Salary is NOT unlimited and rules limiting salary are applied by both the granting agencies as well as the University.  A general rule is not to charge more than 25% of the DC to salary unless the grant is specifically designed to cover salary as in fellowships, visiting professorships etc.  Salary rates on sponsored projects are subject to the cost principles in the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (2 CFR 200) (link is external) – also known as the Uniform Guidance.

Federal agencies have specific requirements.  The National Institutes of Health, imposes a salary cap information. (link is external)  NSF, on the other hand, generally limits the number of summer months of salary a faculty can receive over all NSF-funded projects to two.

Sections 200.430(h)(2) and (5) of the Uniform Guidance (link is external) provide the following guidelines for charging faculty salaries to sponsored research projects: 

Consider faculty salary.  A faculty member cannot receive additional compensation for his or her participation in a sponsored project over and above the appropriate portion of the base salary allocated to the project. If, for example, the base salary is $100,000 and a faculty member is assigned 25% to a sponsored project, the salary charged to the project must be $25,000.

Changes to a faculty member's appointment such that a greater portion of his or her effort is charged at a higher salary base as a consequence of an externally sponsored project do not meet the requirements of the Uniform Guidance and are not allowed.

Summer salary for faculty with 9-month academic year (AY) appointments can be figured at one-ninth of their institutional base salary for each month of summer effort. A maximum of two and one-half months may be included for the whole summer. Some sponsors, however, impose specific limitations on summer salaries. The National Science Foundation, for example, usually will not pay for more than two months of summer research at a rate of one-ninth of the AY salary per month.