Romania is a sought-after destination for many employers internationally due to affordable tax rates coupled with the availability of an experienced talent pool. Romania, located at the crossroads of southeastern and central Europe, is also marketed as a gateway between Europe and the Middle East. Such geographical advantages are a boon for many businesses, allowing them to import and export goods at lower costs while accessing a global pool of raw materials.
The corporate tax in Romania is considered the lowest amongst its European neighbors, which is further coupled with affordable employment options for international employers. Employers’ additional tax liabilities for payroll are very low because only employees pay for pension and insurance benefits.
As a long-standing member of the European Union (EU) and NATO, employers can leverage benefits from Romania, such as lower trading costs, access to huge markets, and more. Romania is one of the few countries worldwide that provides unfathomable advantages to resident and non-resident companies.
Considering the influx of businesses, the government introduced the Romanian labor law to ensure ease of business, thus welcoming more businesses. The labor act regulations in Romania are straightforward to follow, yet as every employment aspect is monitored, navigating the provisions can be time-consuming. This article highlights essential labor regulations in Romania every employer must know before starting a business in Romania.
Who is Covered by the Employment Act?
SometimesIn some instances, the Romanian labor law applies to nationals working in a resident company and international companies. The labor regulations in Romania also protect foreign individuals when certain conditions are met. The mentioned labor law for Romanian nationals applies during the following instances.
- A Romanian citizen working abroad under the employment contract of a Romanian employer. It is applicable only if the local labor laws in the country where the employee is posted are less favorable than the labor code in Romania.
- Individuals working in a particular country where the labor laws cannot be determined, and the employee was engaged in business originating from Romania
Non-residents can also be protected by Romanian labor law when the following situations are witnessed.
- The employer originates from Romania, and the work is done in Romania.
- The employer and employee mutually agreed to abide by Romanian labor law without a suitable alternative.
The labor regulations in Romania enforce the requirement of a written employment contract that highlights all the deliverables and clauses related to a job. There is no specific predetermined contract type per the labor laws. However, every employment contract should stipulate the following information.
- Legal name and address of the concerned parties
- Location and details of working space, which can either be the office or a specific area where an employee is to be posted
- A jobJob description that matches the classification of occupations per the labor act rules in Romania
- Assessment criteria and KPIs
- Joining date
- Employment duration, which can be indefinite or definite
- Remuneration, overtime pay, or any additional benefits
- Payment frequency
- Work hours and holiday entitlements
- Risks involved in the listed job
- Notice period and the concerned clauses
- Tenure for trial or probationary period, when applicable
Key Provisions of the Act
Employment in Romania is moderated by laws enforced by the EU with the Romanian labor law. This law supervises and moderates every aspect of an employment contract. Employers looking to leverage great tax rates and hire from a pool of talented employees must be aware of the necessary provisions underlined by the labor act rules in Romania.
- The Romanian labor law enforces a 40-hour work week, with five working days in 8-hour shifts.
- The maximum overtime allowed per week is an additional 8 hours.
- The total weekly work hour should remain within 48 hours.
- Employees under 18 can work 30 hours per week, with no overtime.
- Employers must also ensure that their employees get a minimum of 12-hour rest between two consecutive work shifts.
- Under the rules, employees are entitled to an unpaid rest break during work hours.
- Employees working shifts longer than 6 hours are entitled to a 30-minute rest break.
- Employees under 18 years working in shifts over four and a half hours must be provided a 30-minute rest break.
- Employees can take other breaks during shifts on mutual agreement with their employer.
- According to labor regulations in Romania, employees are entitled to 20 days of paid leave every year.
- This entitlement can be ignored if the employer provides a more favorable holiday scheme.
- Employees are entitled to two consecutive days off every week, usually Saturdays and Sundays.
- There are 15 public holidays in Romania. The list has been provided below.
- New Year’s Day, 1st January
- New Year Holiday, 2nd January
- Union of the Romanian Principalities, 24th June
- Orthodox Good Friday, 14th April
- Orthodox Easter Sunday, 16th April
- Orthodox Easter Monday, 17th April
- Labor Day, 1st May
- Children’s Day, 1st June
- Orthodox Whit Sunday, 4th June
- Orthodox Whit Monday, 5th June
- Assumption Day, 15th August
- Feast of Saint Andrew, 30th November
- Great Union Day, 1st December
- Christmas Day, 25th December
- 2nd day of Christmas, 26th December
- The total maternity leave per the labor code is 126 days.
