Quick answer: Staff costs are the gross salaries, employer National Insurance, employer pension contributions and certain reimbursed expenses of employees engaged in qualifying R&D, apportioned by the time spent on R&D. They are typically 60-80% of total qualifying expenditure for engineering, software and biotech claimants, and are the most heavily evidenced category in HMRC enquiries.
What are staff costs for an R&D claim?
Staff costs, as a qualifying R&D expenditure category, are the costs of employing staff who are directly or indirectly engaged in qualifying research and development. Eligible cost elements include gross salary, employer National Insurance contributions, employer pension contributions, and specific reimbursed expenses such as travel to third-party R&D sites. Benefits in kind, dividends, and payments to directors who are not employees are excluded. Staff costs are the largest qualifying category for most claimants.
How does HMRC define qualifying staff costs?
HMRC guidance on staff costs is at CIRD83000 onwards of the CIRD Manual. The legislation is at sections 1123 and 1124 of the Corporation Tax Act 2009. HMRC's Reimbursed Expenses Guidance, published in 2016 and updated since, sets out the specific rules on which employer-reimbursed expenses qualify.
What do qualifying staff costs look like in practice?
An R&D engineer on a £80,000 gross salary, with £10,500 employer NIC and £4,800 employer pension, spends 75% of her time on qualifying R&D. The total relevant staff cost is £95,300 and the qualifying staff cost is £71,475. Add any qualifying reimbursed expenses apportioned to the R&D work on the same basis.
How does the employer NIC rate affect the calculation?
Using the example above, employer NIC is charged at 15% from 6 April 2025 (13.8% for accounting periods, or parts of periods, before that date). On the £80,000 salary, 15% NIC is £12,000 rather than the illustrative £10,500 shown above for a period spanning the rate change - small differences like this matter when apportioning a straddling period, since the two portions of the year use different NIC rates before being combined and then time-apportioned to the 75% R&D-engaged fraction.
How much of a typical R&D claim is staff costs?
Staff costs are consistently the largest single category in UK R&D claims, commonly 60–80% of total qualifying expenditure for engineering, software and biotech businesses. Getting the underlying fraction of time right, and applying it consistently across payroll, pension and reimbursed expenses, has more impact on claim value than any other single input - see staffing costs for the full category breakdown and externally provided workers for how the equivalent calculation works for contracted-in staff rather than employees. Time records - timesheets, sprint logs, or project-management exports - are the single most-requested piece of evidence in an HMRC staff-cost enquiry, so claimants who capture contemporaneous time data rather than reconstructing it retrospectively at claim time have a materially stronger position.
Frequently asked questions
Employer contributions to a registered pension scheme for R&D-engaged staff generally qualify on the same time-apportioned basis as salary, but employee salary-sacrifice contributions, and any contributions relating to non-R&D time, are excluded.
Time records, such as timesheets, sprint logs or project-management exports, are the single most-requested piece of evidence in an HMRC staff-cost enquiry. Contemporaneous records captured at the time work was done carry more weight than time estimates reconstructed later.
Staff costs are consistently the largest single category in UK R&D claims, commonly 60-80% of total qualifying expenditure for engineering, software and biotech businesses, which is why getting the underlying time fraction right matters more than any other single input.