Quick guide for developing a Horizon Europe proposal budget

Budget constitutes the cornerstone of the Implementation Section of a Horizon Europe proposal, as it outlines the submitted project in fiscal terms and shows to the reviewers how the project will be conducted, from a financial point of view. Budget information about activities planned and personnel provides reviewers with an in-depth picture of how the project will be structured and managed. Details of a Horizon Europe proposal budget usually reveal whether a proposed project has been carefully planned and may ultimately be feasible.

The proposed budget must give an accurate assessment of all cost items and cost amounts that are deemed necessary and reasonable. In the current article, we intend to demonstrate a brief, but efficient, guide of how to calculate your project’s budget, along with some tips, aiming to cover both collaborative and single partner EU projects.

What kind of costs can be covered by the Horizon Europe grant (eligible costs)?

Before starting the budget calculation, it is crucial to study the categories of eligible costs. Including a non-eligible cost in your Horizon Europe proposal budget may significantly harm your projects and the chances to have it funded. Although, the eligible costs may slightly vary between the various Horizon Europe programmes, the two main categories are:

• Eligible direct costs
• Eligible indirect costs

Eligible direct costs

These costs need to satisfy the eligibility criteria of each funding programme. In particular, they split into the following categories:

Personnel or staff costs (PCs)

These costs usually have the largest share of the overall budget. Especially in projects where there is not a physical product development (e.g. mobile applications, IT related projects) PCs can constitute up to 60 or even 70% of the total proposal budget. Even though there is not a specific threshold for the maximum share, it is important to present a realistic and balanced distribution of these costs. To calculate PCs you need to define two specific parameters:

• The total number of Person Months (PMs) the applicant (or each partner for collaborative projects) would need for the project’s execution. One PM means that the applicant will need to have an employee, working full time for one month (or two employees working half time, etc.). This definition may seem redundant, but the misinterpretation of what a PM actually is consists a quite common mistake in such applications. We will explain below why.

The number of PMs that will be needed for each Work Package (WP) of the Work Plan will be defined by the workload of each task and from its respective duration. A very common mistake applicants do is to distribute a very high number of PMs for a task, aiming to achieve a higher budget (for instance, having 50PMs to deal with the project management or with administrative tasks of a 2-year collaborative project, means that the beneficiary will need to have two employees, working full-time for 24 months, for the project management needs of the submitted project ONLY; this is not realistic at all, considering that not only there will be project management gaps in the timeline of the project, but all partners will need to dedicate some PMs for the project management).

Calculation tip: An easy and efficient way to calculate the number of PMs is to add a relevant column in the GANTT diagram (usually a requirement of the Horizon funding programmes). This will allow you to have the overall picture of the personnel effort of you project and avoid overloading tasks with unnecessary PMs. This is quite helpful in collaborative projects.

As such, defining the needed roles of your personnel (e.g. R&D, engineer, developer, administration personnel, sales people, project managers) for each task and connect them for to the relevant WP(s) can lead to a realistic and accurate calculation of the PMs that will be needed from each applicant.

Horizon Europe update: In the new Horizon Europe programme, the personnel costs follow a simpler, easier to adapt guideline. You just have to define a daily rate to be then multiplies with the total days worked in the project. The daily rate, can be easily calculated by divided the actual annual personnel costs directed to each person with the official number of actual working days per year (215). Another difference is that the is no more the last closed financial year rule.

• Salary per person per month. Here we talk for the gross salaries of the employees (including additional charges such as payment to social insurance bodies, among others). These salary costs shall not extensively exceed the rates corresponding to the usual remuneration policies of the applicants, as in case the project is funded, time sheets and payslips need to be provided to justify these costs, among others. An important note here is that the average salary per PM massively depends on the location (country) of each application (the average salary in Benelux and North Europe for instance, is quite higher compared to the Mediterranean countries). As such, high range of PCs costs are quite common in collaborative projects, where multiple entities from all over Europe are involved.

