Information meeting on the implementation of unit costs

1. Information meeting on the implementation of unit costs Luxembourg, 1 December 2014

2. Content • Applicability and scope • Submission and templates • Method: • Unit costs for average daily personnel costs • Calculation of average daily personnel costs per pay grade • Exchange rate • (see 2 Submission and templates) • Updates • Unit costs in grant applications and grant agreements • Overview

3. Applicability and scope

4. Applicability of the Commission Decision • As from 2015 • All grants awarded under the ESP 2013-2017. • By all beneficiaries.

5. Category of costs covered • Unit costsonlycoverdirect eligible personnel costs. • Indirect costsare declared on the basis of a flat rate of 30% of total eligible direct personnel costs. • Out of scope: • Personnel coststhat are notpaid on the basis of time spent, but on the basis of deliverablessuch as questionnaires/records (e.g. interviewers). • Direct costsotherthan personnel costs.  Reimbursementbased on real costsincurred.

6. Submission and templates

7. Submission of unit cost documents • Approval of unit costs with signature of grant agreement. Westronglyrecommend to submit the information on unit costsas soon as available, to solveanypotential issues before signature of the first grant agreement!

8. Documents to be transmitted • Have to beannexed to eachgrant application form: • Unit costs • Signeddeclaration and checklist on unit costs • If applicable, declaration on social contributions paid by public authoritiesotherthan the beneficiary. • Submissionby e-mail (scanned version of the declarations). • Originals to bekept by the beneficiary.

9. Unit cost template – mandatory elements

10. Declaration on the correct application of the method • To be signed by an authorised person such as Director General, Resources Director or Chief Accountant

11. Checklist with main control points

12. 3.1 Unit costs for average daily personnel costs

13. Reference data • Payroll data of the referenceyear. • Has to bereconcilablewithaccounting data (UC template Calculationbased on underlyingpayroll data as of xx/xx/2015).

14. Reference year • Reference year for 2015 unit costsshouldbe 2014. • The reference are the salaries for the referenceyear (2014), regardless of the date at whichthey are paid! • Onlyinlcudeelements (or the proportion) linked to the referenceyear(ex: retroactivesalaryadjustments, dismissalpayments). • The fact that an employee left before year-end is reflected in the FTEs.

15. Reconciliation of payroll data with accounting data The underlying data for Unit costs have to be reconcilable with the total of (eligible and non-eligible) individual records in the payroll and the general ledger accounts. In case of controls on the correct application of the method you should be in a position to demonstrate your calculation method from all the sources.

16. When to submit your unit costs? • As soon as possible in order to identify (and solve) potential issues. • It could be useful to test the methodology on 2013 payroll data. 2015 unit costsshouldbecalculated (and submitted) at the beginning of 2015 as soon as historicalpayroll data for 2014 isavailable.

17. Pay grade • Unit costs have to beestablishedper pay grade, comprising all staff of senioritysub-levels in this grade. • The breakdown of the entire staff intopay grades should correspond to the structure of the salarygridusuallyapplied by the beneficiary in accordance with national legal provisions for the public service. • No further breakdown by function, tasks, statutoryrights …

18. Salary grid • A salary grid is the range of pay, which usually presents in form of scales the remuneration paid for working at a certain level or grade of an organisation. • The pay grades for which unit costs are calculated have to be consistent with the structure of the salary grid.

19. Changes to the salary grid • In case of changes to the structure of the salary grid during the course of the action (ex: pay grade didn't exist before) • Allocation to unit cost grade per analogy in function of the basic salary. Reimbursement per analogy at the unit cost of the pay grade for which the basic salary is closest to that of the person concerned.

20. Example of reimbursement per analogy A new pay grade B5 has been created during the action. A staff member with a basic salary of 2.500 € (grade B5) has participated at the action. Unit costs for grade A3 include a range of basic salaries from 2.000 € to 3.000 €.  At the moment of the cost claim, reimbursement at the unit cost rate for grade A3.

21. Pay grade

22. Specific cases • Personnel not belonging to anypay grade (stagiaire, Director).  Per analogy in function of the basic salary (unit cost grade whichisclosest to the basic salary) • Secondedemployees– eligibleunder the following conditions: • Any official rulesguidingsecondments? • Who pays the salary (directly or back-charging)? • No margin on the salaryistaken  Per analogy in function of the basic salary (unit cost grade whichisclosest to the basic salary)

23. Example of reimbursement per analogy A seconded expert has a basic salary of 4.000 €. Unit costs for grade B4 include a range of basic salaries from 3.800 € to 4.900 €.  At the moment of the cost claim, reimbursement at the unit cost rate for grade B4.

24. Unit cost grid(s) • In case different salary grids are applied for the remuneration of civil servants working as permanent officials, and for those working under temporary or unlimited employment contracts, separate grids should be provided for • Officials (permanent and temporary) • Contractual staff (working under a temporary or unlimited employment contract)

25. Staff to be included in the calculation The unit costs have to be calculated for each pay grade for the entire staff of a given pay grade, including staff not working on EU-funded projects. • Drivers, technicians, non-statistical assistants/administrators … • President, vice-president (if part of staff) • Please note: The rules for involvement of high management staff in the implementation of the action remain the same as for the current grant agreements.

