Executive Compensation Limit for 2025

The Defense Contract Audit Agency (DCAA) issued their annual memorandum for audit guidance on the upcoming year's Executive Compensation Limit. The new 2025 limit along with historical limits are incorporated in the DCAA Contract Audit Manual, Chapter 6-414.7. Below are the most recent 5 years' limits:

2021 $568,000

2022 $589,000

2023 $619,000

2024 $646,000

2025 $671,000

Compliance Clip:

Incurred Cost Submissions, when required, are due NLT six months after a company's FYE. For Federal Contractors with fiscal years other than the calendar year, a pro-rated amount must be calculated.

What is considered compensation?

Compensation is the total amount of wages, salary, bonuses, deferred compensation for the fiscal year (whether paid, earned or otherwise accrued), and as recorded in the contractor's cost accounting records for the fiscal year.

How is this limit applied?

If an employee's total compensation exceeds the ceiling amount for the year, the amount in excess of the ceiling, charged (directly or indirectly) to any contract covered by the FAR or DFARS limitation, must be disallowed.