- Usually, maternity leave starts 63 days before the expected delivery date and ends 63 days after childbirth.
- Over the last six months, Romanian paid maternity leave is remunerated at 85% of an employee’s average salary. The National Health Fund is responsible for the payment.
- Pregnant employees must provide a medical certificate to their employers to start maternity leave.
- A surrogacy leave falls outside the jurisdiction of the labor regulations in Romania.
- Such leaves can be taken on a mutual agreement with the employer.
- Per the labor act, adoption leave is similar to the Romanian paid maternity leave.
- The newborn’s father is allowed to take paternity leave of five days.
- This leave can be taken during the initial eight weeks after childbirth.
- Paternity leave can extend up to 15 working days, based on specific requirements.
- Employees with a disabled child under 18 must receive 45 days of paid leave annually.
- Employees with chronically ill children below seven years are also entitled to the mentioned leave. However, the 45-day leave is only available to employees who have worked for a company for at least one year and have completed one month of service in a calendar year.
- The Social Security Fund finances this leave at 85% of the employee’s average remuneration over the last six months.
- Employees can get two days of unpaid leave if their close family member dies.
- Employees are allowed to have a 5-day paid leave for their marriage.
- The marriage leave is two days after their child’s marriage.
- Employees can take sick leave of up to 180 days.
- Sick leave is payable when a working citizen actively contributes to the Health House.
- The payable sick leave is calculated between 75% to 100% of an employee’s average earnings over the last six months.
- Employers must pay for the initial five days of sick leave. The National Health Fund pays from the 6th day of sick leave up to 180 days.
- Employees must provide a medical certificate to obtain the mentioned leave.
The minimum wage is updated yearly based on several external and internal market factors. As of 2023, the minimum wage is 1,863 RON, or approximately USD 403.83, for every employer protected by the labor regulations in Romania.
The pension fund is subdivided into three categories: mandatory and non-mandatory private pension funds and state-run or public pension funds.
- Pillar 1 is the name of the mandatory public pensions fund.
- The employee contribution as of 1st January 2018 is 21.25%
- Employers must pay somewhere between 4% to 8% of an employee’s salary for jobs that are deemed dangerous.
- Employments with normal working conditions are exempted from contributions.
- Pillar 2 is a mandatory private pension fund.
- Employees must pay 3.75% of their monthly remuneration to this fund.
- Employees under age 35 must join this scheme. However, employees older than the mentioned age can negate the requirement of joining the pillar 2 pension scheme.
- Pillar 3 pension concerns the contribution to Voluntary Private Pension Funds (contribution is optional)
- Contributions to the pension fund can be made by employers and participants directly.
Payroll tax and employer registration
The Romanian labor law enforces a refined taxation system for easier compliance for resident and non-resident companies. The system follows the withholding tax regime; hence employers must calculate and deduct taxes from their employee’s remuneration before issuing the salary.
- The standard corporate tax rate (CIT) for all companies is 16%. The CIT applies to resident and international companies operating through a permanent establishment (PE).
Social security contributions
- Employees must pay 25% of their monthly salary for mandatory and non-mandatory pension schemes.
- A 10% remuneration is deducted from the employee’s income for the health insurance contribution.
- Employers must pay 2.25% of assimilated income as work insurance contributions.
- Employees must pay 10% in taxes from their monthly remuneration.
- Income from dividends and property transfer are taxed separately.
- Employers should withhold the taxes and pay them to the concerned authorities.
There are no explicit mentions of the requirement of payslip provisions by the labor regulations in Romania. However, with the implementation of withholding taxes, it is highly recommended to issue a payslip for every employer. Some primary components of a payslip are listed below.
- Name and designation of the employee
- Salary date
- Basic salary
- Overtime pay, when applicable
- Other monetary benefits, if outlined by the contract
- Deductions per the applicable taxes
While issuing a payslip, employers should keep a database of all the tax invoices along with the payslip hardcopy to maintain proper documentation and use them in the future, if needed.
The labor act rules in Romania allow an employer to hire candidates on a trial period. The probationary period depends on the employment type, but generally, the tenure is 90 days. A trial period can further increase to 120 days for employees in leadership roles.
The Romanian labor law underlines protocols for dismissal to protect employers and employees.
- Employees can resign from their designation anytime by issuing a letter to their employer.
- Employers have the right to terminate an employee for a just cause. Termination for disciplinary reasons, poor performance, and economic reasons is allowed.