26. 3.2 Calculation of average daily personnel costs per pay grade

27. Calculation of unit costs per pay grade Averagedaily rate per pay grade* = Total annual direct personnel cost per pay grade FTE * 215 working days *Rounded to two decimal places.

28. Calculation per pay grade In case a staff member has changedpay grade during the referenceperiod, there are two options: • Pro-ratacalculation for old and new pay grade (salary and FTE) • Include the staff member in the calculation for the grade at year end (i.e. higher grade).

29. Example change of pay grade during the reference period Staff member working full-time has been promoted from A2 to A3 on 1 July 2014. SalaryfromJanuary to June: 20.000 € Salaryfrom July to December: 25.000 € Option 1: Pro-ratacalculation Grade A2: 20.000 € / 0,5 FTE / 215 days = 186,05 € Grade A3: 25.000 € / 0,5 FTE / 215 days = 232,56 € Option 2: Grade at year end  A3 (20.000 € + 25.000 €) / 1 FTE / 215 days = 209,30 €

30. Total annual direct personnel costs Normal eligibility rules apply! • The amount per grade isbased on the followingcomponents: Basic salary + otherstatutorycosts + social contributions and taxes on wages _____________________________________ = Total annual direct personnel costs

31. Components – Basic salary • Main element of remuneration. • Determined in accordance with the pay grade held. • Governed by the official remuneration scheme. • Not a matter of which function the civil servant actually performs, but solely of the pay grade.

32. Components – Other statutory costs • Statutorybenefitslinked to specificfunctions, responsibilities and/or conditions, as well as specificsalary components that are not paid on a monthly basis (e.g.Christmas or holidayallowances, additionalmonth'spayat the end of the year etc.) • In principleeligiblewhen in line with the beneficiary'susualpolicy on remunerationand in compliance with national legislation.

33. Overtime Overtime may be included if it is in line with the beneficiary's usual policy on remuneration and if there is a system that allows its identification in conformity with the national regulation.

34. Components – Social security and pension contributions • Thesecover: • Employer's social contributions such as insurance contributions, payments for healthcare, labour disability, unemployment; • Taxes on wages; • Pension contributions, includingthose for early retirement. Contributions to pension reserves (provisions) are not eligible.

35. Non-eligible cost items • Indirect costs(overheads). • Provisionspaid to pension funds, reserves … • Non statutory, non-mandatory and discretionary premiums or bonuses. • Additionalremunerationschemesspecificallybenefittingofficialsparticipating in EU-fundedprojects (and exceedingusualremunerationpolicy). Non eligible costs have to be excluded regardless of the fact whether data derive from the payroll system or the accounting system.

36. Specific case of social contributions paid by another public authority • In order to includethesecosts in the unit costcalculation, the beneficiary has to provide a declaration by the respective payingauthoritystating the type of contribution(s) and the amount(s) paidfor the beneficiary's staff during the referenceyear. In case the declaration by the paying authority is not available, these costs cannot be accepted as eligible costs.

37. Declaration on social contributions paid by public authorities other than the beneficiary

38. Specific case of social contributions paid by another public authority Social contributions paid by other public authorities are calculated as a percentage of the total personnel costs incurred by the beneficiary.

39. Specific case of social contributions paid by another public authority

40. FTE per pay grade during the reference period • Full-time equivalents take into account staff that has worked under part-time arrangements or only during a limited period of the reference year. • Option: Where information on FTE is not available, the calculation may be based on the total number of staff. Exemple: A staff member has worked half-time during 6 months, and 80% the rest of the year: 0,5 * 0,5 + 0,8 * 0,5 = 0,65 FTE

41. Staff member left during the reference period • In case a staff member has left/retired during the reference period, this is taken into account in the FTE. Exemple: A staff member working full-time has retired on 30 June. This counts for 0,5 FTE

42. FTE • FTE reflects the employmentcontract. • Maximum 1 FTE per staff member. • Normal statutoryholidays do not impact FTE. • No FTE-adjustment for overtime. • Adjustments possible (but not obligatory!) for: • long-term absences such as unpaidleave, maternityleave or sickleave; • under the condition that the salaryisnot paidby the beneficiary.

43. FTE Exemples: 70% equals 0,7 FTE A staff member working full-time has taken one monthpaidholidaysthroughout the year1 FTE. A staff member working full-time has taken 6 monthsunpaidleave 0,5 FTE over the year A staff memberworking full-time has been on sickleavepaid by the healthinsurancescheme for 6 months. This corresponds to 0,5 FTE.

44. 3.3 Exchange rate

45. Exchange rate • Unit costs have to be submitted in euro. • Amounts calculated in national currency have to be converted in euro using the exchange rate of the reference year. • The conversion in euro is to be done at the average of the daily exchange rates published in the C series of Official Journal of the European Union, determined over the reference year.

46. Example of calculation exchange rate

47. 3.5 Updates

48. Updates • Optional: The beneficiary may update its unit costs annually, from the moment it disposes of more recent annual payroll data. • Updates become applicable to subsequent grant applications. • They will not be applicable retroactively to already on-going agreements. • New signed declaration(s) and checklist have to be transmitted together with updated unit costs.

49. 3.6 Unit costs in grant applications and grant agreements

50. Grant application • The grid of unit costs and a copy of signed declaration(s) and checklist shall be attached to each grant application.