RA64 Personnel Costs
Contents:
- Policy
- Labor Distribution
- Salary Restrictions
- Effort Certification (Effort Reporting)
- Labor Adjustments
- Documentation
- Further Information
- Cross References
POLICY:
Personnel costs must follow the basic costing principles of reasonable, allocable, and allowable. All personnel costs charged to sponsored awards must comply with University policy, as well as with any specific sponsor requirements and federal and state laws and regulations. (For more information, see RA10 - Costing Principles for Sponsored Awards.)
The Uniform Guidance outlines requirements for federal awards in Uniform Guidance 2 CFR 200.430 Compensation – personal services. This section sets forth a principle for Institutional Base Salary (IBS) applicable to institutions of higher education, which states:
Salary basis - Charges for work performed on Federal awards by faculty members during the academic year are allowable at the IBS rate. Except as noted in paragraph (i)(1)(ii) of this section, in no event will charges to Federal awards, irrespective of the basis of computation, exceed the proportionate share of the IBS for that period. This principle applies to all members of faculty at an institution. IBS is defined as the annual compensation paid by an IHE (Institution of Higher Education) for an individual's appointment, whether that individual's time is spent on research, instruction, administration, or other activities. IBS excludes any income that an individual earns outside of duties performed for the IHE. Unless there is prior approval by the Federal awarding agency, charges of a faculty member's salary to a Federal award must not exceed the proportionate share of the IBS for the period during which the faculty member worked on the award.
At Penn State, Institutional Base Salary for full-time faculty is defined as annualized salary to 48 weeks. Examples include, but are not limited to:
36-week salary + 12 weeks of Teaching or Research Extension (Supplemental 1)
44-week salary + 4 weeks of Teaching or Research Extension (Supplemental 1)
48-week salary
Faculty members on 36-week appointments are eligible for up to twelve additional weeks of teaching or research extension with a maximum of 48 weeks total compensation. For these job profiles, salary is derived from the 36-week base and cannot exceed 33.3% of the 36-week salary on a fiscal year basis.
Additional Duties (Supplemental II) payments are not based on the IBS rate of pay and therefore are considered extra service pay (see Uniform Guidance 2 CFR 200.430(h)(4)). Additional Duties payments are not included in effort certification and are not an allowable cost on sponsored awards.
College of Medicine faculty are generally 12 month (52 week) employees.
Salaries of administrative and technical staff should normally be treated as indirect costs. Exceptions are possible but must be documented through the Cost Accounting Justification Form. See RA21 - Development of Proposal Budget for more information regarding when administrative and technical staff salaries can be direct-charged to sponsored awards.
The term “Research Administrator” is used throughout this policy. For purposes of this policy, a Research Administrator is any individual that has research administration duties as part of their job duties, regardless of their actual job title. These duties may include, but are not limited to, Labor Distribution planning, approving effort certifications, reviewing expenses with a PI, and advising a PI on applicable rules and regulations. For example, a Research Administrator may have roles in SIMBA such as LD Planner, may be in the approval workflow for Effort Certifications, or both. Colleges and units/departments are responsible for the assignment of duties to their personnel within their respective colleges and units. This policy is not intended to define a college’s or unit/department’s hierarchy or structure.
LABOR DISTRIBUTION:
All colleges and units/departments distributing labor to federally sponsored awards must use the SIMBA Labor Distribution system to perform the distribution. Distributions to sponsored awards through the SIMBA Labor Distribution system are to be based on the direction of the Principal Investigator or their authorized delegates. Wages must be directly charged and appropriately approved through WorkLion per Policy PR01 - University Payroll.
Colleges and units/departments should review distributions for faculty in their areas to ensure that the balance of the distribution for teaching and other assignments versus research are appropriate given the individual's teaching load and/or outreach duties during the semester. Research Administrators must communicate with their Principal Investigators to review and update labor distributions regularly, but no less frequently than quarterly. More frequent communication will need to occur during fiscal year end processes to create the new labor distributions for the new fiscal year (July 1 of each year).
