Salary Cap | Post Award Fiscal Compliance

Salary Cap Guidance & Resources

Overview

Introduction to Salary Cap
The Salary Cap Process in Workday and ECC
Salary Cap from Proposal to Closeout
Salary Cap Tools
Current Salary Cap Issues
Additional Resources

Introduction

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. This salary limitation is referred to as “Salary Cap” or “Salary Over the Cap” (SOC).

Salary Cap limits the amount that will be awarded and can be charged to grants and contracts issued by sponsors that apply either the HHS Salary Cap or a Salary Cap unique to their organization.

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).

Direct and Indirect Salaries

According to NOT-OD-25-025, the HHS Executive Level II (EL II) Salary Cap applies to:

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

This policy took effect October 1, 2024. The effect of the updated policy is that the HHS Salary Cap applies to employee salaries in calculation of service and recharge center rates in addition to direct salaries charged to applicable sponsored awards. 

Current HHS Salary Cap

The HHS Salary Cap changes periodically, and when it does, NIH issues a notice to inform the research community. Effective January 1, 2026, the Executive Level II Salary Cap changed to $228,000 annually (NOT-OD-26-038). An increase of $2,300 from the previous cap, this change permits departments to charge more of an individual’s salary to grants. The result is a reduction in 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.  Sponsors will not provide additional funding to cover the increase in the salary cap threshold for existing awards.

For 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%). 

Previous HHS Salary Caps are listed on NIH Salary Cap Summary (FY 1990 - Present).

Sponsors That Use Salary Caps

Please refer to the Sponsors with Salary Caps for ECC R1606 report in Workday for a full list of sponsors that use a salary cap.

This report is available to individuals with the following Workday security roles: Award Billing Specialist, Award Contract Specialist, Award Contract Specialist Trainee, Finance Auditor, Grant Manager, Implementers, RBU Finance Analyst, RBU Grant Financial Analyst, Report Administrator, and Report Writer.

It is also important to review your Notice of Award and applicable terms and conditions to determine if a sponsor uses a Salary Cap.

Salary Cap Process in Workday and ECC

When Grant & Contract Accounting creates an award with Salary Cap in Workday, they select the appropriate Salary Cap in the Award Line Salary Cap field.

Workday calculates the payroll that can be charged to the grant worktag consistent with the Salary Cap. The remainder of the payroll is charged to an associated Salary Over the Cap Basis Worktag that uses fund worktag FD101.

As payroll expenditures post in Workday, payroll data is loaded into ECC from an integration with Workday. Normal payroll data (i.e. Workday Journal Source is “Payroll Actual Accrual”) is loaded into ECC weekly on Monday evenings after 7:00 PM PST. Payroll Accounting Adjustments are loaded into ECC weekly on Thursday evenings after 7:00pm PST, after posting to Workday.

During the effort reporting period, effort statements are in Building status. When the Pre-Review period begins and the effort statement is available for pre-review, the statement includes the amount charged to the Salary Over the Cap Type Worktag in the K Award/Funding Shift/Over Cap section.

Changes made to payroll such as Payroll Accounting Adjustments, retroactive payments (“Retro Pay”), and overpayments are automatically loaded into ECC the Tuesday after the change posts to Workday.

Manage Salary Cap From Proposal To Closeout

Salary Cap at Time of Proposal

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.

Requests for salary in proposal budgets should be based on the individual's full Institutional Base Salary.

For information on documenting Salary Over the Cap on proposal budgets, refer to guidance from the Office of Sponsored Programs: How do I document Salary Cap on proposal budgets?

Salary Over the Cap is not considered to be Cost Share because it is an unallowable expense on an award. Do not include Salary Over the Cap on the Cost Share Addendum.

Managing Salary Cap During the Award Period

Once a new award or new award line is set up in Workday, check that the award line has the Award Line Salary Cap field populated with the applicable salary cap flag.

During the award period, be on the lookout for the following:

Payroll Accounting Adjustments (PAAs): Workday cannot calculate the SOC correctly when a PAA is processed for a faculty member who is subject to the Salary Cap. When preparing the PAA, use the SOC Verification Tool to manually adjust.
Retro Pay: Workday cannot calculate SOC correctly when Retro Pay is processed for a faculty member who is subject to the Salary Cap. Prepare a PAA to correct.
Faculty with Clinical Pay: Go to the Salary Cap Tools webpage to learn about the Calculator for Salary Allocations that addresses faculty members with clinical pay.

For all other pay, Workday will correctly calculate the SOC and no additional action is needed.

Salary Cap During Closeout

When preparing for closeout, review expenditures for allowability and post adjustments before the Final Action Date in Award Portal. For more information on preparing for closeout, visit Grant & Contract Accounting’s Closing Checklist.

11/6/25 - Salary Cap process overview
6/26/25 - ADS/ENS removed from IBS reminder, updated Allocations tool
2/20/25 - ECC Salary over the Cap Verification Tool and NIH Salary Cap Info
1/23/25 - PAAs with Salary over the Cap (SoC) (start at 21:20)

ECC System Notice