The Public Spending Code: ETechnical References

Calculation of Staff Costs


Document Update Log

Document Summary:The calculation of staff costs is a key variable in appraisals of public spending and public sector reform proposals. This area has been reviewed by the Central Expenditure Evaluation Unit, taking account of actual data regarding variable overheads across the civil service and imputed pension costs arising from actuarial review. This document outlines a framework for estimating staff costs and updates previous guidance by providing a composite, average parameter of 25% in respect of the overhead component of staff costs on a general basis. The document also highlights those situations where application of the 25% parameter is not appropriate and notes that appraisal of each direct and indirect cost is recommended in the first instance through consultation with the relevant Corporate Services unit.


This section provides guidance on the calculation of staff costs including the estimation of attributable overheads. It updates previous guidance on this matter contained in the Revised RIA Guidelines of June 2009 (Appendix F, “Public Service Implementation Costs”).

Quantification of staff costs and overheads is an important element of appraisal both for new spending proposals as well as for public sector reform measures which may involve a reduction in staff headcount.  As a rule, for the purposes of detailed appraisal, estimates of pay and non-pay costs should always be prepared in the first instance on a cost-by-cost basis using the information available through the relevant Corporate Services section and Management Information Systems.  In many cases, however, such an approach may prove highly resource-intensive and the “principle of proportionality” will dictate that a standard estimation methodology be used instead, based on service-wide averages. This document sets out a framework for estimating staff costs and also provides a formula for daily and hourly rates.

Staff Costs: key components

It is important that staff costs are fully taken into account when making decisions that involve changes to the level of resources. For example, the establishment of a new Agency or the creation of new functions for a Department or Agency may result in a need for additional staff (see also section B06 of the Public Spending Code). Conversely, a reform initiative such as external service provision could result in a structural headcount reduction over time. Staffing costs will be a key variable in decisions of this nature, and it is important that they are accounted for fully and consistently. A framework to assist officials in estimating staffing costs is set out in summary form in the table below:

A Pay Mid point of pay range using formula below
B Direct Salary Cost Pay + Employers PRSI
C Total Salary Cost B + Imputed pensions cost (typically 13%  of A)
D Total Staff Cost C + 25% of A in respect of ‘overheads’

Direct Salary Cost

Direct salary cost is defined as the gross wage or salary paid to an individual at the relevant grade plus the associated employer’s PRSI payment.  An average salary cost should be worked out for each grade based on the current salaries Circular issued by the Department of Public Expenditure & Reform by taking a cash value mid-way between the scale minimum and the highest point, or Long Service Increment (LSI), as appropriate. In general, for employee’s hired after 6 April 1995 the rate is 10.75%. For all other employees the rate is 2.01% (civil servants and Gardai)  or  2.35% (other public servants). A detailed guide to PRSI rates can be seen at http://www.welfare.ie/en/Pages/Employers-Guide-to-PRSI-Contributions—sw3.aspx

Total salary cost is defined as direct salary cost plus an imputed pension contribution.  Employing civil/public servants normally results in the creation of entitlements to pensions which are payable in the future. The employee meets a proportion of the cost through contributions and pension related deductions. However the balance is a deferred cost which is borne by the State. In estimating the total cost of employing a civil servant, allowance must be made for this deferred cost.  The pension contribution is based on gross salary, and not direct salary cost, because employers’ PRSI is not reckonable for pension purposes. In general, the recommended additional charge for the imputed pension contribution is 13% of the gross salary cost for civil servants.  The recommended costs for specific areas of the Public Service are set out in the table below which is taken from the 2009 Comptroller & Auditor General (C & AG) report on Public Service Pensions.

Sector Net Pension Cost as a Percentage of Pensionable Remuneration
Civil Service






Prison Officers


Defence Forces




VECs and ITs




State Sponsored Bodies


Weighted Average Cost


Note: The C&AG has recommended that regular actuarial reviews be carried out, and these figures will be updated on the foot of any such reviews.

Total Staff Cost

 Total staff cost is defined as total salary cost plus an allowance for overheads.  Each officer requires office space, materials, use of telephones, computers, postage service etc.  In addition, security services have to be provided, recruitment and training expenses are incurred, personnel services are provided, and so on.  It is usually easiest to include provision for these by applying a proportionate increase in salary costs.  It is estimated that an addition of 25% to direct salary cost is appropriate to reflect these overhead costs. This is a composite figure applicable to the generality of civil service situations and encompasses costs for accommodation, utilities, support and back-office staff, training, travel, and so on.

With respect to accommodation costs, it should be noted that in those instances where accommodation is owned by the State, although there may be no cash outlay with respect to rent, it still represents an economic cost, and must be factored into any decision-making process concerning resources or overheads (more information on the differences in the treatment of cashflows between financial and economic appraisal is set out in section D of the Public Spending Code).

The 25% figure is recommended as a norm both in situations where additional staff are being recruited, and where staff numbers are being reduced.  While it is the case that there are few immediate overhead savings arising when a staff member leaves and is not replaced (unlike in the hiring scenario where many of the costs are borne up-front), it is entirely valid to count a proportion of overhead as part of the staff cost savings. Over the medium term, a structural headcount reduction will yield proportionate overhead savings:  for example, fewer IT licences and property leases will need to be renewed, with consequent reductions in utility bills, and replacement costs for hardware and furniture will be lower.

The overhead percentage will be reviewed on a regular basis, and revised to reflect any changes in overhead profile (for example due to increased efficiencies) as required.

It is important to note that these are average costs and are applicable only on a general basis. When preparing estimates of staff costs, it is appropriate to consult with the relevant Corporate Services unit in the first instance in order to appraise direct and indirect costs on a cost-by-cost basis.  Where more specific information is available, it should be used, particularly if there are additional costs in respect of specialist equipment or accommodation, or higher levels of travel and subsistence, for example. 

Daily and Hourly Rates

Daily and hourly staff costs in respect of any grade conditioned to a 41 hour week (gross) can be calculated by using the following general formulae: 

Daily rate for a grade

Annual cost for grade


(249 – annual leave entitlement)

Hourly rate for a grade

Annual cost for grade


(249 – annual leave entitlement) x 6.95)

(April 2008)

Situations where the use of the composite 25% factor may not be appropriate:

Certain decisions that could lead to a material change in resourcing – for example the establishment of a new agency, or conversely the closure of an agency – may lead to a step change in overheads, involving inter alia the acquisition or disposal of office accommodation.   In these cases, the use of the composite 25% factor would not be appropriate, and it is important that consideration be given to the actual costs involved in the context of the costing of total cost of staff time.  The factors to be taken into account will include the number of staff to be accommodated, the proposed space allocation per head, the ancillary functions proposed such as public spaces and meeting rooms, the location considered appropriate, the availability of suitable accommodation and the balance between supply and demand in the office accommodation market which will affect the cost per square metre which can be agreed. In situations where the accommodation is owned by the State an appropriate level of imputed rent should be calculated (OPW can assist with this).  Consideration should also be given to the level of IT spend that will be necessary to support the added staff. If you are unsure as to the level of accommodation costs which may be involved, or if specialist accommodation is required, you should seek the advice of the OPW. For advice on IT costs, you should contact CMOD.

Contact details are as follows: Property Management Services Office of Public Works Government Buildings, Trim, Co Meath Tel: (046) 942 6000 CMOD, Department of Public Expenditure and Reform, Lansdowne Road, Dublin4. Tel: 01 676 7571