The Principal Investigator is ultimately responsible for all effort distributed to their sponsored awards and must review personnel expenses regularly but no less frequently than quarterly, via myResearch Funds Portal or other methods to ensure the effort is correct. Incorrect personnel expenses will necessitate changes in labor distributions. PIs must work with their Research Administrator to ensure project personnel's effort is appropriately distributed via labor distribution and charged to a sponsored award(s).
The Financial Officer is, by default, assigned Labor Distribution access for their respective college or unit. The Financial Officer is responsible for the control, management, and delegation of inputs into the SIMBA Labor Distribution system. For example, Labor Distribution access may be delegated to a Research Administrator to perform those duties.
The Research Administrator, shall review labor charges with the PI regularly but no less frequently than quarterly. If the effort distribution is not correct, the person reviewing the labor distribution must report the corrections by means of a memo or an email to the Labor Distribution Planner for the effort to be corrected.
See Procedure FN2015 - Labor Distribution for additional information and detailed guidance.
FRINGE BENEFITS:
Fringe benefits are an allowable cost for sponsored awards. Penn State has fringe benefit rates approved by ONR/DCAA, which are charged based on the direct salaries paid on a sponsored awards (federal or non-federal). These rates capture the costs related to benefits including health insurance and pensions. Any individual categories of costs included in the fringe benefit rates are NOT permitted as direct costs to a sponsored award.
Application of Fringe Benefits - The actual negotiated fringe benefit rates will be charged regardless of whether such rates are higher or lower than the rates used in the applicable proposal. The fringe benefit rates will be adjusted each July 1 for projects overlapping fiscal years.
Fringe benefits cannot be waived but can be considered part of cost-sharing.
MINIMUM FACULTY EFFORT:
All senior personnel on a project are expected to allocate a percentage of their time to the sponsored award (either as a direct charge or a cost-share), unless there is an appropriate reason for not showing any effort (e.g., instrumentation grants). See RA21 - Development of Proposal Budget (Direct Labor section) and the Penn State Compensation FAQ for more detail.
SABBATICAL LEAVE:
Sabbatical leave costs are included in the fringe benefit rates. Therefore, all sabbatical leave costs must be charged to a non-grant cost collector using the appropriate sabbatical G/L. Sabbatical cannot be charged to a sponsored award.
At times, a faculty member may wish to take sabbatical, but also continue working on a sponsored award. This is permitted and is documented in ACG15 - Regulations Regarding Use of Support Funds and Receiving Outside Compensation During Sabbatical Leaves of Absence. Total pay may not exceed 100% of a person's contract pay for the sabbatical leave period. Approval of sabbatical leave is outlined in AC17 - Sabbatical Leave. For sponsored awards, some sponsors require prior written approval when a PI or other key personnel on the award will be absent from the grant for more than 3 months, therefore Research Administrators may consult with the granting agency’s administrative contact to assist in determining if prior written approval is needed. Additional pay over the amount of the sabbatical must not be coded on the sabbatical general ledger account. A person may receive full Teaching or Research Extension (Supplemental 1) for periods outside the sabbatical contract period. A 36-week faculty member's sabbatical contract period is normally mid-August to mid-May. However, for pay purposes the system shows a person's leave starting July 1. The best practice is to add a note to the sabbatical leave form stating, "Sabbatical leave period is 7/1/22 – 6/30/23 for pay purposes only; physically on leave 8/15/22 – 5/15/23". Teaching or Research Extension (Supplemental 1) pay for unusual academic contract periods would have to be addressed on a case-by-case basis. Additional guidance regarding Sabbatical Pay can be found in the Penn State Compensation FAQ.
Principal Investigator on Sabbatical: Sabbatical leave by a PI may be considered a long-term absence by the sponsoring agency. Any leave should be discussed with the sponsor’s program officer and administrative contact to determine if prior approval is needed. The PI may be required to submit formal notification to the sponsor and explain how the sponsored award will be managed during the leave period. Federal grants and cooperative agreements are subject to Uniform Guidance 2 CFR 200.308(f), which states that prior approval is required from Federal agencies or pass-through entities whenever there will be a "change in key personnel (including employees and contractors) that are identified by name or position in the Federal award" or "the disengagement from a project for more than three months, or a 25 percent reduction in time and effort devoted to the Federal award over the course of the period of performance, by the approved project director or principal investigator."