- An investigation is required for termination due to disciplinary reasons. Furthermore, the investigation should be carried out within six months from the estimated misconduct date.
- Employees must serve a notice period regardless of employment type.
- During resignation, employees must serve a maximum notice period of 20 days. However, employees’ maximum tenure can be increased up to 45 days for leadership roles.
- For termination by the company, employees are expected to serve a minimum tenure of 20 days as a notice period.
According to Romanian labor law, employers are exempted from paying any form of severance to their employees after termination. However, employers must pay a severance fee to their employees if it is outlined in the employment contract. Along with severance pay, employees must serve a minimum notice period.
Data protection and employee privacy
The data protection rules enforced by the labor act rules in Romania limit the amount of personal data employers can process. However, with limitations, employers can access all the data relevant to the job listing and rectify, block, or update the information accordingly.
Employers can exercise their rights on data processing, but they must first acquire the employee’s consent. Additionally, before taking action, employers must notify the employee regarding the same. Employing companies are also liable for ensuring the safety of an employee’s data.
EU directive on transparent and predictable working conditions
Romania officially entered the European Union (EU) ranks in January 2007. Therefore, resident and non-resident companies must comply with the EU Directive 2019/1152 on Transparent Working Conditions. Some primary rules, as enforced by the mentioned directive, have been listed below.
- Training: Employees are entitled to free training from the employing company if required. Under no circumstances should an employer charge employees for training.
- Transparency: Employment contracts should enlist all the crucial aspects and deliverables of a job posting. Furthermore, employers are prohibited from forcing additional tasks not listed in the employment contract.
- Additional jobs: Employees can work for multiple employers at a given moment. Certain restrictions that prohibit an employee from the mentioned entitlement must be supported with a fair cause.
- Deadlines: Employers can use deadlines for certain tasks, but they must ensure that the deadlines are reasonable per the work.
- Anti-discrimination: Employing companies must place strict protocols in the workplace to nullify any form of workplace abuse or discrimination.
Failure to comply with Romanian labor law might trigger punishments that might vary per the severity of non-compliance. There are some predetermined fines for certain acts, but punishments for different types of non-compliance may vary. These punishments are decided primarily by the concerned labor authorities.
- Registration: Companies must extend or renew the validity of their registration certificate. In certain scenarios, where a company continues to operate after the certificate has expired can trigger a fine of up to RON 50.
- Work Visa: Employers can hire non-residents in their company. However, employing a non-resident with an expired work visa is punishable. A company must pay RON 2,000 in fines for every such individual. However, the mentioned fine is limited to a maximum of RON 100,000.
- Discrimination: Employees can report workplace discrimination to the concerned authorities with proof. When such allegations are proven, employers can be fined between RON 1,000 to RON 30,000 under Romanian labor law. When a group is concerned instead of an individual, the fine can vary between RON 2,000 to RON 100,000. As the EU also underlines the requirement of providing an anti-discriminatory workplace, additional punishments can be imposed.
Compliance Strategies for Employers
The Romanian labor law is transparent and easy to comply with protocols for resident and non-resident companies. However, as every aspect of employment is moderated, complying with the labor regulations in Romania might get cumbersome. There are several strategies that employers have used to comply with the mentioned laws. Some common and efficient strategies have been listed below.
- An employer can place an in-house HR team to help the company comply with labor regulations in Romania.
- The said team moderates crucial aspects of employment such as remunerations, holidays, and working hours in compliance with Romanian labor law.
- Companies that can spare a higher budget employ a dedicated HR team to fulfill the mentioned requirement.
- Several dedicated HR agencies in Romania can help companies comply with labor laws.
- The deliverables of a third-party HR team are similar to that of an in-house HR team.
- Due to partnerships with several other companies, the cost of outsourcing from a dedicated HR team is comparatively less than maintaining an in-house HR.
Employer of Records
- Employer of records, famously dubbed as EOR solutions, is a neo-compliance strategy for international companies.
- EOR solutions allow an employer to negate the requirement of an HR, and it also helps an employer to comply with the labor act rules in Romania.
- EOR solutions are considered one of the most affordable solutions for businesses of every size.
How Can Multiplier Help?
Multiplier is an EOR solution that allows an employer to comply with the labor regulations in Romania for minimal charges. Businesses working with Multiplier can also test 150+ markets for hiring employees while staying compliant with local labor laws. Furthermore, features like one-click payroll and payments in multiple currencies are some of the many features which make Multiplier a suitable choice for growth-focused employers.