Under FP5 contractors were permitted to use average employment costs. These are no longer permitted – only actual costs can be used. Averages can be used to estimate the project budget over its duration but must report only actual costs for each reporting period.
All eligible costs must be determined in accordance with the contractor’s usual accounting principles. As far as productive hours are concerned, contracting parties must calculate their specific productive hours according to their normal procedures (taking into account national holidays, illness, training, etc.).
Contractors using direct staff hours would normally apply a utilisation rate (i.e. hours actually used after holidays, sickness, etc). This utilisation rate must be calculated for the life of the project and must reflect the real productive hours.
If a legal entity established in a third country participates without receiving any EC funding, it has to calculate the person months and costs according to its usual accounting and management principles. This input should be identified in the technical annex to the contract (Annex I) and the budget estimated for that contractor’s costs be included as part of the total costs of the project (but not part of the estimated maximum EC contribution). If a legal entity established in a third country receives EC funding, it is treated like any other contractor: it must meet all the provisions of the contract including those concerning the eligible costs (Articles II.19, II.20, II.21, II.22 and II.25 of the FP6 model contract).
Working time to be charged must be recorded throughout the duration of the project through any effective tool (including time sheets), in accordance with the contractor’s normal accounting rules. The person in charge of the work designated by the contractor should certify the records. An estimation is insufficient. Employees normally record time sheets on a daily basis while the certification of the person in charge could be done monthly. Certified time sheets must include the person’s identity and her/his time spent on the project. If the person is working in different "activities" under the contract it is necessary to be able to distinguish among the tasks as they relate to each activity. (“activity” here means at a specific rate.) In addition, a full overview of the working time should be possible in the event of an audit (i.e. for persons working part-time on the project it should be possible to determine where their time was spent when not on the project). Costs claimed for personnel time must be actual, not averages, and recorded on the contractor’s account (income statement, balance sheet) not just on internal (management) accounts.
The definition of personnel necessary to carry out the activity (RTD, Demonstration, etc) should conform with the following cumulative criteria:
Directly employed by the contractor in accordance with national law Under the contractor’s sole technical supervision (in essence the technical output must belong to the contractor) Remunerated in accordance with the normal practices of the contractor provided these are acceptable to the Commission.
On the other hand different categories of the "status" of personnel can be possible:
"Permanent employee", who has a permanent working contract with the legal entity.
"Temporary employee", who has a temporary working contract with the legal entity.
"In-house consultant" or "intra-muros consultants" is a worker that, in addition to the two conditions mentioned above, fulfils simultaneously the following conditions:
Works in the offices of the concerned participant; Works only or mainly for this participant; Has a "work contract" with this participant;
The "work contract" mentions explicitly the tasks he has to perform in the indirect action supported by the Commission in which this participant is involved;
The participant may effectively control and assess the performance of the work assigned to this intra-muros consultant;
By way of explanation, it is implied that the consultant makes use of the employer’s administrative services, and therefore has no “overheads” of his own. By way of explanation, it is implied that the consultant makes use of the employer’s administrative services, and therefore has no “overheads” of his own.
For the justification of the costs incurred, in the case of "work contracts", the costs excluding VAT, should be taken from the invoice received for the work performed. Invoices should indicate the project on which the persons have worked, the tasks carried out and the hours spent.