Romania is among the most cost-effective labour markets in Europe. A labour tax, which starts from 37,5% of total salary, is a significant part of an overall labour cost in Romania. If you are thinking of setting up a business start-up in Romania, Romanian Labour Code and costs of hiring an employee might play a role.
Employment-related provisions
What follows is basic information in the context of hiring employees in Romania. The Labour Code itself has as many as 281 articles of the law. However, the obligations related to the employee’s billing and the payment of insurance premiums are much simpler.
Types of employment contract in Romania
In terms of the types of arrangements with employees, only employment contracts are available in Romania. Civil law contracts, which are often used in other countries like Poland, do not exist in Romania. A reference to this is contained in Article 10 of the Romanian Labour Code1:
Contractul individual de muncă este contractul în temeiul căruia o persoană fizică, denumită salariat, se obligă să presteze munca pentru și sub autoritatea unui angajator, persoană fizică sau juridică, în schimbul unei remunerații denumite salariu.
On the one hand, this provision is a great convenience for employers, due to limited regulation. Nevertheless, employers will not escape a number of other basic requirements to be applied to the conclusion of employment contracts for employees.
Employment contracts in Romania can be for a fixed or an indefinite period. Probationary contracts are popular for new employees. The probationary period can last up to 180 days for managers and specialists, or 5-30 days in other cases (for unskilled workers). It is also possible to sign temporary employment contracts – mainly for seasonal workers – and replacement contracts.
Conditions of employment
You must undergo a medical examination before starting work. The extent of this examination depends on the specifics of the position. Minors as young as 16 years of age or even 15 years of age can work in Romania with their parents’ consent, as well as trainees, i.e. persons in the course of their studies. Of course, foreigners can also work in Romania, after registering with the local labour inspectorate.
Rules on termination of employment contracts
In principle, an employment contract can terminate from either of the following sides:
- an employer side – within the framework of layoffs (redundancy of less than 9 people) or group reorganizations (redundancy of more than 9 people),
- an employee side – if an employee grossly violates the work rules, is arrested for more than 30 days or his/her health condition results in permanent incapacity to work.
The Romanian Labour Code provides for situations in which a notice of termination cannot be handed to an employee. These include the following events:
- the worker is on sick leave and receiving benefits,
- the worker is pregnant, on maternity leave, breastfeeding or caring for a sick child under one year of age,
- an employee whose husband is doing military service.
Working hours, holidays
As for the working time in Romania, it is 8 hours per day and a maximum of 48 hours per week (by comparison, in Poland the weekly working time is 40 hours). Every employer keeps a register of the working time of its employees.
In Romania, as a rule, you work from Monday to Friday. Overtime can be taken back within 60 days or be paid at least ¾ of the basic rate. Among others, minors and pregnant women are not allowed to do overtime.
Employees, if the dismissal is not their fault, retain the right to receive a severance payment based on earnings.
The minimum length of annual leave in Romania is 20 days per year (Art. 145 u. 1 of the Romanian Labour Code.1):
Durata minimă a concediului de odihnă anual este de 20 de zile lucrătoare.
The annual leave is fully paid by an employer what adds up to the overall employment cost in Romania.
Selected employee benefits
In addition to salary and sickness/pension/pension insurance, employees in Romania can also count on additional benefits provided by the employer. These include, for example:
- free passes to the gym,
- access to private medical care,
- funding for courses and training,
- business telephone,
- preferential opportunities to purchase company securities (mainly for high-level managers),
- social benefits, including, inter alia, child benefit and care allowance.
Employer’s costs
Salaries in Romania in 2023 are as follows:
- The monthly minimum wage in Romania is RON 3000 gross (this is about USD 641) for a full-time job (168 working hours). The rate for 1 hour of work is RON 17.85,
- Skilled workers – including, among others, university graduates – can count on a higher salary of 120% of the minimum wage,
- workers in the construction industry can count on a higher minimum salary of RON 4 000 gross2,
According to historical data, the average salary in 2022 in Romania was RON 65003.
Both the employer and the employee bear the additional costs associated with employment (income tax, social security).
| Type of contribution | Employer’s costs | Employee costs |
Insurance paid by the employer
|
2,25% | – |
| 1. gross remuneration | ||
| Social security | – | 25% |
| Health insurance | – | 10% |
| Income after deduction of social contributions | ||
| Income tax | – | 10% |
| 3. net remuneration | ||
Labour taxation in Romania is 37.25% or 47.25%.
In connection with the employment of an employee, the costs borne by the employer in Romania (in addition to the net salary) are relatively small, although they also include social security contributions.
In Romania, as in Poland, the payer of social security contributions and income tax is the employer. Payment must be made within 15 days after the end of the working month in question. The same deadline applies to the payment of income tax for employees. It is worth remembering that employees of IT and R&D departments, for instance, are exempt from income tax, thus decreasing the real employment cost.
Employment cost in Romania – example
An example of the employer’s costs associated with hiring an employee in Romania is shown in the table below. The data refer to the gross minimum salary for 2023.
| Position | Value in RON |
| Gross remuneration | 3000 RON |
| Social security | 750 RON |
| Health insurance | 300 RON |
| Income tax | 135 RON |
| Net remuneration | 1815 RON |
| Insurance paid by the employer | 68 RON |
| Total cost to the employer | 3000 RON + 68 RON = 3068 RON |
The employment cost in Romania is not insignificant, but the upside is that the worker sees on the pay sub almost the entire cost that the employer incurs in terms of wages. The European Union has not agreed that the contribution to the labour fund in Romania should also be deducted and paid from the employee’s gross amount.
Costs of employment for non-EU worker
For EU workers, there are no additional employment costs. Though for non-EU workers, the procedure is more complicated and costly.