OTHER LEAVE/EXTENDED LEAVE:
The cost of benefits in the form of regular compensation paid to employees during periods of authorized absence from their jobs, such as annual leave, family-related issues, sick leave, holidays, etc. are allowable. These costs are recognized and charged when the leave is taken and paid. Therefore, a vacation day taken during a month would be allocated as a direct cost on the sponsored award by applying the appropriate percentage of effort for the individual's activities over that month. If 50% of the individual's time over the month, which includes the vacation time, is spent working on a sponsored award then 50% of the compensation cost, including the vacation leave, would be allowable on the sponsored award.
Extended leave may have an impact on employees’ ability to meet their effort commitment to a sponsored award. If an individual will be on leave for more than three months, the individual’s salary should be removed from the sponsored award to avoid an undue burden on the sponsored award. As noted in RA63 - Budget Revisions and Other Prior Approval Requirements, Penn State must request the sponsor’s prior written approval if an individual will be disengaged from a sponsored award for more than three months. And if, as a result of extended leave, an individual reduces their time spent on a project by 25 percent or more of the original commitment, prior approval from the sponsor is required.
In extraordinary circumstances (e.g., war, pandemic, natural disaster, and other large-scale disruptions), project personnel may be unable to access facilities and/or perform activities in support of sponsored awards. During extraordinary circumstances, Penn State may permit salaries and benefits or proportions thereof to be charged to sponsored awards, as well as other costs that may be allowed consistent with federal and state law, regulation, and guidance as may be established or amended in light of such extraordinary circumstances. Such decisions will be made by the Office of the Senior Vice President for Research in consultation with the Office of Budget and Finance. Such costs must be tracked and separately documented.
ACCRUED LEAVE PAYOUT:
Upon termination or retirement, certain employees are eligible for accrued leave payout, based on established University policies. The payout of this accrued leave is permissible on a sponsored award but must be allocated appropriately based on when the leave was earned. (See policy HR34 - Employment Conditions for Full-Time Staff Employees.)
PARTICIPATION BY RETIRED FACULTY:
See Policy HR45 - Post-Retirement Appointments and RAG03 - Retired Faculty Participation, for policy and guidelines related to the approval and use of retired faculty on sponsored awards. Additional guidance regarding payment of retired faculty can be found in the Penn State Compensation FAQ.
SALARY RESTRICTIONS:
Federal agencies or other sponsors may impose limitations on the amount of salary which can be charged to a sponsored award.
The National Science Foundation (NSF) has a "two-ninths" rule which is further explained in Penn State's Compensation FAQ.
The National Institutes of Health (NIH) has established caps on salary reimbursement. If an individual whose salary exceeds the cap is performing effort on an account subject to a reimbursement salary cap, the amount charged to the account for each month must be calculated to account for the cap. See RAG64 - Salary Caps for detail regarding salary cap documentation requirements.
The USDA National Institute of Food and Agriculture (NIFA) requires prior approval of salaries above a certain level. See the most recent version of the USDA NIFA terms and conditions for additional details.
Amounts over the salary cap CANNOT be used to meet a cost sharing obligation, though salary cap is tracked similarly to cost sharing. See Cost Sharing FAQ for additional details.
EFFORT CERTIFICATION (Effort Reporting):
As required by Uniform Guidance 2 CFR 200.430, personnel expenses to Federal awards must be based on records that accurately reflect work performed and be supported by internal controls which provide reasonable assurance that charges are accurate, allowable and properly allocated. Documentation of the effort performed is required, and the annual confirmation of effort, or confirmation of effort at the end of a sponsored award is validated by the electronic attestation of the Principal Investigator. Validating incorrect effort against a sponsored award would be considered a false claim subject to federal prosecution.
The University is required by federal regulation to periodically report on 100% of the effort of employees who perform services chargeable to federal grants and contracts. The current practice is to charge effort monthly based on the Plan Confirmation labor distribution method and confirm effort annually. The exception is the Defense-Related Research Units, which enter their time hourly and use timekeeping to enter time worked daily. The University's vehicle for monthly charging and annual confirmation of effort is the use of salary clearing cost centers. The main function of salary clearing cost centers is to charge employee effort in the month it is earned, which is not necessarily in the same month it is paid.
