Revision Date: September 17, 2026
Contents
3. Accounting for Salary Above a Sponsor Imposed Cap
4. Program Limitation (NIH Career Development Award) Example
1. Purpose
This procedure outlines the standards and requirements that are necessary to comply with a sponsor’s salary cap. This includes providing examples of calculations and instructions for scheduling of an employee’s salary in Workday Payroll Costing when charging a sponsored award with a sponsor-imposed salary cap or program limitation.
2. Salary Cap
Certain funding agencies enforce a federal salary limitation or salary cap. This is a legislatively mandated limit on the annual rate of pay that can be directly charged to a sponsored grant for an individual’s committed effort. While a salary cap does not restrict the total compensation an employee receives from the institution, it does strictly limit the amount the funding agency will reimburse for that individual’s time on the project. This limit is typically benchmarked to a specific government Executive Pay Level and is often adjusted annually, usually on January 1st.
A salary cap imposed by a sponsor may be due to one of the following situations:
- The U.S. Congress legislatively sets a salary cap as part of the Consolidated Appropriations Act that mandates the Department of Health and Human Services (DHHS) agencies to:
- Sponsors (federal and non-federal) other than the sponsors identified above may have a salary reimbursement limitation as a matter of policy; and Sponsors (federal or non-federal, including subawards or pass-through awards made to Yale) may have a salary cap that may be program specific limiting the recovery of salary.
- It is important to note that the sponsor’s funding announcement as well as the terms and conditions of an award must be carefully read to determine if a salary limitation exists.
- Salary caps due to budget appropriations for current and previous years are in the Controller’s Office Factsheet.
- For NIH, you can find a complete history of the past salary caps on the NIH website.
In the situations described above:
- When an individual’s salary exceeds the sponsor’s salary cap, the difference (the amount above the cap) must be covered by non-Federal funds. The capped portion cannot be charged to another federally sponsored award.
- Salary in excess of a sponsor-imposed cap is considered by the Federal government and University to be an unallowable expense.
- Federal regulations do not permit the use of salary over a sponsor-imposed salary cap to meet any cost sharing requirements of the sponsor.
- The employee’s institutional base salary (“IBS”) is not affected. The University will pay an employee’s IBS portion in excess of a salary cap with non-sponsored project funds.
- However, the monthly rate of pay for a faculty member with an academic appointment may be impacted if paid during the summer. Note: IBS excludes bonuses, honoraria, and incidental compensation.
- See Yale University Policy 1311 Institutional Base Salary (“IBS”) for Sponsored Projects for more information.
- To account for the effort of individuals with an IBS exceeding a sponsor-imposed salary cap, it is necessary to account for the salary over the cap using a Yale Designated or Gift fund.
- Consult with the appropriate business support center, Office of Sponsored Projects (“OSP”), or Sponsored Projects Financial Administration (“SPFA”) for assistance.
3. Accounting for Salary Above a Sponsor Imposed Cap
To assist in the assessment of salary over the cap, utilize the Salary Cap Worksheet. The Salary Cap Worksheet is designed to help calculate and allocate salary costs according to Yale’s salary cap policies and procedures when dealing with sponsors. This worksheet is particularly useful for NIH/DHHS. It is strongly encouraged that departments utilize the worksheet when calculating and allocating salary costs. The worksheet should be filed in the award records.
If you have any questions or need assistance, refer to the Yale University Salary Cap guidelines or consult with SPFA via the SPFA Intake Portal.
EXAMPLES
A. 12-Month Appointment
Using the Salary Cap Worksheet, proceed to calculate the percentage of the employee’s salary that can be charged to each NIH award.
Example: Dr. Smith has a 12-month appointment. In addition to teaching and performing other University activities, Dr. Smith works on two NIH awards as follows. Below is Dr. Smith’s effort breakdown.
1. Determine the employee’s percentage of effort for each activity.
| Activity | Effort Percentages |
| NIH Award #1 | 20% |
| NIH Award #2 | 30% |
| University Activities | 50% |
2. Calculate the percentage of the employee’s salary that can be charged to each NIH award.
- Dr. Smith’s institutional base salary for 12 months is $250,000, which exceeds the NIH cap of $221,900. Note: the example uses the NIH salary cap of FY2024 at $221,900.
- Although Dr. Smith spends 20% of his time on NIH Award #1, the percentage charged to the NIH award is calculated against the NIH cap of $221,900 rather than the IBS of $250,000.
- As a result, 20% effort on NIH Award #1 (.20 x (221,900/250,000)) =17.75% chargeable to NIH.
- The remaining 2.25% (20% - 17.75%) of Dr. Smith’s salary effort for this award must be charged to a cost sharing account containing the same Grant Worktag number as the NIH award number.
