Calculating payroll and indirect expenses for companies, the public sector including health trusts and others
In this way, you report on personnel and indirect costs for organisations that are not part of the higher education sector or are not part of the institute sector and have reported hourly rates to the Research Council.
Personnel costs cover salaries and employee costs such as employer's national insurance contributions, holiday pay and pension. Indirect costs include the lease and operation of areas and support functions that are necessary to carry out the R&D activities in the project.
See further down the page for examples of calculations.
Budgeting of personnel costs and indirect costs
Personnel costs and indirect costs must be budgeted as a whole based on a calculated hourly rate or man-year rate. In projects with partners, personnel costs and indirect costs must be calculated and entered for each of the organisations participating in the collaboration.
Organisations that do not have an established model for calculating personnel and indirect costs can make a simplified budgeting for employees who are part of the R&D project, according to the following rules:
- The hourly rate and full-time equivalent rate are calculated on the basis of the agreed annual salary, with a rate that reflects the enterprise's actual indirect costs.
- For organisations with low expected indirect costs, we recommend calculating the hourly rate as 0.8 per thousand of the agreed annual salary, or a full-time equivalent rate with a mark-up (overhead) of 35% on the agreed annual salary. Examples of such organisations will be those that have low costs for space and insignificant support functions related to the R&D activities in the project.
- For organisations with high expected indirect costs, we recommend an hourly rate of up to 1.1 per thousand of the agreed annual salary, or an overhead of 85% on the agreed annual salary. Examples of such organisations would be those that have costs for space and support functions related to their R&D activities in line with organisations in the higher education sector and the institute sector.
- The hourly rate (or man-year rate/1695 hours) cannot exceed NOK 1100.
- In the budget, it is possible to use common rates for groups of R&D employees in an organisation, provided that the variation in salary levels within the group is limited and indirect costs are comparable.
- Simplified rates must only be used in budgeting. Project accounts and disbursement of grants must always be based on actual personnel costs and indirect costs.
Calculation of support for personnel costs and indirect costs
The Research Council finances personnel costs and indirect costs in the same way as other approved project costs. In each of our calls for proposals, we state the maximum project support and the level of support for the organisations that can receive funding.
Personnel costs and indirect costs in project accounting
The Project Owner and any partners that are grant recipients must keep separate accounts of actual project costs. The project accounts form the basis for financial reporting and payment claims to the Research Council. The following rules apply to the recognition of personnel costs and indirect costs in the project accounts:
- Recipients of project funding from the Research Council must have a system for registering employees' working hours in the project.
- Accrued personnel costs and indirect costs must be entered in the project accounts on separate cost lines.
- If the total hourly cost (personnel costs + indirect costs) for an employee exceeds NOK 1100, the excess amount shall not be included in the calculation basis for payment of funding from the Research Council.
- An employee can charge a maximum of 1850 hours per year to projects funded by the Research Council.
Sole proprietorships
As a general rule, sole proprietorships cannot be the Project Owner or partner. Any exceptions to this rule will be provided in the individual call. The owner of a sole proprietorship cannot have his or her own personal and indirect expenses covered.
Sole proprietorships can be reimbursed for personnel and indirect expenses for employees they may have, provided that these can be found in the sole proprietorship's accounts. A spouse can work in a sole proprietorship, but cannot be employed.
Example of hourly cost calculations
This is a guide on how the company can calculate the hourly rate for the individual R&D employee. The guide takes the form of a calculation example, and it is emphasised that this is only an example. The enterprise must itself find out what types of costs and what amounts/cost levels apply to the enterprise, and which can thus be used as a basis for the calculation. When the agency reports project costs to the Research Council, it is responsible for ensuring that the reported costs are real and can be found in the agency's accounts. This also applies to costs that are included in the calculation basis for hourly rates.
