Employment in Romania: An Introduction

Mihai-Alexandru Cristea 28/07/2022 | 15:21

Located in southeastern Europe, Romania is one of the largest countries in the region by size and population. The country’s fast-growing economy in the 21st century has attracted many foreign businesses in the past years. Since the end of the 20th century, many reforms have been introduced with the purpose to simplify regulation and attract investment.

 

Employer Costs

Citizens and companies must pay taxes on income at different tax rates. Employers are required to cover mandatory costs deducted from the employees’ payroll on their behalf. The income tax is flat, at a fixed 10% rate for individuals and 16% on corporate income.

All self-employed and employed citizens must cover social security contributions, which include pension and health insurance. The fiscal legislation requires both the employee and employer to cover these costs, as follows:

  • The employer must cover 2.25% unemployment insurance and 4% pension contribution, for a total of 6.25%
  • Employee payroll contributions, which must be deducted by the employer on behalf of the employee, are 25% for pension and 10% for health insurance
  • Employee income tax is an additional 10%

All of these contributions must be calculated, withheld, and paid to the State Budget by the employer, before the 25th of the following month.

Requirements in the Employee Agreement

According to Order 64/2003, employers who want to hire in Romania must provide an individual employment agreement that contains specific information:

  • The identity of the parties (the employer and the employee details)
  • The object of the contract and the term
  • Workplace (if fixed, or the possibility to work in different places, such as in case of remote workers)
  • The type of work to be done (the position) and the job description
  • How many hours to be worked per day and per week
  • The length of the leave the employee is entitled to
  • The monthly wage and other bonuses, if applicable
  • Rights and obligations regarding work safety and health
  • Probation period and the notice required in case of contract termination
  • A list of employee and employer rights and obligations

Remote Work in Romania

Law 81/2018 allows employees to work remotely. This initiative defines telework as work organized by the employee while using information and communication technology. The employee voluntarily and regularly fulfills their job duties away from the employer’s premises at least one day per month in order to qualify as a remote worker.

According to this, the teleworker, or the remote worker, has the same rights and obligations as regular employees. The employer must specify in the employment agreement, the employee handbook, or the collectible bargaining agreement, details such as the methods of control over the work to be done remotely.

The legislation permits the labor inspectorate to control the workplace (in workers’ residences) to verify if all labor legislation is applied correctly and the workplace meets all the safety and health requirements. Employers can also check the workplace, but only if they provide prior notification to the employee.

In addition to this, the employer needs to approve the workplace (i.e., within the employee’s residence). They also have the obligation to provide appropriate software, training, and data protection, and cover costs associated with work equipment and technical support. On the other hand, the employee is liable for any damages to the goods provided by the employer.

Tips to Hire Remotely in Romania

To hire in Romania, companies must either partner with a global company that will manage the entire employment process on their behalf or own a local entity. Businesses must understand and correctly apply all the relevant legislation regarding human resources, comply with all the rules and requirements of hiring remotely, and stay up to date with the labor laws. Some tips to successfully hire remotely in Romania include:

  1. For small firms, it may be best to partner with a global company that can manage the entire employment process and employee management afterward
  2. Be aware of all mandatory requirements, such as the pre-employment physical examinations required by the government for all employees
  3. Provide training and efficient onboarding to ensure new hires are knowledgeable and prepared for their jobs and the new corporate culture
  4. If necessary, opt for translation services as all documentation must be submitted in the Romanian language
  5. The country is more bureaucratic than others, so the hiring company should establish great strategies for meeting deadlines and handling paperwork
  6. Ensure GDPR (General Data Protection Regulation) compliance, such as how the company manages collected personal data
  7. Usually, contracts in Romania are open-ended (undetermined term), but fixed-term contracts of up to 12 months are also possible, with an extension of a maximum of 18 months in total

Summary

Overall, Romania is one of the most attractive places for employment thanks to its economic growth and multiple reforms. The relatively low labor costs and employer tax contributions make it a great place to expand your business.

However, understanding the hiring process and ensuring legislation compliance is key to protecting business reputation. Most likely, a foreign company may need to opt for translation services in this country to ensure the appropriate handling of formal documents and compliance with all the mandatory rules and regulations.

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