Same example as above but calculated on the monthly rate of pay rather than the IBS.
- Dr. Smith’s IBS per month is $20,833.33, which exceeds the NIH cap of $18,491.67
- Although Dr. Smith spends 20% of time on NIH Award #1, the percent charged to the NIH award is calculated against the NIH cap of $18,491.67 rather than the IBS of $20,833.33
- As a result, 20% effort on NIH Award #1 (0.20 times ($18,491.67/\$20,833.33)) = 17.75% chargeable to NIH.
Salary Cap Worksheet Results: Use the Salary Cap Worksheet to apply this scenario or explore other scenarios.
3. Schedule the employee’s Payroll Costing. Review Procedure 3501 PR.01 Payroll Costing or contact askfinance@yale.edu for assistance.
Payroll Costing Example: Dr. Smith’s assignment-level labor schedule will be:
| Activity | Grant Worktag | YD or Gift Worktag | Fund | % |
| NIH Award #1 | GR12345 | FD02 | 17.75% | |
| GR12345 | YD000001 | FD01 | 2.25% | |
| NIH Award #2 | GR67890 | FD02 | 26.63% | |
| GR67890 | YD000001 | FD01 | 3.37% | |
| Other Activity | YD or GF | Appropriate FD | 50% | |
| Total % | 100% | |||
B. Summer Salary Example
For an employee who charges summer compensation to one or more projects funded by NIH awards, and whose salary exceeds the imposed cap, review the following example for assistance:
Example: Prof. Jones has a 9-month faculty appointment. Prof. Jones’ 9-month academic institutional base salary is $180,000 (if annualized their institutional base salary would be $240,000) charged to a General Appropriations account during the academic year. During the summer, Prof. Jones’ monthly rate of pay is $20,000. During the month of July, Prof. Jones will devote effort to the following projects:
1. Determine the employee’s percentage of effort for each activity.
| Activity | Effort Percentages |
| NIH Award | 60% |
| University of Chicago Subaward (NIH Prime) | 40% |
2. Calculate the percentage of the employees’ July compensation that can be charged to each award.
- Prof. Jones is paid $20,000/month exceeding the monthly NIH cap of $18,491.67 (annual NIH salary cap of $221,900 divided by 12 months).
- The 60% effort on the NIH award x $18,491.67 (monthly NIH cap)/by $20,000 (total monthly compensation) = 55.48% charged to the NIH award.
- The 4.52% (the remaining percentage 60% - 55.48% = 4.52%) must be charged to a non-sponsored account and not the University of Chicago subaward (see Note below).
- The 40% effort on the University of Chicago subaward x $18,491.67/$20,000 = 36.98% charged to the University of Chicago subaward. The remaining percentage (40% - 36.98% = 3.02%) must be charged to a non-sponsored account.
Note: In general, faculty with a 9-month appointment and receiving summer compensation from a sponsored project are not compensated by Yale for salary over a sponsor-imposed cap. However, faculty in the 9 over 9 program can use funds from their personal research account to support the difference.
Salary for a 9-month appointment reflects the academic year salary only (even when paid out over 12 months) with no obligation to provide summer salary support. If the Provost’s Office grants an exception to support the salary over a sponsor-imposed cap, an appropriate non-federal source of funds must be identified when submitting a proposal.
3. Schedule the employee’s Payroll Costing. Review Procedure 3501 PR.01 Payroll Costing or contact askfinance@yale.edu for assistance.
| Activity | Grant Worktag | YD or Gift Worktag | Fund | % |
| NIH Award | GR77777 | FD02 | 55.48% | |
| GR77777 | YD000001 | FD01 | 4.52% | |
| U Chicago Subaward | GR44444 | FD02 | 36.98% | |
| GR44444 | YD000001 | FD01 | 3.02% | |
| Total % | 100% | |||
C. Joint Veterans Administration (“VA”) Appointment Example
The VA Connecticut Healthcare System and Yale University must establish a Memorandum of Understanding (“MOU”) for all dually appointed faculty that have effort on a Yale sponsored award specifying the investigator’s title, responsibilities (both at Yale and the VA) and the percentage of effort available for research at the University. For detailed information about joint VA and Yale appointments, consult Memorandum of Understanding Requirements: Faculty with Both a Veterans Administration Medical Center and Yale University Joint Appointment.
