Taxes and payrolls: the Romanian labour market
Each labour market has some peculiarities. Foreigners may find it difficult to fully comprehend payment methods, taxes, and other benefits. TalentUp is starting a series of different blog articles, one for each country. This article analyzes the Romanian labour market.
Even if the national currency is the Romanian Leu (RON), the whole article is in EUR to compare easily across countries and exchange rates.
General data about the Romanian labour market
|Minimum monthly wage||450.65€ or 474.9€ for the employees assigned in positions for which higher education studies are required and have at least one year of seniority in the higher education area|
|Maximum working hours a day||8h or 6h for employees under 18|
|Maximum working hours a week||40h or 30h for employees under 18|
|Maximum overtime hours a day||4h|
|Maximum overtime hours a week||8h|
|Working hours compensation||Paid hours off or 75% of the basic wage per hour. After working a 12-hour day, employers must give a 24-hour rest period. Overtime hours are forbidden for workers under 18, part-time workers and pregnant employees.|
Payroll taxes in Romania
Social security contributions are made by the employer and the employee and are used for funding unemployment, pension, maternity/paternity leave, and sickness or injury.
|Contingencies||Employer %||Employee %|
|Disability Fund (50+ employees)||4||0|
Once contributions are paid, employees need to pay an income tax that is established at a 10% flat rate.
Contingencies from self-employees
Sole proprietors need to pay pension and health contributions once they exceed the minimum income threshold. This rule means that if your income is less than or equal to the minimum salary, you only pay income taxes. The contributions amount to 25% (pension) and 10% (health contributions) of the annual minimum wage. If your income is higher than 5042.30€ a year, there is a flat rate of 1764.80€ per year for contributions.
Self-employed individuals earning up to 65,000 EUR per year are exempt from VAT on a national level. But, even if this limit is not exceeded, a self-employed person in Romania should register for VAT since certain instances may require this registration.
Example of net salary in Romania
As a reference, we use the average salary of a software engineer. In Romania, on average, software engineers earn annually 15,000€.
|Gross salary (annually)||15000|
|Disability Fund (50+ employees)||4||600||0||0|
|Net salary (annually)||8775|
The employer contributes 937.5€ to social security and the employee 5,250€.
After paying the income tax, the employee has a net salary of 8,775€ coming from a gross salary of 15,000€.
Romanian unemployment regulation
The maximum probation periods are:
|5 working days||fixed-term employment contract concluded for a period that does not exceed 3 months|
|15 working days||an employment contract, concluded for a fixedterm period ranging between 3 and 6 months|
|30 working days||an employment contract, concluded for a fixedterm period exceeding 6 months|
|45 working days||in the case of management positions, for which the fixed-term employment contract is concluded for more than 6 months|
|30 calendar days||disable persons in indefinite contracts|
|90 calendar days||operational positions in indefinite contracts|
|120 calendar days||management positions in indefinite contracts|
A written decision from the employer is always required, except for terminations during the trial period.
Notice period in case of dismissal is a minimum of 20 working days, 45 days for management positions.
Different kinds of leaves in Romania
There are 15 public holidays. 20 days is the minimum holiday guaranteed by law per year.
The first 5 calendar days are paid by the Employer. From the 6th day, the medical allowance is supported by the National Health Fund.
The payment percentage in the case of the sick leave allowance ranges between 75% and 100% of the calculation base. The calculation base is the average of the employee’s monthly gross wages during his last 6 months prior to the month the medical leave is granted.
Other leaves are:
- Bereavement leave: 2 days of unpaid leave is granted to an employee who has had a death within their immediate family.
- Marriage leave: 5 days for an employee’s marriage and 2 days for the marriage of a child.
Paid parental leave
The maternity leave is 63 days before and 63 days after birth. It represents 85% of the calculation base, and it is paid by the National Health Fund.
Fathers are entitled to 5 days of paid paternity leave, which can be used until the child reaches the age of 8 weeks. It can take up to 10 days just for the birth of the first child.
Parental leave entitlement last until the child is 2 years old. In the case of a disabled child, leave is until the child is 3 years of age. The payment is made directly by the state institution and represents 85% of the employee’s average revenues during his last 12 months of activity. During this period, the employment contract is suspended.
Expected benefits offered by Romanian companies
|Benefit||% of companies with this benefit|
|Cutting edge technology||26|
|Work from home||21|
How to employ a Romanian worker
Companies hiring employees will need to draw up contracts. Romanian law requires written contracts, and companies must write them in the Romanian language and register them with the Employees’ General Register.
According to the Labour Code, art. 34 (7) of law no. 53/2003, republished and updated, each employer from Romania has the obligation to instate a General Registry of Employees in electronic format, more widely known as Revisal.
Some platforms (Papaya Global among them) offer the Employer of Record (EoR) service helping companies hire countries where they do not have any office.
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