Personnel Compensation and Other Considerations

The largest proportion of most projects’ budgets is allocated to personnel costs. It is not unusual for half or more of a project’s direct costs to be for personnel-related costs – salary, wages and fringe benefits.  To estimate personnel costs, you need to identify all the individuals who will work on the project, their level of effort to be committed to the project, and their rate of compensation.  The effort committed for each individual should be reasonable in the context of the project’s needs and the individual’s other institutional obligations. The guiding principle is the notion of allocability – the project should be charged in proportion to the benefit received.

Project effort is the proportion of an individual’s total institutional effort proposed to be committed to a specific project or activity.  For effort reporting purposes, total institutional effort represents 100%, regardless of the individual’s appointment.  No individual may commit more than 100% institutional or summer effort or be compensated at a rate that would exceed their annualized IBS. The maximum summer sponsored project compensation ordinarily cannot exceed the amount derived from 3.5 months payment at 95% of base salary. See Effort Reporting and Summer Salary Policy and Effort Reporting FAQs for additional information.

Alert: Time devoted to grant writing or any other activities that do not directly benefit the project’s objectives may not be charged to a federal sponsor.

Budgeted salaries/wages are based on current IBS for the employee (or employee classification if ‘to be hired’) in proportion to the effort devoted to the project.  Out-year salaries and wages as escalated by 3% per year, a rate consistent with historical levels.  Escalations or salaries that deviate from these norms require HR or supervisor approval.

Institutional Base Salary

IBS is the annual compensation that the University pays for an individual’s appointment, whether that individual’s time is spent on research, teaching, service, or other activities. IBS excludes bonuses, one-time payments, incentive pay, or any income that an individual may be permitted to earn outside of the duties performed for the University.

Special Considerations:

• IBS is established annually in an appointment letter regardless of funding source.
• IBS includes regular salary as well as secondary assignments (e.g., department chair) and university service.
• IBS excludes bonuses, honoraria and extra compensation.
• All University employees must be budgeted as salary and cannot be included as outside consultants or vendors.
• Level of compensation may not increase solely as the result of an increase in sponsored funding.

IBS and Sponsored Projects

When requesting or charging salary to sponsored projects the percent of effort (in person months) must be based on the individual’s IBS.  The portion of effort multiplied by the IBS will establish the correct salary request from the sponsor.

Other Considerations:

• Increased or decreased effort (from what was originally proposed) may require the prior approval of the sponsoring agency, depending on the specific award terms and conditions. Please see Effort Reporting for more information.
• Compensation for incidental activities may be allowable on sponsored awards, provided that: (1) the work performed is directly related to a sponsored project, (2) has been authorized in the awarded budget or prior approval has been obtained from the funding agency, and (3) the rate of pay is consistent with an individual’s IBS.
  • Examples of allowable incidental activities include: delivering special lectures about specific aspects of the ongoing activity, writing reports and articles, developing and maintaining protocols (human, animals, etc.), managing and securing project-specific data, coordinating research subjects, participating in appropriate seminars, consulting with colleagues and graduate students, and attending meetings and conferences.

In addition to salary, fringe benefits are part of the total compensation package provided to University employees.  The applicable fringe benefit rate is applied to salary line items as a percentage to cover ancillary expenses such as health and dental insurance, life and disability insurance, contributions to social security (FICA), retirement plans, Workers’ Compensation, Unemployment Insurance, Salary Continuation Plan, Sick Leave pay (non-exempt employees who did not use sick leave), severance pay  and employee tuition remission.

The applicable fringe benefit rate must be charged to all sponsors in direct proportion to an individual’s effort devoted to a sponsored project.  For budget development purposes at the proposal stage, currently negotiated fringe rates are used; however, when the project is awarded actual negotiated fringe rates in place at the time of the associated salary expense will be charged.

There are 5 distinct and separate federally negotiated fringe benefit rates for the following employment statuses.

• Faculty with academic year appointments, regular full time/part time staff, and part time faculty in Adjunct Union (with standard benefits)
• Faculty summer, and non-exempt union staff with summer appointments
• Temporary employees, including part-time non-union faculty
• Graduate Assistants
• Adjunct Union part time faculty (modified benefits)

PLEASE NOTE: The University’s RCM fringe benefit rates (i.e.- for all non-sponsored business) are not applicable to sponsored programs as they include items that are not allowable on federal awards.

Special Considerations for Graduate Assistants – Fringe benefits and Tuition

There are two fringe benefit rates for Graduate Assistants.

1) The federal rate must be used on all federal awards and on non-federal awards where tuition is a direct charge. The federal rate may be charged on some non-federal awards provided that the student hasn’t previously received tuition support using the non-profit/foundation fringe benefit rate.  In cases where the non-profit/foundation rate is waived, no tuition may be provided to the student.

