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.
Salary and Benefit Costing
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.
Rate Development
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
Holiday Annual Budget
Hours
Vacation Sick Leave Leave
Hours
Full-time P&S, A Base Faculty
2,080
B Base Faculty (9 month appointment)
1,560
Full-time Merit (ISU employee for 1-4 years)
2,080
Full-time Merit (ISU employee for 5-11 years)
(192)
(144)
(72)
1,672
(108)
(56)
1,396
(96)
(144)
(72)
1,768
2,080
(136)
(144)
(72)
1,728
Full-time Merit (ISU employee for 12-19 years)
2,080
(176)
(144)
(72)
1,688
Full-time Merit (ISU employee for 20-24 years)
2,080
(192)
(144)
(72)
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.
Labor Rate Models
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
Pay Base (Select from Dropdown)
Employee Name
Smith, Jane
*Click on the cell, in the upper right hand
corner the dropdown arrow will appear.
Salary
Full-time P&S, A Base Faculty
Total
Salary &
Benefit
Time
committed
to FFS
Non FFS
Work
Total
75%
25%
100%
Budgeted Hours/Service
1,254
418
1,672
35.00% $121,500.00 Salary & Benefit Rate $91,125.00 $30,375.00 $ 121,500
Per Hour Rate
$72.67
% of time/service
$90,000.00
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Benefit
Rate %
7/29/2017
Example 2: Hourly rate by service per hour
Pay Base (Select from Dropdown)
Employee Name
Williams, Richard
*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.
Salary
Benefit Total Salary
Rate % & Benefit
Service A-
Full-time P&S, A Base Faculty
% of time/service
Budgeted Hours/Service
75,000
35.70%
101,775
Salary & Benefit Rate
Per Hour Rate
Cline, Deb
B Base Faculty (9 month
appointment)
% of time/service
Budgeted Hours/Service
55,000
40.10%
77,055
Salary & Benefit Rate
Per Hour Rate
Julifs, Marie
C Base (Grad Asst) - 3/4 time
15,600
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
0%
0
0.00
0%
0
0.00
0%
0
0.00
0%
0
0.00
0%
0
0.00
100%
0
- $
100%
0
-
823
837
Budgeted Hours/Service
39.50%
48,825
Salary & Benefit Rate
Per Hour Rate
% of time/service
Budgeted Hours/Service
0
Salary & Benefit Rate
$243,255.00
Total Budgeted
Hours/Service
Total Faculty Salary &
Benefits/Service
Per Hour Rate
$177,000.00
Total
60%
1,003
61,065
60.87
% of time/service
35,000
Non FFS
Work
25%
418
25,444
60.87
Salary & Benefit Rate
Full-time Merit (ISU employee for 511 years)
Total time
on FFS
10%
167
10,178
60.87
Per Hour Rate
Deems, Ben
Service D-
15%
251
15,266
60.87
Budgeted Hours/Service
30.00%
Service C-
10%
167
10,178
60.87
% of time/service
12,000
Service B-
1,494
794
40%
100%
669
1,672
40,710 $ 101,775
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.
Pay Base (Select from Dropdown)
Employee Name
Mitchel, David
*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.
Salary
Time
committed
to FFS
Benefit Total Salary
Rate % & Benefit
Full-time P&S, A Base Faculty
% of time/service
Budgeted Hours/Service
75,000
34.80%
101,100
Salary & Benefit Rate
Per Hour Rate
Sander, Vander
Full-time P&S, A Base Faculty
% of time/service
Budgeted Hours/Service
65,000
38.30%
89,895
Salary & Benefit Rate
Per Hour Rate
Tigard, Margaret
Full-time Merit (ISU employee for
1-4 years)
% of time/service
Budgeted Hours/Service
40,000
41.20%
56,480
Salary & Benefit Rate
Per Hour Rate
% of time/service
Budgeted Hours/Service
0
Salary & Benefit Rate
Per Hour Rate
% of time/service
Budgeted Hours/Service
0
Salary & Benefit Rate
Per Hour Rate
$180,000.00
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$247,475.00
Total
75%
1,254
75,825
60.47
25%
100%
418
1,672
25,275 $ 101,100
100%
1,672
89,895
53.76
0%
100%
0
1,672
- $ 89,895
20%
354
11,296
31.95
80%
100%
1,414
1,768
45,184 $ 56,480
0%
0
0.00
100%
0
- $
100%
0
-
0%
0
0.00
100%
0
- $
100%
0
-
3,280
Total Budgeted Hours/Service
Total Faculty Salary &
Benefits/Service
$177,016.00
Per hour rate
$53.97
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Non FFS
Work
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 adjustment 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, http://www.controller.iastate.edu/far/staff.htm.
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