Calculating Grant Person-Month Costs for EU Projects

The Hidden Complexity of Grant Budgets

For most European startups, the largest line item in a grant proposal is personnel. Whether you are applying for an EIC Accelerator grant or a national R&D subsidy from Business Finland or Innovation Fund Denmark, how you calculate your "person-month" rate determines whether your project is financially viable or a liability.

Many founders make the mistake of using simple gross salaries or, conversely, inflated estimates that get flagged during audit. To secure funding and ensure you aren’t paying out of pocket for "free" money, you must understand the mechanics of the person-month calculation.

Defining the Productive Hour

Public funding bodies do not pay for 365 days of work. They pay for productive time spent specifically on the project tasks. To reach an accurate person-month rate, you first need to establish your company’s standard productive hours per year.

Typically, this is calculated by taking the total workable days, subtracting weekends, public holidays, and statutory annual leave. In many Nordic and EU jurisdictions, this results in roughly 1,600 to 1,720 productive hours per year. When the grant body asks for a person-month, they are usually looking for 1/12th of that annual total (approx. 140 hours).

What Counts as Personnel Cost?

You cannot simply pick a number. You must be able to justify the rate based on actual payroll data. The eligible costs generally include:

• Basic Gross Salary: The monthly wage stipulated in the employment contract.
• Social Security Contributions: The employer’s share of pension, healthcare, and unemployment insurance.
• Statutory Benefits: Mandatory costs required by local labor law.

Non-eligible costs that founders often mistakenly include are bonuses based on commercial targets, dividend payments, and non-statutory perks like gym memberships or private car leases. If these are included in your "person-month" rate, you risk a clawback during the mid-term audit.

Navigating the Indirect Cost Flat Rate

In programs like Horizon Europe, "Overhead" or indirect costs—such as rent, utilities, and administrative support—are not calculated line-by-line. Instead, they are usually applied as a 25% flat rate on top of the direct personnel costs.

This makes the accuracy of your personnel calculation even more critical. If you under-calculate your staff costs by €10,000, you are also losing €2,500 in overhead coverage. Conversely, if you are a "lean" remote team, this 25% flat rate often exceeds your actual administrative spend, providing a small but vital buffer for the company’s general operations.

The SME Owner-Manager Rule

A common trap for early-stage founders is the "Owner-Manager" rate. If you are a founder who does not draw a formal salary (common in pre-seed stages), you cannot claim an arbitrary market rate.

Most EU programs have a specific formula for this: the "unit cost" for SMEs. This is a daily rate set by the Commission based on a specific MSCA (Marie Skłodowska-Curie Actions) formula. Before you submit your budget, check if you need to use this flat unit cost instead of your actual (often low) founder salary to ensure the grant covers the true value of your time.

Documentation and Time-Tracking

A grant is a contract. If you claim that a Senior Developer spent 6 person-months on "Work Package 2," you must have the time-sheets to prove it.

Successful founders implement a simple time-tracking system the moment the grant starts. The logs should show the date, the person, the work package number, and a brief description of the activity. Modern project management tools can export this data, but it must align perfectly with the financial reports you submit to the funding agency.

Matching the Budget to the Roadmap

Finally, ensure your person-month allocation matches the technical complexity of your milestones. If you claim that a complex AI architecture requires only two person-months, reviewers will doubt your technical feasibility. If you claim it takes 24 person-months for a simple UI adjustment, they will flag it as poor value for money.

Aim for a balance where the seniority of the staff assigned (and their corresponding cost) reflects the difficulty of the task.

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