2) The non-profit/ foundation rate may be used for graduate assistants proposed on non-federal awards for which tuition is not direct charged, but is an allowable cost.  The higher fringe benefit rate may not be used for sponsors that disallow tuition as a direct cost.

Fringe Benefit Rate for Graduate Student Summer Activity.

Graduate students who have a fall, spring, or academic year assistantship (regardless of the source of funds), and who also work during the summer on the same or similar activities should be classified as an SU Graduate Assistant -Summer (Account 536259).

The temporary employee fringe rate is to be used for those graduate students who are hired to perform temporary/hourly wage positions. Students who are temporary employees do not receive health benefits.

Expectation of Minimum Effort for PI and other key personnel

All PIs and key personnel on sponsored projects, ordinarily are expected to commit a minimum level of effort to the project.  The minimum amount of committed effort for each sponsored project should be no less than 1% of the employee’s University effort, whether charged to the sponsor or to the University.  In most cases, it is expected that the effort will be greater than 1% and should be reflective of the actual effort necessary to meet the goals and objectives of the project.  This requirement is based on the federal government’s expectation that they be fairly charged for the costs of research (OMB Clarification of January 5, 2001).

Deviations from this expectation require submission of additional justification for OSP review and concurrence.

When is effort not required on a sponsored project?

Some applications, typically for non-research activities, do not require committed effort for the PI or other key personnel.  Examples of sponsored projects that have no expectation for effort include but are not limited to: NIH NSRA individual fellowship applications, NSF Doctoral Dissertation Research Grants, NSF REU Supplements, conference grants, training grants, equipment grants, and travel grants.  OSP will review the program guidelines to determine when effort should be committed to a sponsored project.

Calculating Project Effort for Key Personnel

This example is for key personnel, whose participation is essential for project success and generally possess a high degree of skill and knowledge (PI, co-PI, or co-Investigator, etc.):

To accomplish a project’s work plan, the PI plans on spending 25% of his academic year effort on the project, and ½ of the summer on the project.  To perform the effort calculation, it is necessary to have the PI’s institutional base salary, which in this case is his academic year salary.

PI Institutional Base Salary =

• Academic Year = $85,000 or $10,000/month ($85,000/8.5 months)
• Summer = $10,000/month * 3.5 months = $35,000

(NOTE: $10,000 is the maximum rate at which this PI can be compensated for 1 month of work. The maximum summer sponsored project compensation ordinarily cannot exceed the amount derived from 3.5 months payment at 95% of base salary.)

Approach #1 –

When sponsor requires salary calculation based on percent effort.

Example: assuming 25% academic year effort and ½ summer effort

• Academic Year (8.5 months)
  • $85,000 base salary * 25% = $21,250 for academic salary
• Summer (3.5 months)
  • $10,000/month * 3.5 months = $35,000 (total summer pay allowed)
  • $35,000 * 50% = $17,500 (salary for ½ of the summer effort)

Approach #2 –

When sponsor requires salary calculation based on person months – generally applies to federal grants.

Example: assuming 25% academic year effort and ½ summer effort

• Academic Year –
  • 25% of his 8.5 month AY appointment = 2.125 person months
  • 2.125 * $10,000 = $21,250 for academic year salary.
• Summer –
  • ½ of his summer months = 0.5 * 3.5 months = 1.75 months
  • $10,000/month * 1.75 month= $17,500.

Note:  The OSP budget template includes a calculator to convert percent effort to person-mont

Course Buy Out Cost

A Course Buy Out costs 15% of your academic-year base salary and fringe benefits per course. If your salary is above a mandated cap, such as the Federal NIH Salary Cap, the cost is based on the 9-month equivalent of that cap.

You may buy out no more than two courses in an academic year without prior Provost approval. The University expects faculty to teach at least one course per year unless on leave; a buyout of all assigned courses in a year requires additionally buying out your institutionally funded research effort (or, for professors of practice, effort to stay connected to your profession) for a total cost of 80% of academic-year salary plus fringe, with Provost approval, and only under extraordinary circumstances.

Approvals

Course Buy Outs require prior approval from your department chair or school director and dean. For buy outs on sponsored projects, approval must come from the Office of Sponsored Programs before the proposal is submitted, and external-grant buy outs must be pre-approved during proposal development. If a buy out is approved before proposal submission, the University will honor it.

Conditions

Funding must be available at the start of the semester in which you buy out, and the buy out must occur in the same fiscal year the funding is made available. You must continue to meet any remaining teaching, service, and administrative obligations. No supplemental pay for overload teaching will be provided in an academic year in which you use a Course Buy Out. Buy outs may not fund research, administrative, or unpaid leave, and do not affect eligibility for research leave. Faculty may not self-fund buy outs with non-university money; all funds must run through the University.

