Salary cap

If you are a Grant Accounting user and the grant project is subject to a salary cap, you must set up a salary cap schedule. Only posting projects are associated with a salary cap schedule. Salary cap schedules are used for salary encumbrance and labor distribution. Salary cap schedules are used to define the maximum salary per year that can be encumbered and distributed to a posting project funded by a grant. When salary encumbrance or labor distribution is run, a calculation is performed to determine the salary amount that can be distributed to the project. The salary amount is based on:

  • The salary encumbrance amount for the employee
  • The full time equivalent (FTE) amount for the employee
  • The salary cap amount
  • The pay periods for the employee
  • The salary percent that is assigned to the project for the employee

When there is a salary cap for a project, the same calculation is used for both salary encumbrance and labor distribution. Salary encumbrance does not have an overage account to post to, so the overage is left in the home account. Any fringe burden is calculated at the salary amount that can be encumbered.

For labor distribution, any amount that is more than the calculated amount for the employee for a period is posted. The amount is posted to the salary cap overage finance structure based on the selection on the project structure.

  • When Original Transaction is selected and this field is blank, then the overage remains in the employee’s home account. If a specific field of the finance structure is different for the overage, then the field that is different must be specified. For example, an overage must be posted to the same accounting entity and accounting unit, but to another account. Specify the account field. If you specify an account, then it replaces the account on the original salary and wages account and is not posted to a project.
  • When Project Employee is selected and this field is blank, then the labor distribution finance structure on the employee is used for the overage. If a specific field of the finance structure is different for the overage, then the field that is different must be specified. For example, an overage must be posted to a specific project, but to the employee’s home accounting entity and accounting unit. Specify the Project field. If you specify any dimension, then the dimension on the labor distribution finance structure for the project employee is replaced.

When the salary cap is reached when labor is distributed, the amounts are used on the processed labor distribution for the employee. A red alert is displayed for the amount on the posting project. The columns contain the amounts for distributed overage and undistributed overage.

For example, a full time employee (FTE = 1) is paid bi-monthly, works 10% on a federal award, and is over the salary cap of $187,000. The calculation is:

(187,000 x 1 /24) = 7,791.67 x 10% = $779.17

The $779.17 is the amount that can be charged to the grant for the pay period.

If the same employee was part-time (FTE = .5) the calculation would be:

(187,000 x .5 / 24) = 3,895.83 x 10% = $389.58

Another scenario can be an employee that works for multiple departments and has multiple payroll distributions. The salary cap must be distributed to each of the departments proportionally.

For example, the full time employee is paid bi-weekly and worked 60% on a project for three different departments. The pay for the period was $12,000. The department split was 30%, 40%, and 30%, and is over the salary cap of $189,600. The calculation is:

(189,600 x 1 / 26) = 7,292.31 x 60% = $4,375.39

The salary that is charged to the grant is split:

Department 1 30% = 1,312.62

Department 2 40% = 1,750.15

Department 3 30% = 1,312.62

When encumbrance is executed, the calculation is similar. The salary encumbrance amount is first compared to the salary cap amount to decide which amount should be used for the calculation.

For example, a full time monthly employee (FTE=1), has an encumbrance salary of $190,000, planned work is 10% on a project and the salary cap is $187,000. The lesser of the salary encumbrance amount or the salary cap x the FTE amount is used in the calculation.

(187,000 x 1 / 12) = $15,583.33

(190,000 / 12) = $15,833.33

The lesser of the two amounts is used: $15,583.33 x 10% = $1,558.33

A monthly employee is part-time (FTE = .5), has an encumbrance salary of $100,000, planned work is 10% on a project with the salary cap of $187,000. The calculation is:

(187,000 x .5 / 12) = $7,791.67

(100,000 / 12) = $8,333.33

The lesser of the two amounts is used: $7,791.67 x 10% = $779.17