Romania has the 7th biggest cost of social contributions among EU member states, after the cap was removed from the basis for calculation from 1 February 2017, according to a study by Deloitte Romania.
Starting 2018, Romania could get back on the 11th position, if the cumulated contribution rate will be cut from 39.25 percent to 35 percent, as provided by the governing program.
However, the measure is accompanied by an increase of the gross salary by 22.75 percent to maintain the the net salary.
If this increase were not taken into account and a comparative analysis of social security costs was made starting from a net income rather than an artificially risen gross, Romania could even be among the countries with the highest social insurance costs.
Romania was in the second part of the ranking when the Comparative Survey on Social Insurance Benefits by the Deloitte Network was published in January 2017. Since the ceiling for the Contribution Calculation Base was eliminated from 1 February 2017, we updated the analysis and found that Romania had climbed 11 positions, “said Raluca Bontas, Deloitte Romania partner.
Romania has similar level to Germany but no matching benefits
The level of social contributions imposed by Romania is similar to that of Germany and Belgium, but the benefits offered to employees are not matching. Deloitte also noted that most states allow for alternative private health insurance, an option that is missing in Romania, although more and more employees are turning to this type of medical services, Monica Tariuc, Deloitte Romania manager said.
In 2018, Romania is set to eliminate 4 of the six categories of existing insurance contributions, transfer them fully to the employee, and reduce their cumulative rate from 39.25 percent to 35 percent according to the governmerning program. The income tax is set to decrease from 16 percent to 10 percent (0 percent below RON 2,000).
Labor costs will be 70 percent, compared to 75 percent today. For every RON 100 received by the employee, the state will pay RON 70 instead of 75.
“The concept – the full transfer of contributions to the employee – is welcome because the employer now has obligations but no benefits, and employees will become more aware of the cost of the work they are paid for. They are currently aware of the gross salary that includes their own contributions, not the total cost of their salary, which also means the employer’s contributions, “says Raluca Bontas.
On the other hand, she considers that it is legally questionable whether employers are required to increase their gross salary to maintain the current net salary. „Probably most employers will increase gross wages. However, there is the risk of disturbing the labor market because pay scales are set according to a coefficient based on the value of the minimum wage. There could be inequities in pay within a company because the salary gap will decrease,”said Raluca Bontaş.
“Romania would thus become the second South Eastern European state to place insurance contributions only on the employee, alongside the UK.