Understanding Budget Categories
When preparing a Horizon Europe application, costs must be distributed across several budget categories, each governed by specific rules and eligibility conditions.[1] The overall project budget is divided into two main categories — direct costs and indirect costs — and the total is specified in Part B of the application, where the applicant also states the requested EU funding.[1]
Direct Costs
Direct costs can be directly attributed to the project and are expenses incurred in connection with project implementation.[1] Horizon Europe's framework defines six cost categories that determine how applicants calculate, report, and claim project expenses.[2]
Personnel
Personnel costs often represent a significant portion of the project budget and cover gross costs such as salaries, pensions, and health insurance.[1] Personnel costs represent roughly two-thirds of most project budgets, making accurate cost classification essential for successful financial management.[2] Eligible personnel costs include employees working under an employment contract or equivalent appointing act, assigned to the action.[4]
Subcontracting
If necessary, limited parts of the tasks in a Horizon Europe project can be outsourced to subcontractors, and these costs must be included in the budget.[1] Subcontracting is subject to specific rules to ensure only genuinely necessary tasks are outsourced.
Travel and Equipment
When preparing a proposal for a Horizon Europe grant, one of the most important steps in the process is the project budget, and knowing which categories of costs can be allocated is essential.[3] Travel and equipment are among the eligible cost categories that applicants must understand in detail before submitting a proposal.[3]
Eligibility Conditions
Project costs and contributions are eligible for reimbursement if they meet the eligibility conditions set out in the Grant Agreement.[5] Grants are typically based on actual costs, which must be incurred by the beneficiary, incurred during the project, and declared under one of the budget categories.[5] Horizon Europe defines five main categories of eligible costs, as outlined in Article 6.2 of the General Model Grant Agreement.[4]
Ineligible Costs
Not all project expenditure qualifies for reimbursement. Costs that fall outside the defined budget categories or do not meet the conditions set in the Grant Agreement are classified as ineligible.[5] Accurate cost classification from the outset helps organisations avoid financial corrections during audits.
Adjusting the Budget During a Project
Applicants can gain insight into the different categories, what they cover, and how to adjust the budget during a Horizon Europe project.[1] Budget flexibility is an important feature, allowing project teams to respond to changing circumstances while remaining compliant with grant rules.[2]
What to Watch
As Horizon Europe continues to fund research and innovation across Europe, mastering budget categories is becoming a baseline competency for any organisation seeking EU funding. The distinction between direct and indirect costs, the dominance of personnel expenditure, and the strict eligibility criteria all require careful planning well before submission. Institutions and companies that invest time in understanding these rules early reduce their risk of financial non-compliance later in the project lifecycle. If you want to manage your Horizon Europe budget with confidence, start your 14-day free trial at EU Reporting and see how structured financial tracking can simplify your grant management.