PART II: Myths and Truth about the Additional Remuneration and National Project Reference Rate schemes
Some weeks ago we discussed the additional remuneration scheme of Horizon 2020, listing the pros-and-cons of this unique feature. As promised, we continue with an even more special scheme, the action vs. national project reference rate.
The national project reference rate is strongly linked to the issue of additional remuneration. It is primarily for those employees whose remuneration is project-based (i.e. different – usually of course higher – salary is paid when working on (research) projects). As discussed in our earlier post, the most basic rule is that one shall not be paid more in H2020 than paid usually. So, here again, the question is how we can decide whether the salaries coming from different sources (i.e. salary for “normal” work, extra salary for project(s)) are equal, higher or lower than the acceptable level in Horizon 2020. Therefore, once again we need to differentiate between the components that can be considered basic remuneration and those that are additional remuneration. The hourly rate charged to the action must be calculated using only basic remuneration.
At the end, in this scheme typically part of the additional (a.k.a. project-based) salary on the project, could be considered as part of the basic salary.
How? Follow the next 3 steps:
Step 1: Be aware of the definitions
- Action reference rate (salary in H2020 projects)
- National Reference rate (salary payable in other – typically national – projects)
It is essential that the beneficiary must have a written policy (regulatory requirements or internal rules) on how much salary is to be paid in national or externally funded (research) project, and that must have been used (i.e. paid out actually) before the particular H2020 project.
In most countries where this scheme would be beneficial, there are no regulatory requirements for setting up the remuneration in national projects. So, the best would be setting up internal rules for the whole organisation – if the organisation does not have such rules yet. Check the Annotated Model Grant Agreement from page no 59 where “Step 1b — Comparing the action reference with the national project reference” gives you a full example for Ms R. From this example: “The internal rules of University Z provide that a professor working in externally-funded projects may get an extra salary of up to 50 % for the time it works for those projects.” (NB! any externally funded project, again applicable to any professor)
It is advisable to fully revise your remuneration policy to make sure that such payments cannot be based on arbitrary decisions, but clear rules will apply. These rules must cover both the remuneration for additional work/tasks outside normal duties and the remuneration rules for externally funded projects. One does not work without the other.
Step 2: Calculate both hourly rates to compare them
The beneficiary shall calculate the hourly rates – using the same methodology as used for any other employees: fiscal/financial year based or monthly based.
This is as simple as it sounds:
- the action reference rate is the total salary costs paid (e.g. per year), divided by the total hours worked (e.g. 1720); while
- the national project reference rate is the salary that is usually paid in (national) projects (e.g. per year), divided by the number of hours worked (use 1720)*
Compare them – if the national rate is higher or equal than the action reference rate, you can use the first one shall be considered as basic remuneration. So, you can then stop reading here: just simply multiply the hours worked on the project with the hourly rate, and basically, that’s it.
Dr. Bond’s yearly basic salary cost is 30.000.- EUR, and an additional 10.000.- EUR salary was paid as project-based salary working on a Horizon 2020 project in the same year. He has a full-time position at the organisation.
The organisation has an internal policy, that researcher working on a national research project can earn 4.000.- EUR per month, and it is proved that this amount was paid at least once before this particular H2020 project
Mr. Bond worked 400 hours on the H2020 action in this year.
- Action reference rate: 30.000 + 10.000 = 40.000.- EUR / 1720 productive hours is 23,56 EUR/hour
- National reference rate: 4000*12 = 48.000.- EUR / 1720 productive hours is 27,91 EUR/hour
The national reference rate is higher than the action reference rate, so the time spent on this particular H2020 project (i.e. 400 hours) by Mr. Bond can be multiplied with the action reference rate (23,56 EUR/hour) and that is all basic salary (400 x 23,56 = 9.424 EUR).
Dr. Bond yearly basic salary cost is 20.000.- EUR, and an additional 30.000.- EUR salary was paid as project-based salary working on a Horizon 2020 project in the same year. He has a full-time position at the organisation.
The organisation has an internal policy, that researcher working on a national project can earn 3.000.- EUR per month, and it is proved that this amount was paid at least once before this particular H2020 project
Mr. Bond worked 400 hours on the H2020 action in this year.
- Action reference rate: 20.000 + 30.000 = 50.000.- EUR / 1720 productive hours is 29,07 EUR/hour
- National reference rate: 3000*12 = 36.000.- EUR / 1720 productive hours is 20,93 EUR/hour
The national reference rate is lower than the action reference rate, so the time spent on this particular H2020 project (i.e. 400 hours) by Mr. Bond must be multiplied with the national reference rate (20,93 EUR/hour) to get the eligible basic salary costs (400 x 20,93 = 8.372 EUR); while the difference between the 2 hourly rates may be charged as additional remuneration!
Step 3. Calculation of the eligible additional remuneration
This step is only applicable to those, where the calculation for the 2 hourly rates (step 2) results in higher hourly rate on H2020 project(s) than in a national project (action reference vs. national reference). In that case, the difference can only be charged against the additional remuneration scheme: up to 8000 EUR/year for an FTE, if the organisation is not-for-profit.
Following Example B above, the action reference rate was higher (29,07 EUR) than the national reference rate (20,93 EUR), so the eligible basic salary must have been calculated using the hours spent on the project (i.e. 400) with the lower rate.
The difference is eligible as eligible remuneration as shown in the next calculation:
- Difference: 29,07 EUR (action rate) – 20,93 (national rate) = 8,14 EUR x 400 hours on the project = 3.256 EUR
- Limit for additional remuneration: 8.000 / 1720 * 400 = 1860,47 EUR (Please note that the 8.000 EUR limit is for an FTE, working full-time on the project – any other cases (like here) it must be pro-rata)
- Eligible additional remuneration: 1860,47 EUR
So, the total eligible salary costs in example B is 8.372 EUR basic + 1860,47 EUR additional remuneration.
It may sound and look complicated, but it’s not. The key here is in Step 1 – unless you have a.) bulletproof definitions, b.), internal regulations on using national reference rates and c.) track history of using them before, do not use this methodology. In case you have them all, just follow these 3 steps.
Stay tuned with us!
*The hourly rate of the national project reference must be calculated using 1720 fixed annual productive hours (unless there is an hourly rate directly set in the law, collective labour agreement or internal rules. If the beneficiary uses the internal rules it must keep documental evidence of the internal rules applied, the category of the person (if applicable), and the payslip and payment documents proving that such remuneration was paid at least once prior to the submission of the proposal.