Z Compensation May Not Be Budgeted or Charged to Extramural Sponsors

The UCSF Health Sciences Compensation Plan is made up of three primary components: base salary (X and X'), negotiated additional compensation (Y), and incentive/bonus compensation (Z). UCSF has previously allowed Z payments to be funded from non-federal sponsored sources in alignment with the terms and conditions of each award. After reviewing this funding practice, the systemwide costing policy group has identified that the charging of Z payments to sponsored activities is out of compliance with UCOP Policy AM-P196-37: Payroll: Health Sciences Compensation.

Section VII of the policy, Charges to Extramural Funds, specifically states, “The X and Y portions, but not the Z portion, of a faculty member’s compensation may be charged to sponsored activities.” It goes on to state, “Proposals to extramural sponsors, requests for reimbursement for academic effort devoted to a project, or documentation of voluntary or mandatory cost sharing must reflect both an accurate estimate of the percent of effort devoted to a project and the correct rate of X and Y pay. This includes anticipated range adjustments, merit increases, and pending personnel actions. Z compensation may not be budgeted or charged to extramural sponsors.”

The implementation of UCPath has provided an opportunity to ensure compliance with systemwide payroll guidance and policy. UCPath has been configured with an error message that will prevent Funding Entry Initiators and Salary Cost Transfer Initiators from entering funding distributions for Z payments using a sponsored Fund or Project. Users will receive the error message, “Z payments can only be distributed to compensation plan funds.”

Please ensure that the budgeting and charging of a Z payment is not included for sponsored research projects going forward. If you have questions, contact Contracts & Grants Compliance.