# What does overhead rate mean?

In US, universities often have a fixed overhead rate around 50%, or at least that's what I heard. But I don't know what it exactly means. How does this affect how much grant money goes where?

• In UK, the overhead rate could be over 100% nowadays. Commented Mar 22, 2018 at 19:03

• To explain further: when you develop a grant budget, you figure out your equipment costs and personnel costs and travel costs and summer salary, and then the university adds overhead to make up X% of the budget. So if you need $500K to support your research, and your university overhead rate is 55%, you need to apply for a$1.1M grant. Oh wait, the grant program has a $750K cap. Commented Jul 15, 2014 at 5:44 • On the other hand, at some universities (like mine), a small fraction of that overhead (maybe 1-2% of the total budget) trickles back down to the PIs as unrestricted funds. Commented Jul 15, 2014 at 5:47 • @JeffE Hmm, that calculation does not seem to agree with how it was done last time (and so far the only time) I applied for a grant. There, the overhead percentage was added to the total budget, rather than being the final percentage. This might be something that varies from grant to grant, so it might be good to keep in mind (as the potential difference can be quite big). Commented Jul 15, 2014 at 11:28 • @TobiasKildetoft: It depends on how the overhead rate is reported (sometimes it's a multiplier, sometimes it's the percentage of the total taken). The difference, as you suggest, can be quite substantial. Commented Jul 15, 2014 at 11:31 In the US, the overheads proposed to federal funding agencies (NSF, NIH, etc) are in my experience always calculated as an additional percentage on top of the total direct costs (salaries plus fringe benefits, travel, etc). So if your total budget for salaries, fringe benefits, and travel is$500k, and your overhead rate is 50%, then your total proposed budget is \$750k.