Salary Cap

The National Institutes of Health (NIH), the Substance Abuse and Mental Health Services Administration (SAMHSA), and the Agency for Healthcare Research and Quality (AHRQ) have historically restricted the amount of direct salary an individual may charge an NIH, SAMHSA, or AHRQ grant or contract. Other sponsors may also implement a limitation on salaries on their awards.

DHHS Salary Cap Threshold Changes: (Effective 1/1/2026 EL II Annual Cap is $228,000) [NOT-OD-26-038]

For example, on January 1, 2026, the Executive Level II (EL II) DHHS salary cap changed to $228,000 annually, an increase of $2,300 from the previous cap of $225,700.  This change permits departments to charge more of an individual’s salary to grants thereby reducing the amount of salary cap cost sharing required.  Departments may also elect not to increase the salary charges to grants especially when there are insufficient funds remaining in the grant budget to cover the additional charges.  Note, sponsors will not provide additional funding to cover the increase in the salary cap threshold for existing awards. 

Example - A department elects to charge more for a faculty member with an institutional base salary (IBS) of $250,000 per year and working 10% on a grant.  They can increase the direct charge to the grant by $200 (per year) thereby reducing the salary cap cost sharing by $200 ($2,000 x 10%).  

Matrix of Common Sponsors Applying Salary Caps

*Review your notice of award and applicable terms and conditions to determine if your sponsor(s) impose a salary cap 

The salary cap restriction limits the amount that will be awarded and can be charged to grants and contracts issued by sponsors that apply either the DHHS salary cap or a salary cap unique to their organization. It is important to note that the salary cap serves as the base for determining the amount of salary faculty (and any other UW employee) may be paid from awards issued by these agencies. 

• The amount of the faculty member's institutional base salary (IBS) requested to be awarded (and ultimately charged) is determined based on the percentage of effort to be devoted to the grant multiplied by the salary cap (not the IBS). 

For grant proposal budgets, the full uncapped IBS should be included in the "Institutional Base Salary" section of the proposal. The sponsor will adjust the awarded amount to the cap in effect at the time of the award.

Indirect Salaries

NIH released notice NOT-OD-25-025 on November 14, 2024, which stated that effective October 1, 2024, the Executive Level II Salary Cap applies to:

1. Direct salaries (individuals working directly on NIH projects, and
2. Indirect salaries (executive salaries in various uncapped cost pools)

The effect of the updated policy is that the NIH Salary Cap applies to employee salaries in calculation of service and recharge center rates in addition to direct salaries charged to applicable sponsored awards. 

Cost Share Addendum 

Salary cap is not considered to be Cost Share as the salary over the cap is an unallowable expense on the Award. Do not include over-the-cap coverage on the Cost Share Addendum. 

Resources

• Salary Cap Calculator - for use when an individual receives Clinical Pay in addition to REG pay.
  
  Note: For individuals that only receive REG pay, a calculator is not required. Workday will automatically calculate the salary cap based based on the entered payroll allocation.

  Beginning July 1, 2025, ADS and ENS are excluded from the University's definition of IBS. (see GIM 35) Use of the Salary Cap Calculator is not needed for individuals that receive only REG pay and an ADS or ENS. To ensure the correct amount of effort is allocated to the award, the REG payroll allocation should be the same as the amount of committed or required effort.

  An overview of the impacts of removing ADS and ENS from IBS was provided at the Effort Team Focused Topic Office Hour on May 15th.

  Focused Topic Office Hours Recordings | Post Award Fiscal Compliance