Exploring the Pros and Cons of Personnel Unit Costs

Going with unit personnel costs in your project is like a menu option – it’s totally up to you, and for many it’s pretty tempting.  No more complicated calculations, no discussions about whether some salary components may be eligible or not. A single daily rate for all staff categories and roles. Streamlined reporting and smoother audits.

But hold your horses before jumping in. Let’s talk about the potential long-term effects. There are a few downsides and interesting aspects worth considering.

Let’s start with the pros!

1. The process of applying for unit costs is super simple. You will be requested to provide 2 numbers: the total actual salary from the last closed financial year for all types of staff & the number of Full-time equivalents (FTE) in your organisation. Both numbers must be backed by an “ad hoc independent audit certificate”. Keep in mind, the cost of this audit is fully on you.
2. With unit costs, everyone gets the same daily rate: SME owners, junior and senior staff, as well as student positions and natural persons. It’s straightforward and removes the need for complex calculations involving individual daily rates for each staff member. Plus you can finally stop worrying about what salary elements are eligible.
3. Applying unit costs reduces the risk of errors and streamlines the reporting and audit process. Simplifying the reporting saves time and resources that can be used to focus on actual project work. Auditors can easily verify the calculations without getting bogged down in complex calculations.

It sounds perfect, but let’s see if there are any downsides to unit costs. If nothing comes to mind, let’s investigate further:

1. The unit costs are valid for two years and cannot be updated during that period, even if your actual rates increase! It’s quite a surprising rule. Why are unit costs are set in stone for a solid two years? After all, the calculation for personnel unit costs is so simple, so why not update it annually?
2. Once you’ve committed to the unit costs method, well, you’re in it for the long haul. No turning back! Once the unit rate gets the green light, you will be bound to that rate throughout the project’s lifetime, no matter if the project runs for two years or six.
3. You get one chance at reverting to actual costs if those unit costs don’t quite work out as planned. BUT this change will only affect future grants, not the ongoing ones! If you start using unit costs for a specific project, you must stick with it till the end.
4. Although unit costs are normally not subject to any financial audits based on recorded expenses, you can still expect standard checks and audits from the EC to ensure you didn’t misuse the unit costs. If during the audit it turns out that your unit cost for personnel is higher than reality, they can withdraw your right to use it! Quite a twist, right?
5. Finally, keep in mind that using personnel unit costs doesn’t mean you can forget about timesheets. You still need accurate time records to back up units (days) to be declared. The capping rule of 215 days per FTE per year also stays in force, along with the obligation to prevent double funding.

Not sure if this option is good for you? Don’t hesitate to contact us at hello@getpolite.eu. We’ll help you figure it out!