See the Faculty Course Buy Out Policy for the full policy.

Requests for overload or extra service

Overload and extra service activities, or ‘intra-University consulting’ as the federal government refers to it, are work performed on behalf of the University or sponsor that are outside of those activities for which an employee is compensated by their Institutional Base Salary (IBS). The supplemental amount paid for these extra activities must be commensurate with the employees IBS rate of pay.

Overload or extra service activities are not included in institutional effort tracking. Such requests, which are expected to be infrequent on sponsored programs, must be explicitly presented in the budget and budget narrative for sponsor approval.  Such requests are also noted on the Internal Routing and Review form, question #4. The supervisor (e.g. Chair or Dean or other individual) of the individual for whom overload or extra service is requested must sign the Internal Routing and Review form to indicate his or her awareness of the activity and approval of its designation as overload or extra service. This determination is not at the discretion of the PI/PD.

NOTE: For unanticipated overload or extra service activities not originally included in the application, ordinarily sponsor approval is required and should be obtained through OSP.

Overload refers to all teaching assignments rendered by any semi-monthly SU staff or faculty employee over and above their regular job or appointments.

Extra Service refers to all non-teaching inter/intra-departmental services performed by a semi-monthly full-time/part-time SU faculty, staff, or graduate assistant employee over and above their regular job, appointment or assistantship, usually on a “one time basis.”  For example, if an employee possessed a special talent not associated with their regular job, performed extra work on a project according to an agreement, the service should be treated as Extra Services and submitted accordingly.  (Note: weekly employees performing extra service of a repetitive nature should be set-up with an additional job and, when appropriate, paid overtime to perform those duties.)

Examples of when overload or extra service might be appropriate:

• Activities performed are distinctly different than competencies/responsibilities required in appointment or job description.
• Activities are performed at distinctly different location(s) than routine for the employee (i.e. non-SU owned or SU-controlled facility).
• Activities are short term/non-routine.
• Activities are performed for different school or college.

When overload or extra service is probably not appropriate:

• Activities performed based on expertise/skills reflected in appointment.
• Activities are performed for programs within the employee’s school/college.
• Activities are performed at location(s) routine for the unit.
• Not short-term (i.e. extend through entire multi-year grant period).
• Predictable need to be served, i.e. existing program intended to be stable and having consistent or regular needs or training.

Because circumstances can be unique, the guiding consideration is the appointment letter or job description.  The above examples are among the common considerations, but are not meant to be all inclusive.  OSP is responsible for determining allowability of extra service or overload on grants and is happy to provide guidance and direction on this topic.  Please contact us with specific questions or concerns.

Faculty members are to follow University procedures for securing research or administrative leave. If some or all of this leave is compensated through a sponsored program, University approval is documented on the Institutional Routing and Review form, question #4.  The rate of compensation is to be based on institutional base salary, appropriately escalated.

Annual escalation of salaries and wages.

If expenditures will occur in another fiscal year, the year one salary costs may be escalated by 3% per year for each out year.  Annual escalation of salaries and wages at rates greater than 3% requires OSP approval.

Salaries presented in budgets are based on best available information at the time the application is submitted.  At the time of award, salaries/wages and fringe benefits are again reviewed and information updated, if appropriate. Actual salaries in place at the time the expense is incurred are charged to the sponsor. Compensation is determined by the chair or supervisor in accordance with SU policies.  Under no circumstances may an awarded budget be used to determine appropriate compensation for an employee.

OSP will confirm the accuracy of salaries presented in application budgets, and correct errors or salaries which cannot be adequately justified based on available information.

Although the University fiscal year starts on July 1 and ends on June 30, OSP budgets salaries based on the fiscal year when an award is expected to start; salaries are escalated with each budget year without consideration of the fiscal year.

Since 1990 Congress has legislatively mandated limits to the direct salary that an individual may receive under an NIH grant. Since 2001, these caps are tied to Executive Level II pay scales. For current rate caps see: http://grants.nih.gov/grants/policy/salcap_summary.htm.

In developing a budget for an application that includes a categorical breakdown in the budget, the proposal should continue to reflect the actual institutional base salary of all individuals for whom reimbursement is requested. NIH does allow applicants 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.

NOTE: Although actual salaries are used for budget development purposes, NIH will not award funds for nor may SU expend funds on salaries whose rates exceed the cap in place at the time of expenditure.

The salary limitation provision also applies to subawards for substantive work under an NIH grant or contract.

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.

NIH considers the terms “direct salary,” “salary,” and “institutional base salary” to have the same meaning and are exclusive of fringe benefits and facilities and administrative (F&A) expenses. 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, service, or other activities. Base salary excludes any income that an individual may be permitted to earn outside of the duties to the applicant organization.

