Module 3: Staff time apportionment

Staff costs are usually the largest line in a claim and the first one a reviewer tests. After this module you will be able to decide whose time is in scope, choose an apportionment method that fits the size of your team and the risk in the claim, apply it to the right cost base, and document it so that a reviewer can follow it from the payroll ledger to the figure in the claim.

What this module covers

Whose time counts: people directly engaged, technical supervision and support, and the roles commonly excluded.
Four methods, from timesheets kept at the time to role-based estimates, and how each reads under review.
The cost base the percentage is applied to.
The method memo: documenting the apportionment so it survives a change of staff and a later review.

Whose time counts

Every scheme starts with the people directly engaged in the work done to resolve the uncertainty: designing experiments, building and testing, analysing results and writing up what was learned. Several schemes also bring in direct technical supervision and support, and most exclude general management, administration and clerical work. The boundary differs, and the country rows carry each scheme's wording. The method is the same everywhere: build a role list before you touch the numbers.

Role group	Examples	Typical treatment	What to record
Hands-on technical staff	Engineers, developers, scientists	In scope for the share of time on the eligible projects	Time by project code, or the method used to estimate it
Technical supervision	Team leads planning and directing the work	In scope for time spent directly on the technical work in several schemes; general management excluded	Which projects they directed, with plans, reviews and design decisions as evidence
Technical support	Lab technicians, machinists making test parts, data preparation	In scope in some schemes where the support is direct; general administrative support excluded	The tasks that supported the eligible work
General management and administration	Managing director, finance, HR, sales	Excluded in most schemes unless the person also did technical work	A statement that they were excluded, or the technical share with evidence

Four methods and how each reads under review

Several tax authorities state expressly that they expect timesheets or another reasonable method supported by records, and that they test how allocations were made. The methods below run from strongest to weakest. Mixed approaches are normal: timesheets for the core team, a documented estimate for the few around it.

Method	What it needs	How it reads under review	Typical failure
Timesheets kept at the time, by project and task	Hours against project codes at least monthly, manager approved	Strongest: a record made at the time that ties to the project codes in the ledger	Codes too coarse to separate eligible from routine work; no approval; entries filled in at year end
Periodic sampling	Representative weeks or sprints recorded and extrapolated	Acceptable where the sample is documented and representative and the extrapolation explained	Sample taken in an unrepresentative period; no record of why it was chosen
Reconstruction from project artefacts	Sprint boards, lab notebooks, commit history, calendars, test logs tied to people and dates	Credible where the artefacts were created during the work and name the people involved	Artefacts show the project existed but not who worked on it or for how long
Role-based estimate	A percentage per role agreed with managers, ideally during the year	Weakest alone; workable for a small team where other records corroborate it	Round numbers, 100 percent for everyone, prepared after the year with no supporting record

Whatever the method, a reviewer asks: who did the work and in what role; what share of their time went to it and how that was measured; and what cost the share was applied to. Staff costs get reduced where an allocation cannot answer all three.

The cost base

The percentage is applied to the scheme's definition of staff cost, not to the payroll total. Definitions differ on employer contributions, bonuses, reimbursed expenses, benefits in kind, dividends and directors' fees, and some cap the pay of owner managers. Work person by person:

Start from gross pay per person in the payroll ledger for the claim period.
Remove the items the scheme excludes and add the employer contributions the scheme includes.
Apply any cap the scheme sets for particular people.
Multiply by that person's apportioned share.
Sum, and reconcile the starting figures back to the payroll ledger and the accounts.

The United States row below records a threshold rule for people substantially all engaged in the work; do not generalise it to other countries.

The method memo

The memo is short, written while the method is applied, and kept with each year's claim file. It records the scope (people and period); the role list and the treatment of each group; the method for each group and why; the data sources; how gaps, joiners and leavers were handled; who approved the allocations; the reconciliation to the payroll ledger; and a change log for anything that differs from the previous year. If the company moves from estimates to timesheets during a year, keep both and show where they join. Consistency year to year is itself evidence; an unexplained change in method or percentages invites a question.

Illustrative example

Illustrative example. Harbour Robotics Ltd, a hypothetical company, has twelve technical staff with payroll of 1,200,000 for the year, including the employer contributions its scheme allows. Eight engineers record time against project codes; their timesheets show 55 percent of hours on the two eligible projects, so 55 percent of their 800,000 cost, or 440,000, is apportioned. Two technical leads keep no timesheets; their project plans, design reviews and meeting records support 40 percent of their 240,000, or 96,000. One technician is allocated 50 percent of 60,000, or 30,000, on a role-based estimate corroborated by work orders for test rigs. The operations manager, at 100,000, is excluded and the memo says so. Apportioned staff cost is 566,000 of 1,200,000. The memo records each method, the reconciliation to payroll and the approver. The benefit is calculated on 566,000 at that country's rate after any scheme specific adjustment to the cost base.

Across the seven countries

Each row uses that country's own wording; the linked page sets out the staff cost definition and the records expected.

Country	Staff costs and apportionment	Detail
United States	Qualified services means engaging in qualified research or in its direct supervision or direct support. If substantially all, meaning 80 percent or more, of an employee's services are qualified services, all of the wages are treated as qualified wages. The Audit Techniques Guide directs examiners to test how time allocations were made and what records support them.	Qualified research expenses
United Kingdom	Staffing costs comprise earnings, employer Class 1 National Insurance contributions and employer pension contributions for directors and employees directly and actively engaged in R&D, apportioned where only partly so engaged. Managerial staff qualify to the extent of time spent directly and actively engaged, for example planning and supervising the technical work; general management of the company does not.	Eligible expenditure
Ireland	Staff costs are apportioned according to the proportion of time spent on qualifying R&D activities, supported by records such as timesheets; time spent on general management, administration and non-R&D supervision is not qualifying expenditure.	Eligible expenditure
Canada	Salary or wages of employees directly engaged in SR&ED qualify for the portion of time so engaged. Directly engaged means hands-on involvement, including performing experiments and analysis, directly supervising the work and technical documentation, but not general management, administrative or clerical functions. The portion claimed should be supported by time records or another reasonable method with documentary support.	Eligible expenditure
Australia	Salary expenditure must be apportioned on a reasonable basis between R&D and non-R&D activities, and contemporaneous records such as timesheets are expected to support the apportionment.	Eligible expenditure
New Zealand	Salary or wages and other employee remuneration, including employer superannuation contributions, to the extent the employee performs R&D activities. Employee costs are expected to be apportioned using timesheets or another reasonable and consistent method supported by records.	Eligible expenditure
Singapore	Staff costs comprise salaries, bonuses, allowances and employer CPF contributions of employees directly engaged in the R&D, excluding directors' fees, apportioned where the employee is not wholly engaged. Staff costs claimed are expected to be supported by records of the time spent on R&D, such as timesheets or project allocation records.	Eligible expenditure

Where to go next

Module 1: Scheme mechanics: how the apportioned cost turns into a benefit.
Contemporaneous documentation: what reviewers actually look for: the records behind time allocations.
Canada: proxy vs traditional method: where the staff cost base also drives the overhead figure.
Documentation and compliance: the guide hub.
In-House Finance Team Program: the overview and module list.