For small and medium-sized enterprises (SMEs) participating in Horizon Europe (HE), reporting personnel costs can be challenging, especially when the SME owner personally works on the project.

This actually happens quite often. Unlike large organisations with established procedures, SME owners often have flexible working arrangements, non-standard remuneration structures, or no formal employment contract at all.

As a result, justifying costs and choosing the correct cost-reporting method is not always straightforward for SME owners that would like to see their work reflected in the financial report.

Read more about who qualifies as an SME owner at What are SME Owner costs in Horizon Europe?

The Two Options: Actual Costs and Unit Costs

Horizon Europe offers two main approaches for charging the costs of SME owners who contribute to a project:

1. Actual Costs
   This model applies when the SME owner has an employment contract and receives a salary recorded in the company’s accounts. Personnel costs are declared based on real salary, social charges, and the number of hours worked on the project as any other employees working at the HE project.
2. Unit Costs (SME Owner Rate)
   When the SME owner does not have a standard employment contract—often the case in micro-enterprises—the Commission allows the use of a fixed daily rate. This “SME owner unit cost” is a simplified method that does not rely on payroll (although still requires proper time recording). It reduces administrative burden but must only be used when the eligibility conditions are met.

Country-Level Differences and Decision Difficulties

Seems straightforward, right? However, it is not always that simple! If you want to avoid headaches when justifying SME owner unit costs, keep reading.

National rules for company directors, partners, or self-employed founders vary significantly between countries. Depending on local legal status, an SME owner may appear as an employee, as self-employed, or in hybrid or special situations – making it difficult to determine which option applies. This is the case for countries like Spain and France, that have a specific regime for SME owners working at their own company. Taxation rules, social security regimes, and company structures can also influence the situation and the final decision on how to charge SME owners costs.

Conclusion

Our suggestion is to assess several indicators, such as the existence of a formal employment contract, regular payroll documentation, the type of labour relationship (employee, director, shareholder-manager, self-employed contractor), and how remuneration is recorded in the accounts.

However, because individual situations and national frameworks vary widely, there is no one-size-fits-all approach and the validation of costs afterwards also depends on the auditor’s interpretation. This is why we also suggest discussing your specific case directly with your Project Officer.

We can help you analyse your specific case and get confirmation of the correct approach. All you have to do is get in touch at [email protected]