Effort is allocated and encumbered based on budget estimates but must be reviewed and adjusted to accurately reflect the actual effort performed by an individual on a sponsored award. Penn State considers changes in effort greater than 5% to be significant, warranting adjustment. As stated below, short-term fluctuations of effort need not be considered as long as the distribution is reasonable over the effort certification period.
The Uniform Guidance provides detailed standards at 2 CFR 200.430(g) for documentation of personnel expenses which Penn State has incorporated into its systems to assure compliance.
To document and confirm effort performed, a summary for each account of salary amounts and related percentages to the total salary charged for each month is distributed to the Research Administrators and/or Principal Investigators for confirmation of effort on an annual basis, and within 30 days after the end-date of each sponsored award.
Annual Effort Certification statements are generated based on the fiscal year and the certification by the Principal Investigator is due September 30 of each year.
Project-End Effort Certification statements are generated when a project ends and certification by the Principal Investigator is due 60 days after the period of performance (i.e. project end date) of the award. RA90 - Finalization and Closure policy states that all final expenditures on a project must post within 60 days after the end date, therefore all labor adjustments must be completed within this timeframe and in some cases sooner depending on final invoicing and final reporting deadlines.
The PI is ultimately responsible for confirming all effort for all individuals working on their project(s). Therefore, proxy approvals are not acceptable, except in the case where a PI leaves Penn State or is on an official extended leave. When a PI leaves Penn State prior to certifying effort, the certification may be performed by the PI’s Department Chair, the PI’s immediate supervisor, or a delegate. The individual certifying on behalf of a departed PI should have knowledge of the PI’s work activities. This knowledge may be obtained during the offboarding discussions with the PI (Also see HRG20 policy). In cases where Penn State is retaining a grant, the new PI will certify the effort for the project.
When the effort is confirmed through appropriate electronic approval, the approved Plan Effort Confirmation Statement will be archived in the Effort Certification system for the required retention period.
See Procedure FN2064 - Effort Certification for additional information.
LABOR ADJUSTMENTS:
There are two categories of Labor Adjustments:
1. REALIGNMENT OF ESTIMATE
Realignment of budget estimates must be done within 3 months following the month for which the estimated revision is needed if for a pay period already paid. This timeline will be sooner in cases of award closeout, as final expenses need to post within 60 days or sooner so final invoicing deadlines can be met. Revisions may be done at any time for pay periods not yet paid. The Research Administrator must communicate with the PI regularly, but no less frequently than quarterly, and request/enter the estimate revision. Estimate realignments may happen frequently and are an expected standard operational event given that the initial labor distribution process is done using the Plan Confirmation method.
2. LABOR TRANSFER
Labor transfers are adjustments that are requested more than 3 months after the pay period in which the labor was paid. Given that a timely review of clearing account reports and award expenditures is expected, labor transfers should occur infrequently and must include detailed documentation as to why the transfer is required. Written justification for the labor transfer for sponsored awards is required and must be included with the amended labor distribution plan. For non-sponsored funds, approval from the Budget Administrator or appropriate delegated authority may be required, however non-sponsored funds management is outside the scope of this policy. Per Procedure FN2015 - Labor Distribution, labor distributions that are realigning effort more than 3 months after the original pay period which charge a federal or federal flow-through account must also be approved by the Director of Financial Analysis and Compliance Office, or their delegate, with additional documentation provided on the Personnel Cost Transfer Justification Form.
DOCUMENTATION:
All costs need to have adequate documentation to support their application to a sponsored award. The documentation must provide enough detail for a reasonable person to understand the purpose of the cost and how it benefited the sponsored award. These justifications must be documented in appropriate Labor Distribution forms through the explanation, purpose, description, comment section, and/or attachment describing the justification. In certain cases, additional justification, such as the Cost Accounting Justification form noted above, or explanations for late transfers, may also be required beyond the detail included within the expense transaction.