As a general policy, NSF limits compensation requested in the proposal budget for faculty to two months of their regular salary in any one year. This limit applies to salary compensation received from all NSF-funded grants.

PI’s and co-PIs may propose receipt of compensation from NSF for the effort committed to the project; such requests are expected to be consistent with NSF’s compensation limits as well as their departmental or unit requirements. As per NSF policy, when required by the nature of the project, a PI may propose effort that exceeds the two months cap.  This level of effort must be fully justified in the budget narrative, and if awarded, will be explicitly noted in the Notice of Grant award.

When PIs or co-PIs choose not to receive compensation from NSF, there is an expectation of minimum effort commitment to the project at a level reasonable and appropriate for the activities to be pursued.

On occasion, faculty and staff may be asked to submit budgets that present salary costs as labor hours, shown either as a salary rate alone or as a ‘loaded rate’, which would include fringes and F&A in the rate calculation.  As an educational institution, presenting compensation in terms of hours worked is not consistent with University policy or with the applicable federal regulations pertaining to effort reporting in the Uniform Guidance.  Consequently OSP will present information in labor hours “for budget estimate purposes only” and will note in the budget narrative, transmittal to the sponsor, or in some other appropriate manner that the University takes exception to requirements to monitor and report salary expenditures as hourly wages/time, and that effort will be certified as a proportion of all institutional responsibilities and billed as effort devoted, not hours worked.

Graduate student compensation

The salary or wage norms for graduate research assistants vary by department and program.  The graduate program director should be consulted for guidance on the rate of compensation normally provided to graduate research assistants.  Graduate students whose role is a Graduate Research Assistant, in addition to salary / wages, also receive tuition, as per University policy.  All academic units except for the School of Education routinely contribute half of the tuition needed on a sponsored project for graduate research assistants, provided that the sponsor will be charged for the other half the tuition cost and full indirect costs are recovered.

Graduate teaching assistant appointments are limited to those projects that clearly identify this activity in the proposal.

Graduate administrative Assistants are not allowed on federal awards, as the combined cost of wages, fringe benefits and tuition makes the cost unreasonable.

See also Other Direct Costs, for additional information on tuition costs.

NIH compensation cap

NIH limits total graduate student compensation on research grants or cooperative agreements to the NRSA zero level of experience for postdoctoral fellows.  Total graduate student compensation is the sum of salary, fringe benefits and remitted tuition. For the current pre-doctoral stipend levels, go to: NRSA Stipend Schedule, scroll down to “NRSA Stipend Levels” and select the fiscal year of interest.

The difference between salary and stipend

Salary or wages are payments that are compensation for work performed. Salary (compensation received by exempt employees) and wages (compensation received by non-exempt employees) are subject to taxes. Salary and wages are processed through the payroll system and reported on an employee’s Form W-2 and/or Form 1042-S.

Stipends are payments that are not compensation for work performed, but rather are funds provided to support educational or research training. Because these payments are not forms of compensation (no services are required), they will not appear on a Form W-2 and may or may not be subject to tax withholding and reporting  (see also: Stipend Information Sheet. As indicated on the Comptroller’s web site, be advised that the tax withholding and reporting rules differ for US Citizens and Nonresident Aliens.)

• Stipends are a form of scholarship and are expressly disallowed on federal research grant awards.
  • NOTE: please contact OSP if you have any questions about sponsor’s intent.  The term ‘stipend’ is among the most frequently misused in the sponsored programs area.
• OSP is responsible for reviewing sponsors’ guidelines and determining whether students are to receive compensation for work performed, or a stipend for educational or research training purposes. OSP consults with the Comptroller’s Office if sponsor’s guidelines are ambiguous.

Recommendation:  Because stipends do not include fringe benefits, when applying for a fellowship or training grant, it is important to consider whether health benefits can or should be purchased. Most sponsors now allow this as a separate line item on the application. Health benefits can be purchased from external providers with whom the University contracts.  Please contact Student Health Services; for additional information go to Student Health Insurance.

ALERT:  The purchase of such non-employee benefits for a student is considered a fellowship payment and is distinct from the tuition and fees required to attend the institution.  Consequently, these non-employee benefits may or may not be subject to tax withholding and reporting.

Administrative and Clerical Support

Administrative and clerical support costs are generally not allowable on federal projects except for when four conditions are met in accordance with OMB Uniform Guidance Section 200.413.

The direct charging of administrative salaries is only allowable when all of the following conditions are met and described in the budget justification:

1. Administrative or clerical salaries are integral to a project or activity;
2. Individuals involved can be specifically identified with the project or activity;
3. Such costs are explicitly included in the approved budget or have the prior written approval of the cognizant Agency; and
4. The costs are not also recovered as indirect costs.