Research Administration Policies
RA64 Personnel Costs
Policy Steward:Senior Vice President for Research and Corporate Controller>
- Labor Distribution
- Salary Restrictions
- Effort Confirmation (Effort Reporting)
- Labor Adjustments
- Further Information
- Cross References
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 (h)(2) 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:
36 week salary + Teaching or Research Extension (Supplemental 1) which extends contract up to 48 week appointment.
44 week salary + Teaching or Research Extension (Supplemental 1) which extends contract up to 48 week appointment
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 confirmation and do not qualify as an allowable cost on sponsored awards.
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 programs.
Below are more detailed policies regarding personnel costs on sponsored awards.
All departments distributing labor to federally sponsored projects must use the Pay and Effort system to perform the distribution, with the exception of the Defense-Related Research Units, which have their own audited labor distribution system. Distributions to restricted accounts through the Pay and Effort system are to be made only upon the direction of the Principal Investigator (PI) of the project or, for non-federal funds, the Budget Administrator of the account, or their authorized delegates. Wages must be directly charged and appropriately approved through WorkLion per Policy PR07, Wage Payroll - Non-Regular Employees.
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.
The Financial Officer's role in distribution of labor is in the control and management of inputs into the Pay and Effort system.
It is the responsibility of the Principal Investigator or Budget Administrator (or their authorized delegates) to ensure that the amount of salaries charged to a particular account is appropriate given effort expended and the specific terms and conditions of the particular grant or contract.
The Budget Executive, Budget Administrator or Principal Investigator or their authorized delegates shall review monthly clearing account vouchers for each account within the month following the pay date. If the effort distribution is not correct, the person reviewing the voucher must report the corrections by means of a memo, an email, a notation on the voucher or by submission of an updated salary assignment sheet to the affected account's Financial Officer.
See Procedure CR2015 for additional information and detailed guidance.
Fringe benefits are an allowable cost for federal 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 costs which are 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.
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 costs are included in the fringe benefit rates. Therefore, all sabbatical leave costs must be charged to general funds through object code 109. Sabbatical may only be charged to a sponsored award in unusual circumstances and approval is required from the Corporate Controller's Office. If sabbatical pay is approved on a sponsored award the person's regular pay object code must be used.
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 is required from the Dean/VP for Research/VP for Commonwealth Campuses and written approval is required from the granting agency. Additional pay over the amount of the sabbatical must not be coded as 109 Sabbatical. 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/X4 – 6/30/X5 for pay purposes only; physically on leave 8/15/X4 – 5/15/X5". 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 program officer. 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(c), which states that prior approval is required from Federal awarding agencies whenever they will be a "change in the a key person specified in the application of the Federal award" or "the disengagement from the project for more than three months, or a 25 percent reduction in time devoted to the project, by the approved project director or principal investigator."
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 project. If an individual will be on leave for more than three months, the individual’s salary should be removed from the sponsored project to avoid an undue burden on the sponsored fund. As noted in RA63, Penn State must request the sponsor’s prior written approval if an individual will be disengaged from a sponsored project for more than three months. And if, as a result of extended leave, an individual reduces his or her time spent on a project by 25 percent or more of the original commitment, prior approval from the sponsor is required.
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 accrued. (See policy HR34, Employment Conditions for Staff Employees.)
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.
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. When an effort confirmation for a grant includes an employee who earns at a rate in excess of a reimbursement salary cap, a notation must be listed at the bottom of the effort confirmation. 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 detail.
Amounts over the salary cap CANNOT be used as cost sharing. See Cost Sharing FAQ for additional detail.
As required by Uniform Guidance 2 CFR 200.430, salary/wage charges 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 signature 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. 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 have their own audited labor distribution system. The University's vehicle for monthly charging and annual confirmation of effort is the 1002 Salary Clearing Account. The main function of the Clearing Account 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 longer term.
The Uniform Guidance provides detailed standards at 2 CFR 200.430(h) 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 administrators and/or Principal Investigators for confirmation of effort on an annual basis, and within 45 days after the end-date of each sponsored program. The Plan Effort Confirmation Statements will be produced after the end of the fiscal year for all accounts open during the fiscal year and must be signed and filed by September 30th each year. These statements will also be produced for individual accounts by the unit upon reaching the end-date of the sponsored program. These are to be signed by the Principal Investigator and Budget Administrator or authorized delegate. No individual may confirm his/her own effort, so in those cases where the Budget Administrator is also the PI, the confirmation must be approved by the appropriate Associate Dean for Research, Budget Executive or authorized delegate. In compliance with Uniform Guidance 2 CFR 200 Subpart E—Cost Principles requirements for effort confirmation, "a responsible person with suitable means of verification that the work was performed" must sign the effort confirmation statement. Therefore, proxy signatures or signature stamps are not acceptable.
When the effort is confirmed through appropriate signature, the approved plan effort confirmation statement will be returned to the Financial Officer.
See Procedure CR2015, Labor Distribution, for additional information.
There are two categories of Labor Adjustments:
- REALIGNMENT OF ESTIMATE
Realignment of estimates must be done within the month following the month for which the estimate revision is needed if for a pay period already paid. Revisions may be done at any time for pay periods not yet paid. The PI or authorized delegate must request and approve the estimate revision for federal funds; Budget Administrator or appropriate delegated authority for non-federal funds. 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.
- LABOR TRANSFER
Labor transfers are adjustments that are requested more than 30 days after the pay period in which the labor was paid. Given that a timely review of monthly clearing account vouchers is expected, labor transfers should occur infrequently and must include detailed documentation as to why the transfer is required. Written PI approval for the labor transfer for sponsored awards is required and must be included in the information sent to the Finance Office with the request for the labor transfer. For non-sponsored funds, written approval from the Budget Administrator or appropriate delegated authority is required. Per Procedure CR2015, Labor Distribution, any labor transfers which charge a federal or federal flow-through account must also be approved by the Assistant Controller with additional documentation provided (30 day memo).
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 IBIS forms through the explanation, purpose, description and/or notepad. 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, signatures on reports, including effort confirmation, are asserting a claim that the contents of the reports are accurate and appropriate. Review of reports, including effort confirmations, is critical before reports are signed to protect those signing. It is the responsibility of the PI to bring forward any questions regarding costs reported to the research administrator or Financial Officer before signing and certifying the costs. Knowingly signing 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.
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 the Corporate Controller.
Other Policies and Procedures may have specific application and should be referred to, especially:
Procedure CR2015 - Labor Distribution
HR45 - Post-Retirement Appointments
ACG15 - Support Funds and Outside Compensation During Sabbatical
PR07 - Wage Payroll - Non-Regular Employees
RA02 - Stewardship of Sponsored Programs
RA10 - Costing Principles for Sponsored Awards
RA21 - Development of Proposal Budget
RA63 - Budget Realignment
RAG03 - Retired Faculty Participation
RAG64 – Salary Caps
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.
Date Approved:July 8, 2019>
Date Published:January 4, 2020>