In addition, electronic approvals of reports, including effort certification, are asserting a claim that the contents of the reports are accurate and appropriate. Review of reports, including effort certifications, is critical before reports are approved to protect those approving. It is the responsibility of the PI to bring forward any questions regarding costs reported to the Research Administrator or Financial Officer before approving and certifying such costs. Knowingly approving an incorrect report regarding costs charged to a sponsored award is a false claim. Please see RA02 - Stewardship of Sponsored Programs, for more information regarding the False Claims Act and the reporting of non-compliance.
FURTHER INFORMATION:
For questions, additional detail, or to request changes to this policy, please contact the Office of the Senior Vice President for Research or the Office of Budget and Finance.
CROSS REFERENCES:
Other Policies and Procedures may have specific application and should be referred to, especially:
Procedure FN2015 Labor Distribution
Procedure FN2064 Effort Certification
HR45 Post-Retirement Appointments
RA02 Stewardship of Sponsored Programs
RA10 Costing Principles for Sponsored Awards
RA21 Development of Proposal Budget
RA63 Budget Revisions and Other Prior Approval Requirements
RAG03 Retired Faculty Participation
Revision History:
- February 5, 2025 - Updated to reflect change of SME to AVP for Research (Post-Award Contractual Compliance). Policy updates: 1) effort certification due dates clarified, 2) Department Heads removed from effort certification workflow, except in exceptional cases, 3) time frame for realigning budget estimates extended to 90 days, 4) Financial Analysis and Compliance Office (FACO) identified as the responsible party for approving labor transfer adjustments requested more than three months after the pay period, and 5) sabbatical rules clarified.
- October 7, 2024 - Updated to clarify expectations for reviewing labor charges.
- September 26, 2024 - Updated to remove PI's role in approving Labor Distributions
- May 1, 2024 - Updated to reference new procedures (FN2015 and FN2064)
- October 14, 2023 - Updated Effort Certification to indicate that effort certifications for programs closed during the fiscal year are distributed 30 days after the end date of each program (as per the SIMBA Labor Distribution Team)
- July 11, 2023 - Editorial changes:
- References to the Corporate Controller changed to Associate Vice President for Budget and Finance
- References to the Office of the Corporate Controller changed to the Office of Budget and Finance
- November 10, 2022 - Updated to include link to PR01
- October 15, 2020 - Updated to include new SIMBA terminology and workflow requirements
- April 24, 2020 - Added guidance under "Other Leave" regarding charging of salaries during extraordinary circumstances
- January 4, 2020 - Added guidance regarding Extended Leave to Other Leave section
- September 19, 2019 - Changed Vice President for Research to Senior Vice President for Research
- February 7, 2019 - Updated policy to reflect new terminology for Supplemental I and Supplemental II, as well as references to WorkLion.
- January 23, 2019 - Updated to indicate that effort reporting is no longer required for employees who "have a portion of all of their earnings chargeable as departmental administration on University general funds."
- July 17, 2017 - Information pertaining to the USDA National Institute for Food and Agriculture added to the Salary Restrictions section.
- February 26, 2016 - This new policy has been created as part of the policy reorganization brought about by the implementation of the Uniform Guidance (2 CFR 200).
- September 4, 2012 - Editorial change to the PLAN EFFORT CONFIRMATION section, adding the term "or designated representative" to actions required to be taken by a budget administrator or budget executive, with respect to the signing and confirmation of effort as it applies to the Plan Effort Confirmation Statement.
- July 10, 2009 - Link to NIH Rate caps added in SALARY CAP section.
- July 1, 2009 - Added an illustration of salary cap scenario and added language for when non-federal funding is unavailable.
- October 20, 2006 - Per recommendation of the Administrative Committee on Research (ACOR), policy title changed from "SALARY RATE LIMITATIONS AND EFFORT CONFIRMATION" to "REIMBURSEMENT SALARY CAPS AND PLAN EFFORT CONFIRMATION." Revised "Salary Cap" and "Plan Effort Confirmation (formerly Effort Confirmation)" sections.
- December 19, 2000:
- "Effort certification" now referred to as "effort confirmation" due to changes in the process.
- Process is now performed annually instead of monthly.
- Added cross reference to procedure CR2015.
- March 16, 1999 - Illustrative example reworded.
- February 20, 1998 - New policy (RA08). Previously was an OSP policy dated January 1996.