Accurate salary and wage (S&W) allocations are essential for compliant service center rate setting. Federal and university regulations require that costs included in rates be allocable, allowable, and reasonable:
- Allocable: The S&W must directly benefit the service activity in proportion to the effort provided.
- Allowable: Only S&W charges to the actual 3E fund may be included in internal rates.
- Reasonable: Pay levels and allocations must reflect fair compensation for the work performed.
When Staff Work Across Functions
Many service center employees split their time among multiple responsibilities. For example, if a director spends 50 percent running samples, 30 percent training users, and 20 percent on unrelated research, only 80 percent supporting the service center can be included in the rates. The remaining 20 percent must be charged elsewhere.
Job descriptions help clarify expected effort, but they are not sufficient on their own. Initial estimates may be acceptable during the first year of operation, but services should strengthen their documentation over time.
Tools for Supporting S&W Allocations
Two primary methods provide adequate support:
- Direct Time Tracking
This is the strongest and expected form of documentation. Logged hours show exactly how staff spent their time on service center activities, including maintenance, quality assurance, and work associated with specific instruments or processes. Many professional fields use this approach, and several campus units already track time successfully.
- Time Studies
If direct tracking isn’t available, a time study can provide a representative snapshot. A valid time study must be:
- Contemporaneous: Recorded in real time.
- Representative: Covering a typical period of activity.
- Updated: Repeated periodically to reflect changes in operations.
Time studies are particularly useful when technicians support multiple processes or instruments.
Bottom Line
Compliance requires support for how S&W amounts included in rates were determined. Whether through direct tracking or time studies, service centers should be prepared to document how staff effort aligns with billable activities.
Contact
If you have questions about S&W allocations or need help determining what method fits your service, System Government Costing is here to help.
