salary exceeds the sponsor-imposed cap. The salary for a 9-month appointment reflects only the academic year salary, regardless of whether it is paid out over 12 months. NIU has no obligation to provide summer salary support beyond the sponsor's cap.

Guidelines for Preparing a PHS Budget Proposal Using the Salary Cap

Charging for Effort

 If an individual works only part-time on a project (e.g., 50% effort), NIU may only charge the grant for that portion of the salary, capped at the PHS salary limit.

Example

If an individual earns $250,000 annually and works 50% of their time on an NIH project, they may allocate up to $112,850 (50% of the maximum allowable salary of $225,700) from the grant.

Excess Salary

When an individual’s salary exceeds the PHS salary cap, the difference between the actual salary and the allowable amount for the respective effort percentage cannot be charged to another federal award. Additionally, this excess amount cannot be used to meet cost-share obligations, as it is considered an unallowable expense.

InfoEd and Salary Cap Application

InfoEd will automatically apply the salary cap and mark any excess salary as unallowable. The primary budget page will show the excess amount as “Cost Share,” but in the “Source View” and exported budget, it will be marked as “Unallowable.”  

The institutional data page and award checklist will identify awards with salaries budgeted using the cap. PIs and departments will want to note this when preparing payroll to ensure that salary charges for effort approved in the grant does not exceed the cap. Effort not paid from the grant must be charged to a non-sponsored account.

If, during SPA’s monitoring of PHS awards salary charges are found to exceed the cap, the charges will be transferred from the grant and to the indirect cost center of the home department of the PI or other cost center provided by the department.   

It is especially important to keep the cap in mind when a PI increases effort or there is a significant change in scope, or if the PI's salary is close to the cap in a multi-year award.

The salary cap will be funded at the level in effect at the time of the award. If the cap increases during the award period, NIU may be able to use rebudgeting authority to adjust the salary, but no additional funds will be provided for this adjustment.

Contact the award grants and contracts associate for guidance.