This commentary makes the case for a re-examination of certain existing guidelines of the Department of Health and Human Services (DHHS) and the National Institutes of Health (NIH) regarding reimbursement of salary costs under NIH grants. The settlement earlier this year involving salary costs and effort reporting at Northwestern University has focused attention on arrangements under which grantee faculty and other personnel receive compensation from two or more legal entities (dual compensation), or from a legal entity other than the grantee (separate compensation). Existing NIH and DHHS guidelines define reimbursable salary narrowly, to include in general only compensation that is paid by the grantee itself. The commentary identifies certain problems that these guidelines cause for some grantees, researchers, and the Government itself, and argues for a more flexible approach that accommodates the many different compensation arrangements that exist today in the field of biomedical research. The commentary concludes that a dual or separate compensation arrangement should be permitted if it (a) results in salary levels that are reasonable and accurately allocated to grants by a workable effort reporting system, and (b) provides a reasonable assurance that the grantee's performance and compliance obligations will be fully satisfied.