Personnel costs regularly account for the major part of costs in Horizon Europe actions. A range of requirements must be observed when declaring personnel costs. It is essential to familiarise yourself with the relevant provisions of the Grant Agreement (GA) at an early stage in order to avoid errors.
As with all costs, personnel costs must meet the general cost eligibility criteria. Additional special requirements apply, depending on the personnel cost category (e.g. employees, SME owners).
On the one hand, the rules of the European Commission for personnel costs have to be strictly met when calculating them in order to get the costs funded by the European Commission.
On the other hand, the time worked for the project must be documented in so-called "declarations" and/or time sheets. The relevant record-keeping requirements are described in the Annotated Model Grant Agreement (AGA), Article 20.1. The European Commission provides a template for a "declaration". If "declarations" as well as time sheets are used, they must be consistent.
Personnel costs for employees
Personnel costs for employees are the most important personnel cost category in practice (Art. 6.2.A.1 of the GA). A daily rate must be calculated for each employee, which is multiplied by the number of days worked on the action (personnel costs = day equivalent x daily rate).
Record-keeping based on hours still is optionally possible, but the hours must be converted for reporting (i.e. for each reporting to the European Commission) to a day equivalent. For this conversion there are three options available:
- Option 1: fixed day equivalent (= 8 hours)
- Option 2: average number of hours that the person must work per working day according to the contract (BUT: not possible if the individual contract does not allow determination of the average number of workable hours per day)
- Option 3: (the higher between the standard annual productive hours of a full-time employee according to the usual practice and 90% of the standard annual workable hours of a full-time employee) divided by 215
The result must be rounded up or down to the nearest half day (e.g. result of 7.4 --> rounded up to 7.5). This rounding up or down must be done at conversion per reporting period.
Please note: Only one conversion option may be chosen per group of personnel (i.e. personnel employed under similar conditions).
Alternatively to "actual costs", personnel costs may also be declared as average personnel costs ("unit costs"), as far as it is allowed in the GA (see article 6.2.A.1).
Personnel costs for persons working on several funded actions
If the personnel costs of a person are included in several funding programmes (e.g. HE, H2020, FP7, national projects), the personnel costs must be calculated for each programme according to the rules of each programme. This will most probably lead to different numbers and may also lead to different denominators (if the non-eligible costs differ).
Please note: In order to prevent double funding, the personnel costs declared per person and year must not exceed 100% of eligible personnel costs in all EU projects.
Additionally, the so-called "horizontal ceiling" must be respected: Per person not more than ... in EU projects must be declared
- ... 215 days or the calculated maximum day equivalents per calender year
Please note: For Horizon 2020 a ceiling of 1.720 hours or the annual productive hours used for the calculation of the personnel costs applies.
Other categories of personnel costs
Eligible personnel costs also include:
Art. 6.2.A.2 GA: "Costs for natural persons working under a direct contract" - "Freie Dienstverträge" do not comply with the criteria given by the European Commission (especially of supervision and of presence requirement) as they are inconsistent with Austrian law. Nevertheless, the costs are not ineligible, but eligible under fulfilment of the respective criteria under the category "employees", article 6.2.A.1 MGA or "other goods, works or services", article 6.2.C.3 MGA.
Art. 6.2.A.3 GA: "Costs for seconded persons by a third party against payment" - The secondment must be granted by organisations which are not temporary work agencies (e.g. an organisation not participating in the action, seconds persons to a beneficiary for working in the action against payment). It must not be a secondment by temporary work agencies.
Art. 6.2.A.4 GA: "Costs for SME owners or natural person beneficiaries not receiving a salary" - They must be reported by applying a fixed daily rate. See "More information" at the bottom of this page.
Costs that are not eligible personnel costs
Temporary agency workers (i.e. hired from agencies whose business model is to assign workers to user undertakings), have to be declared as service contract (cost category C.3 “other goods, works and services”) or as subcontract (cost category B. "subcontracting").
Persons working under a contract for work or services and experts remunerated on a fee basis are also considered as “service contract” or “subcontract”.
Salary components and their eligibility
Which salary components are eligible?
Ongoing salary payments (including 13th and 14th salary) and other fixed salary components based on contracts, national legislation and company agreements are eligible. This includes mandatory bonus payments.
Furthermore, ancillary wage costs such as taxes and social security contributions as well as benefits in kind (e.g. meal vouchers, company car, company flat) are eligible.
Variable complements, such as bonuses, are only eligible under certain conditions: They have to be paid based on objective conditions, set out, at least in the internal rules of the beneficiary AND they have to be paid in a consistent manner (i.e. not only for EU actions) AND, if applicable, they have to fulfill the specific eligibility conditions for supplementary payments.
Which salary components are not eligible?
Salary payments that are not actual costs for the beneficiary (e.g. partial retirement, parental leave) and dividends as well as arbitrary bonuses (i.e. which are not based on objective conditions and/or are not paid in a consistent manner) and bonuses depending on the budget availability in the project are not eligible.
Variable complements are not eligible, if the payment is based on commercial or fund raising targets and/or if they do not fulfill the specific criteria for variable complements (see "Which salary components are eligible?").
What are objective criteria for bonus payments?
Objective criteria for bonus payments need to fulfill the following:
- Indication of the specific employee
- Determination of the amount (e.g. EUR 5 extra payment per hour, 10% bonus of the annual salary)
- Justification for the bonus payment (e.g. work as project leader)
What are frequent difficulties with salary components?
Travel costs: They are often settled via the annual salary account and should not be taken into account in the calculation of the daily rate. Part of the travel costs may be subject to ancillary wage costs, which have to be deducted.
Change of contract: According to the AMGA, only one (1) daily rate has to be calculated for each person in the respective reporting period. If there is a change of contract and/or (larger) salary differences (e.g. trainee becomes a project employee), the maximum day-equivalents must be calculated separately for each change of contract and then added up. Finally, the one (1) daily rate is calculated by taking the total salary costs.
Termination payments: They are eligible, but CANNOT be included in the daily rate, but instead have to be calculated separately. Only the component that refers to the project period can be included in the calculation (e.g. anniversary payments, holiday payments).
Payments of which amount is certain in retrospect: They are not eligible, until the expense has actually incurred (e.g. reserve funds for bonuses, pension payments).
What should be considered for reporting?
The following best practices are recommended to ensure a smooth reporting process:
- close cooperation and coordination with the human resources and controlling department(s)
- ongoing controls to avoid double funding
- correct entry to the respective cost center
- centralised calculation of the daily rates including record-keeping of the calculation
Which documents serve as important records for personnel costs?
Declaration and/or time sheets!
Examples for further records:
- annual wage accounts
- works agreements
- employment contracts incl. amendments/additional contracts
- calculation details
More information can be found ...
- in the Annotated Grant Agreement (AGA), Article 6.2.A (personnel costs)
- in our FAQ document
- in our factsheet "KMU-Eigentümer:innen und natürliche Personen (als Projektpartner:innen) ohne Gehalt in Österreich" (in German only)
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