Calculation tip: Create and excel tab and add the following additional parameters next to each employee: dedication (in %), total duration of assigned tasks (in months) – multiplying those two you can get the total number of PMs for each employee for the whole project. By adding another column with the monthly salary cost you can easily calculate the total personnel costs per employee category (e.g. technician, director, sales, etc.)

At this point, it is important to mention that personnel costs only apply to official employees of the applicant companies. Payments to other individuals such as external consultants or advisors apply to subcontracting costs or third linked parties (e.g. employees of the sister/mother companies).

Subcontracting costs

A very important cost category that needs specific attention as it can severely harm the project’s chances are the subcontracting costs to third entities, not legally bind with the applicant. Here, it is important to note that: (i) the applicant is the sole responsible for carrying out the input a subcontractor will bring into the project; (ii) subcontracting may not cover core tasks of the project. This is a common mistake, especially in single partner projects. The reason that evaluators will not favour (and in most cases the proposal will fail either in the initial evaluation or in the interview process) this parameter is mainly due to the high level of dependency on the project’s success to an external entity; and (iii) it is advisable that the total subcontracting costs do not have a share higher than 15-20% of the overall Horizon Europe proposal budget.

Purchase costs

• Travel costs – for single partner projects, trips for dissemination purposes (attend exhibitions, exhibit in fairs/conference) need to be included, as this will validate the dissemination strategy of the applicant. Nevertheless, these costs vary depending on the nature of each project (e.g. trips for clinical trials for health related projects or for field tests for agricultural projects). For collaborative projects, at least two to four meetings per year between the consortium members also need to be included.

Tip: Do not forget that we are in the middle of the Covid-19 pandemic. Thus, it is very important to realise that most of these trips (e.g. consortium meetings) will take place telematically. Very high travel costs may not be favoured by the evaluators.

• Durable equipment – these costs can have a significant share in industrial projects, where machinery needs to be developed, tested and constitute the final product of the project. Although, the cost of buying machinery for the scope of the project is fully eligible, the EU grant justifies this expense ONLY for the duration of the project, thus the calculation of amortisation is needed.

Calculation tip: In the excel document, you can create the following columns for each equipment type of expense: (a) cost per item, (b) amortisation time (e.g. in years), (c) usage for the project (in %) and (d) use time in project (again in years). With the following simple formula, you can have the real cost for each piece of equipment in your project: (a / b) * c * d

• Other goods, works & services – this includes any other costs related to the project, such as consumables (e.g. online/offline promotion material, packaging, audit certificates, patent management costs, project management software etc.). Splitting these costs into subcategories (e.g. materials, consumables, computing, IPR, services, other costs) is also an option for bigger, more complex project (e.g. project with big consortiums of more than 10-15 partners) to ensure a better cost management.

Other costs

This includes any other costs such as financial support to third parties, internally invoiced goods and services, transnational access to research infrastructure unit costs, virtual access to research infrastructure unit costs, PCP/PPI procurement cost, euratom co-fund staff mobility costs, ERC additional funding and ERC additional funding (subcontracting, FSTP and internally invoiced goods and services).

Eligible indirect costs

Indirect costs function in connection with the eligible direct costs. The percentage of these costs is fixed and it can vary, depending on the programme, but it can reach up to 25% of the aforementioned direct costs. On a good note, detailed justification is not needed and as such, many entities use them to cover expenses that cannot be easily justified (e.g. success fee of consulting companies that undertake the proposal submission process.

A final important point for the budget calculation is related to collaborative projects in general. The nature of these projects is for partners to collaborate with each other; this is something that they need to take into account during the calculation of PMs and budget activities, especially in tasks that other partners are also involved.

The practices and tips mentioned above can constitute the base to start the budget calculation of your project, as well as saving significant time and ensure a more efficient budget distribution among activities and/or partners.

This article is written by Panos Antonopoulos, Innovation Consultant.

Streamline budget calculation in Horizon Europe proposals

In this article we’ve collected tips on how to budget a project with many stakeholders and turn budget calculation in Horizon Europe into a straightforward process, as well as give you an example of a budget for a collaborative project.