Personnel costs in Horizon 2020

Personnel costs regularly account for the major part of costs in Horizon 2020 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 and mistakes.


Personnel costs in the proposal

The proposal must contain a calculation of the time that a person will likely spend on the project. This estimated working time has to be stated in Part B (Section 3.4, Table 3.4a) of the proposal as so-called “person months”.


1 person month = actual annual productive hours / 12

These person months have to be indicated per partner organization of the future project for the whole project duration per work package.

The calculation of the estimated personnel costs should be based on a rough estimate that considers a range for e.g. future pay increase.

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).

The time worked for the project must be documented in time sheets. The relevant record-keeping requirements are described in the Annotated Model Grant Agreement (AGA), Article 18.1.2. If a person works exclusively (100%) for an action, a relevant declaration by the beneficiary is sufficient. The European Commission provides a template for a "Declaration".

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). An hourly rate must be calculated for each employee, which is multiplied by the number of hours worked on the action (personnel costs = hourly rate x project hours).

The hourly rate can be calculated on an annual or monthly basis. The annual hourly rate is calculated by dividing the annual gross gross costs (i.e. salary, ancillary wage costs and other  mandatory salary components) by the annual productive hours (hourly rate = annual gross gross costs / annual productive hours).

Three options are available for the number of annual productive hours:

  1. 1720 hours (fixed number of hours for persons working full time; or corresponding pro-rata for persons working part time)
  2. Individual annual productive hours: annual workable hours (according to law/collective agreement/employment contract taking into account holiday entitlement, public holidays etc.)
    + overtime – absences (sick leave etc.)
  3. Standard annual productive hours of the beneficiary: calculated according to usual cost accounting practice; the standard annual productive hours must be at least 90% of the annual workable hours (see option 2).

Please note for the annual calculation: If the ongoing financial year is not closed at the time of reporting, the personnel costs from the last closed financial year have to be taken for the calculation (Example: financial year from 01/01-31/12/2020; end of the reporting period: 31/10/2020; therefore the hourly rate from the year 2019 has to be taken for the year 2020 as well).

The monthly hourly rate is calculated by dividing monthly gross gross costs (i.e. salary, ancillary wage costs and other  mandatory salary components) by one twelfth of the annual productive hours (option 1 or 3). Special payments like the 13th/14th salary must be taken into account on a pro rata basis.

Each organisation may use only one option (monthly or annual hourly rate) per financial year.

Salary components that are paid for additional work or expertise contributed to the project (“additional remuneration”) are not included in the gross gross costs. They are only eligible for non-profit organisations under certain circumstances.

Alternatively, personnel costs may also be declared as average personnel costs ("unit costs based on the usual cost accounting practices of the beneficiary").

Personnel costs for persons working on several funded actions

If the personnel costs of a person are included in several funding programmes (e.g. H2020, FP7, national projects), a separate hourly rate must be calculated for each programme according to the relevant guidelines. This will most probably lead to different numbers of hours and may also lead to different denominators (if the non-eligible costs differ).

Please note that the personnel costs declared per person and year must not exceed 100% of eligible personnel costs in order to prevent double funding. Hours that are not charged to EU projects will not be included in an audit.

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 with the beneficiary other than an employment contract

Art. 6.2.A.3 GA: Costs for personnel seconded by a third party against payment: This category only includes the secondment of employees by organisations which are not temporary work agencies and do not pursue financial interests, but not the provision of workers by professional agencies.

Categories Art. 6.2.A.4 GA (Costs for SME owners who do not receive a salary) and Art. 6.2.A.5 GA (Costs of beneficiaries that are natural persons not receiving a salary) include costs for SME owners and natural persons not receiving a salary. They receive a fixed hourly rate for their services (more information can be found under "Downloads" (see below)).

Costs that are not eligible personnel costs

Temporary agency workers hired from agencies whose business model is to assign workers to user undertakings do not fall under the “personnel costs” category. These costs must be declared under “contracts” (cost category “other goods and services”) or “subcontracts”.

Persons working under a contract for work or services and experts remunerated on a fee basis are also considered as “contracts” or “subcontracts”.

Questions & Answers

Question: Are executive allowances eligible?
Answer: Yes, complements for holding a management post are eligible.

Question: Are profit distributions eligible?
Answer: “Real” profit distributions are not eligible. Complements based on the overall financial performance of the organisation are, however, eligible if the remaining requirements specified in the AGA are met.

Question: Are variable salary components and bonuses eligible?
Answer: According to the AGA, variable complements (e.g. bonus additionally to the fixed salary) are eligible if they have a legal basis (law/collective agreement/employment contract) and if the amount is determined on the basis of objective and documented criteria. In all other cases they are considered either as “additional remuneration” (eligible only for non-profit organisations) or as non-eligible “arbitrary complements”.

More detailed information can be found ...


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