PROCEDURES FOR INCLUSION OF SALARY AND BENEFITS
IN FEE-FOR-SERVICE (FFS) RATES
There are two areas to consider regarding the inclusion of salary and benefits in FFS rates: what salaries and benefits costs are appropriate to include and how to incorporate salaries and benefits into the rate development. Salary and benefit costing relates to how and when salaries and benefits are charged to FFS accounts. The rate development will vary in complexity, depending on the services provided, and is detailed below.
Regardless of the rate development model used, salaries and benefits included in a FFS rate must be charged to the FFS account. FFS administrative staff should periodically review the FFS account to ensure all personnel performing services for the FFS operation are being paid from the FFS account. For example, if
20% of an employee’s salary is paid by the FFS account, only the 20% portion may be used in the rate. If adjustments need to be made to move a portion of salary from the current account to the FFS account, an electronic personnel action (EPA) for salaried employees, or a payroll correction voucher for hourly employees, needs to be processed to move the budgeted/estimated annual salary and benefits to the FFS account.
Personnel NOT related to the FFS operations should not be paid from the FFS account.
Administrative time
Time spent on administration of the service unit itself should also be built into the cost-reimbursable rate. The administrative time should be included in the overall labor rates and allocated across all services.
Factors to consider when selecting a model include the nature of the service being provided as well as the anticipated volume of service. Centers can use variations of these models as long as the result is to accurately allocate the actual cost of the service.
Available Budget Hours
Before selecting a model, we need to determine the appropriate full-time budget hours by pay base available for use in a FFS operation. The table shows the maximum allowable hours after vacation/sick leave/holiday accruals have been removed.
Pay Base
Annual Base
Hours Vacation Sick Leave
Holiday
Leave
Annual Budget
Hours
Full-time P&S, A Base Faculty 2,080 (192) (144) (72) 1,672
B Base Faculty (9 month appointment)
Full-time Merit (ISU employee for 1-4 years)
1,560
2,080 (96)
(108)
(144)
(56)
(72)
1,396
1,768
Full-time Merit (ISU employee for 5-11 years) 2,080 (136) (144) (72) 1,728
Full-time Merit (ISU employee for 12-19 years)
Full-time Merit (ISU employee for 20-24 years)
2,080
2,080
(176)
(192)
(144)
(144)
(72)
(72)
1,688
1,672
Full-time Merit (ISU employee for 25+ years) 2,080 (216) (144) (72) 1,648
C Base (Grad Asst) - 3/4 time 1,560 (56) 1,504
C Base (Grad Asst) - 1/2 time 1,040 (56) 984
While actual leave usage varies by individual, use of these annual budgeted hours is required for consistency across the University. The B base annual budgeted hours can be used for other 9 month appointments such as P9, A9, E9 and K9.
Fringe Benefit Rates
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The average benefit rate by individual is available using the Benefit Rate by Month report located in e-Data ’s
Labor Portal. The image below is an example report.
After determining the annual budgeted hours and fringe benefit rates for individuals working on the FFS operations, choose from one of the costing models below. Using a combination of the models may be appropriate in certain FFS operations. A template of the 3 labor rate models is available on the FAR website, http://www.controller.iastate.edu/templates/ffslaborrate.xlsx
.
Specific Labor Rate Model
The specific labor rate model breaks down an employee’s salary and benefits into a per hour rate. This model applies when a specific individual(s) is assigned to the service(s).
Example 1: Hourly rate by employee
Faculty member A is spending 75% of their time on a service center operations. Their annual salary is
$90,000, with a benefit rate of 35%. The faculty’s member’s rate is calculated below.
$90,000*1.35(benefit rate) = $121,500*.75 (time)/(1672*.75) hours (working hours per table on page 1)
= $72.67/hr.
OR
Total
Employee Name
Smith, Jane
Pay Base (Select from Dropdown)
*Click on the cell, in the upper right hand corner the dropdown arrow will appear.
Full-time P&S, A Base Faculty
Salary
Benefit
Rate %
Salary &
Benefit
% of time/service
Budgeted Hours/Service
Time committed to FFS
75%
1,254
Non FFS
Work
25%
418
Total
100%
1,672
$90,000.00
35.00% $121,500.00
Salary & Benefit Rate
Per Hour Rate
$91,125.00 $30,375.00
$ 121,500
$72.67
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Cline, Deb
Julifs, Marie
Example 2: Hourly rate by service per hour
Employee Name
Williams, Richard
