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 2022 are as follows:

  • The monthly minimum wage in Romania is RON 2550 gross (this is about USD 515) for a full-time job (168 working hours). The rate for 1 hour of work is RON 15.24,
  • 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 3 000 gross2,

According to historical data, the average salary in 2021 in Romania was RON 56953.

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

  • labour fund = 2.25%
  • pension and disability fund = 4%
    (the latter optional)
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 2022.

Position Value in RON
Gross remuneration 2550 RON
Social security 637.5 RON
Health insurance 255 RON
Income tax 133 RON
Net remuneration 1524 RON
Insurance paid by the employer 57 RON
Total cost to the employer 2550 RON + 57 RON = 2607 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.

  1. Web: https://www.lexology.com/library/detail.aspx?g=8d2cabfe-579a-4c32-8604-ac54cedecc88 (dostęp: 03.01.2022).
  2. Web: https://take-profit.org/en/statistics/wages/romania/ (dostęp: 11.02.2022)
  3. Romanian Ministry of Finance: TITLUL V Contributii sociale obligatorii.pdf

 

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