Office of Sponsored Programs - 300.07, Procedure 1 - Estimating Salary

Title

Office of Sponsored Programs - 300.07, Procedure 1 - Estimating Salary

Corresponding with:

• OSP Operating Standard 300.07 - Direct Cost, Personnel

Purpose

Salary calculations can be based on a percentage of effort (Percent Effort Model) or the number of months of effort (Person-Months Model) dedicated to the sponsored project. Guidelines for both are listed below.

Summer salary, normally considered three (3) months, is added compensation to nine-month employees, therefore, it is calculated separately. Some sponsors limit the effort allowed for summer salaries. Thus, it is very important to read the sponsor guidelines carefully.

Calculations for salary do not include fringe benefits. They are calculated separately and should be identified in the proposed budget as a separate line item.

Procedure

I. Annual Salary Estimations

Percent Effort Model

• Determine an employee's FTE (Full-Time Equivalency) on a project:
  • Multiply the number of months of effort divided by the length of the employee appointment.
  • Two months of effort for an employee with a nine-month appointment equates to 2 ÷ 9 = .222
  • The result (in this case, .222) is the FTE.
  • Multiply the FTE by 100 to determine the percentage of effort .222 x 100 = 22.2%
  • Multiply this percentage of effort by the employee's Institutional Base Salary. if this is $60,000 per year: 22.2% x $60,000.00 = $13,320.00
  • The resulting amount (here, $13,320.00) is the proposed annual salary for the estimated time spent on the project.

Person Months Model

• Determine the number of months of effort by multiplying the percentage of effort times the length of the employee appointment:
  • 25% effort for an employee with a 12-month appointment would equate to .25 x 12 = 3
  • The result (in this case, 3) is the number of months of effort
  • The equation is Institutional Base Salary ÷ length of appointment x months of effort = estimated salary
  • Divide the Institutional Base Salary by the length of the individual's appointment: $70,000 ÷ 12 = $5,833.33
  • Then multiply that amount times the months of effort (here, 3): $5,833.33 x 3 = $17,499.00
  • The resulting amount (in this example, $17,499.00) is the proposed annual salary for the estimated time spent on the project.

II. Summer Salary Estimations

Person Months Model

• Divide the Institutional Base Salary (here, $75,500) by the length of appointment (in most cases, 9) to determine the monthly salary: $75,500 ÷ 9 = $8,388.88
• The result is one month of salary, which would be applicable for each summer month of effort.
• Next, multiply the number of summer months of effort times the one month of summer salary: 2 x $8,388.88 = $16,777.76 (the total proposed summer salary)
• The resulting amount (here, $16,777.76) is the proposed salary for the estimated time spent on the project.

III. Projecting Annual Salary Increases

Once the proposed annual salary amount is calculated, apply the allowable annual salary increase rate (generally set by the sponsor) to reflect inflationary and legislative increases in future years (commonly known as the Escalated Institutional Base Salary). For example, if the annual projected salary of the project has been estimated at $13,320 for the first year and a 3% increase is anticipated each year, the salary calculations for a 5-year project would be calculated as follows:

• Year 1: $13,320
• Year 2: $13,320 x 1.03 =$13,719
• Year 3: $13, 719 x 1.03 =$14,131
• Year 4: $14,131 x 1.03 =$14,555
• Year 5: $14,555 x 1.03 =$14,992

Contact Information

For questions regarding this procedure and its related operating standard, please contact SponsoredPrograms@unc.edu.

For questions regarding Pre-Award management or Post-Award administration, please contact the assigned Sponsored Projects Specialist (SPS).

For invoicing, reporting and other financial matters, please contact the assigned Sponsored Projects Accountant.
OSP Staff assignments may be found in RAMSeS or on the OSP website.

History

The operating standards in the Office of Sponsored Programs Operating Standards & Procedures Manual supersede any OSP operating standards, procedures and appendices previously included in the University Business Manual, a publication of UNC-Chapel Hill’s Division of Finance.