Pay Base (Select from Dropdown)
*Cl i ck on the cel l , i n the upper ri ght ha nd corner the dropdown a rrow wi l l a ppea r.
Full-time P&S, A Base Faculty
B Base Faculty (9 month appointment)
C Base (Grad Asst) - 3/4 time
Salary
75,000
55,000
12,000
Benefit
Rate %
Total Salary
& Benefit
35.70%
40.10%
30.00%
101,775
77,055
15,600
% of time/service
Budgeted Hours/Service
Salary & Benefit Rate
Per Hour Rate
% of time/service
Budgeted Hours/Service
Salary & Benefit Rate
Per Hour Rate
% of time/service
Budgeted Hours/Service
Salary & Benefit Rate
Per Hour Rate
Service AService BService CService D-
10% 15% 10% 25%
167
10,178
60.87
251
15,266
60.87
167
10,178
60.87
418
25,444
60.87
Total time on FFS
60%
1,003
61,065
60.87
Non FFS
Work
40%
669
40,710
Total
100%
1,672
$ 101,775
30%
419
23,117
55.20
25%
349
19,264
55.20
35%
489
26,969
55.20
10%
140
7,706
55.20
100%
1,396
77,055
55.20
0%
0
-
100%
1,396
$ 77,055
10%
150
1,560
10.37
10%
150
1,560
10.37
50%
752
7,800
10.37
10%
150
1,560
10.37
80%
1,203
12,480
10.37
20%
301
3,120
100%
1,504
$ 15,600
5%
86
2,441
28.26
5%
86
2,441
28.26
5%
86
2,441
28.26
5%
86
2,441
28.26
20%
346
9,765
28.26
80%
1,382
39,060
100%
1,728
$ 48,825
Deems, Ben Full-time Merit (ISU employee for 5-
11 years)
35,000 39.50% 48,825
% of time/service
Budgeted Hours/Service
Salary & Benefit Rate
Per Hour Rate
0
% of time/service
Budgeted Hours/Service
Salary & Benefit Rate
Per Hour Rate
0%
0
-
0.00
0%
0
-
0.00
0%
0
-
0.00
0%
0
-
0.00
0%
0
-
0.00
100%
0
-
100%
0
$ -
$177,000.00
$243,255.00
Total Budgeted
Hours/Service
Total Faculty Salary &
Benefits/Service
823 837 1,494 794 3,948
$37,295.25 $38,531.25 $47,388.00 $37,150.50 $160,365.00
Per hour rate/Service $45.33
$46.06
$31.71
$46.77
Pooled Average Labor Model
The pooled average labor model calculates an average labor rate and is applicable when multiple people with varying labor rates provide the same service but it makes no difference which employee provides the service.
Note: This example calculates the average labor rate per hour; the number of hours to perform the service will need to be determined to calculate a rate per service.
Employee Name
Mitchel, David
Pay Base (Select from Dropdown)
*Cl i ck on the cel l , i n the upper ri ght ha nd corner the dropdown a rrow wi l l a ppea r.
Full-time P&S, A Base Faculty
Salary
Benefit
Rate %
75,000 34.80%
Total Salary
& Benefit
101,100
% of time/service
Budgeted Hours/Service
Salary & Benefit Rate
Per Hour Rate
Time committed to FFS
75%
1,254
75,825
60.47
Non FFS
Work
25%
418
25,275
Total
100%
1,672
$ 101,100
Sander, Vander Full-time P&S, A Base Faculty
65,000 38.30% 89,895
% of time/service
Budgeted Hours/Service
Salary & Benefit Rate
Per Hour Rate
Tigard, Margaret Full-time Merit (ISU employee for
1-4 years)
40,000 41.20% 56,480
0
0
% of time/service
Budgeted Hours/Service
Salary & Benefit Rate
Per Hour Rate
% of time/service
Budgeted Hours/Service
Salary & Benefit Rate
Per Hour Rate
% of time/service
Budgeted Hours/Service
Salary & Benefit Rate
Per Hour Rate
100%
1,672
89,895
53.76
0%
0
-
100%
1,672
$ 89,895
20%
354
11,296
31.95
80%
1,414
45,184
100%
1,768
$ 56,480
0%
0
-
0.00
100%
0
-
100%
0
$ -
0%
0
-
0.00
100%
0
-
100%
0
$ -
3,280
$180,000.00
$247,475.00
Total Budgeted Hours/Service
Total Faculty Salary &
Benefits/Service
Per hour rate
$177,016.00
$53.97
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Elements to review
When reviewing the labor component of a FFS rate, the following are suggestions on where to focus:

Verify the salary for the employee(s) and that the employee is paid from the account. It is acceptable to build in a reasonable factor for estimated annual raise if the rates will cross the fiscal year.

Verify that the correct fringe benefit rate is being used. Estimates of the increase in benefit rate are much more difficult to determine and are not recommended.

Rate reviews need to be performed annually by the operations manager and rate developer to compare budgeted salary to actual efforts needed to perform the services. Over or under recovery of actual salaries should result in an adju stment to the next year’s rates in order to compensate for the variance. o When hours of service are built into the rates, compare the expected number of hours of service to the actual hours charged to the FFS account. For example, if the initial budget was 100 tests at 3 hours each, 300 hours of labor should be budgeted. If actual hours were more than 300 hours the FFS will need to adjust next year’s rates by the amount of excess revenue recovered due to the additional hours. Same is true if the budget hours were over estimated.
Please discuss exceptions with FAR staff,
.
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