For any employee who works on one or more Yale sponsored projects funded by NIH awards, has a joint appointment at Yale and the VA, and whose Yale salary exceeds the NIH salary cap, the calculation is as follows:
1. Determine the employee’s percentage of effort for each activity.
Example: According to the MOU between Yale and the VA, Dr. Bass works 20% of their professional effort at the VA and works 80% of their professional effort doing research at Yale. The 80% effort devoted to Yale research represents 100% of Dr. Bass’s Yale-compensated effort in this example. Dr. Bass works a total of 12 calendar months (“CM”) between both their VA and Yale appointments. (Note: Some dually appointed faculty may have more than 12 CM between both appointments- for more information see NIH guidance.)
| Activity | Effort Percentages |
| Clinical work at VA | 20% (2.4 CM) – not included in salary cap calculation |
| NIH Award at Yale | 80% (9.6 CM) = 100% Yale effort |
2. Calculate the percentage of the employee’s salary that can be charged to the NIH Award.
Dr. Bass is paid $20,000 in monthly salary by Yale and $5,000 in monthly salary by the VA for combined monthly professional compensation of $25,000. However, ONLY the portion paid by Yale can be considered when calculating applicability of a salary cap.
- 100% (represents the 80% in the MOU or 9.6 CM) effort on an NIH award.$19,000 / $20,000 = 95% chargeable to NIH research. (NIH salary cap of $228,000 used for calculations.)
- The remaining 5% of Dr. Bass’s Yale salary must be charged to a non-sponsored source of funds as salary over the NIH salary cap.
| Activity | Committed Effort % | % Salary to NIH Award | $ Salary to NIH Award | % Salary to Non-Sponsored Account | $ Salary to Non-Sponsored Account |
| NIH Award | 100% (9.6 CM) | 95% | $228,000 | 5% | $12,000 |
3. Identify the source or sources that will be used to fund any remaining percentages of salary. At the proposal stage or once the award is received, identify the appropriate source of funds to support the salary over the sponsored-imposed cap.
4. Schedule the employee’s Yale Payroll Costing.
Payroll Costing Example: Dr. Bass’s assignment-level labor schedule will be:
| Activity | Funding Source | % |
| NIH Award | NIH Award | 95% |
| Non-Sponsored Funds | 5% | |
| Total % | 100% | |
Payroll costing and effort reporting reflect 100% effort on the NIH award because the award supports all of Dr. Bass’s Yale-compensated effort. The MOU, NIH Research Performance Progress Report (RPPR), and NIH Current and Pending Other Support (CPOS) reporting reflect that Dr. Bass has only 9.6 calendar months available for Yale activities because 20% of total professional effort is devoted to the VA.
4. Program Limitation (NIH Career Development Award) Example
Some sponsors may limit the maximum salary that can be charged directly to an award while identifying the minimum required effort. For individuals whose salary associated with the minimum required effort exceeds the maximum salary limit, the salary amount exceeding the maximum salary permitted must be charged to a non-sponsored account.
For example, NIH Career Development Awards have a maximum salary limit that can be charged to an award with a required percent of effort. The “Program Limitation” for NIH Career Development (K) Awards most commonly refers to the minimum required effort the recipient must dedicate to the award and the maximum salary contribution the NIH will provide, which is often lower than the legislative NIH Salary Cap. These limitations are core to the K-award mechanism, as they ensure the recipient has protected time to become an independent investigator
The portion of the IBS greater than the maximum allowed by the sponsor is not considered institutional cost sharing and must be charged to a non-sponsored account. Refer to University Policy 1316 Effort Commitment: Managing Effort Associated with Sponsored Projects regarding proposing effort in the form of voluntary cost sharing for programs that have salary limits but do not have minimum effort requirements.
To confirm that the required effort is met, the salary in excess of the program’s limit and supporting the percent effort, is normally charged to a non-sponsored account. Refer to Procedure 1306 PR.01 Cost Sharing for assistance.
The table below provides an example of a program limitation for a NIH career development award.
| PI’s IBS | Career Program Salary Limitation | Minimum Effort Required | Payroll % - K Award | Payroll % - Unrestricted (KSL) |
| $130,000 | $90,000 | 75% | 69% | 6% |
| $125,000 | $90,000 | 75% | 72% | 3% |
| $90,000 | $90,000 | 75% | 75% | 0% |
Where the grant cannot be identified in the COA value for salary over the program (e.g., the Connecticut Mental Health Center (CMHC) staffing contract), a note must be entered in the effort certification statement’s Notes field reflecting the percent effort being supported by unrestricted funds.
Illustrative Notes box language: The PI’s salary representing the 75% effort commitment to the K award exceeds the amount supported by the sponsor. The amount exceeding the sponsor’s limit is funded by the CMHC staffing contract. Therefore, only 69% of the PI’s salary is directly charged to the K award and the remaining 6%, fulfilling the 75% commitment, is funded by non-federal account.
For NIH Career Development Awards, refer to the FAQs found in Procedure 1315 PR.04 Effort Reporting.
Related Resources
Policy 1311 Institutional Base Salary for Sponsored Projects