| A. Direct payroll costs | Employee costs | Units | Comments/description |
|---|---|---|---|
| 1. Nominal annual salary (11 months’ salary + holiday pay) | 800 000 | NOK | The nominal annual salary is the salary a (full-time) employee receives each year and that forms the basis for ordinary salary payments and tax deductions. The percentage of full-time is used to convert the actual salary to the nominal annual salary for employees who work part-time. |
| 2. Other payroll expenses and personnel-related costs | |||
| a. Pension contributions | 64 000 | NOK | Costs that are directly linked to the individual employee’s salary, depending on the company’s pension scheme. Calculated here as 8 % of the nominal annual salary. |
| b. Employer’s National Insurance contributions | 122 388 | NOK | Statutory contributions linked to the individual employee’s salary. The most common rate (14.1%) is used in the example. |
| c. Employee insurance | 4 000 | NOK | Occupational injury insurance and other relevant employee insurance. Here estimated at 0.5% of salary. |
| d. Welfare costs | 8 000 | NOK | Total costs divided between all employees. Here estimated at 1 % of the salary. |
| B. Indirect costs | These are actual costs that the enterprise spends on resources that are necessary to support the implementation of the project, but that are not specifically linked to project activities or project employees. To calculate indirect costs, start with the enterprise’s total costs for that cost category and the number of (full-time) employees these costs are divided between. In the event of an audit, the enterprise must be able to present documentation that total costs corresponding to (employee cost * number of employees) have been recognised under the cost category. If it is not natural to divide the cost category between all employees (or all employees in a more limited group, e.g. an R&D department), it must be considered whether this is a project cost at all, or whether the cost must be deemed to be a direct project cost and should therefore be reported under ‘Other operating expenses’. | ||
| f. Share of rent and electricity, offices/work premises | 60 000 | NOK | Estimate: The total cost for this cost category is normally divided equally per full-time equivalent, unless there are big differences between departments or groups of employees. |
| g. PCs, mobiles, data and office equipment | 30 000 | NOK | Estimate – can vary between groups of personnel based on different needs for work tools. |
| h. Administrative support functions: HR, HSE, accounts, auditing | 40 000 | NOK | Estimated here to be 5 % of salary |
| i. Special infrastructure costs | - | NOK | For example costs relating to labs etc., but not equipment, services etc. that are ‘ordered’ or directly triggered by the project. This cost category is only relevant in exceptional cases. Therefore, no amount is estimated here. |
| Total payroll costs, non-wage labour costs and indirect costs per full-time employee (with pertaining overhead rate) | 1 128 388 | NOK | |
| Number of hours of a (net) full-time equivalent for calculating the hourly rate | 1 695 | hours | The hourly rate is calculated by dividing the total costs by the number of hours worked by a typical full-time equivalent. For an employee who works 37.5 hours per week and has 5 weeks holiday a year, a net full-time equivalent will be around 1,695 hours. An upper limit of NOK 1,850 has been set for what an enterprise can enter as expenses for one and the same person in a project funded by the Research Council, i.e. around 10% more than a ‘normal’ full-time equivalent. |
| Hourly rate based on a full-time equivalent (1,695 hours) | 666 | NOK | The hourly rate can be used for all employees with a nominal annual salary as in the example, or, if relevant, for a group where the salary varies little from this amount (e.g. +/- 5%). The Research Council has set an upper limit on hourly rates (currently NOK 1,100). |
| Calculation factor = Hourly rate/salary (full-time equivalent = 1,695 hours) | 0,83 | ‰ | For project personnel with roughly the same salary (e.g. +/- 10%), the same calculation factor can be used provided that the calculation is carried out on the basis of the average salary of the group. |
| Alternative full-time equivalent as basis for calculation | 1 600 | hours | Sickness absence, contractual time set aside for self-development etc. can justify distributing the full-time equivalent costs between a somewhat lower number of hours than a full-time equivalent (1,695 hours). An alternative number of hours must be substantiated on the basis of relevant key figures, e.g. the scope of sickness absence, contractual further education activities etc. In the example, 1,600 hours is used as such an alternative number of hours. |
| Pertaining hourly rate when using alternative full-time equivalent | 705 | NOK | The same conditions as mentioned under Hourly rate above |
| Pertaining calculation factor = Hourly rate/salary | 0,88 | ‰ | The same conditions as mentioned under Calculation factor above |
Messages at time of print 7 January 2026, 23:50 CET