An Employer of Record (EOR) in Romania is a company that takes on the responsibility of being the legal employer for a worker. This includes managing payroll, benefits, and other employment-related tasks on behalf of the worker's actual employer.
Discover the key considerations and essential details you should be aware of before opting for an Employer of Record (EOR) in Romania.
Employment Contracts | Employment Laws | Social Security | Personal Income Tax | Employee Benefits
| Overview | |
| Continent | Europe |
| Country | Romania |
| Capital | Bucharest |
| Time zone | UTC+02:00 (EET) |
| Total Time zones | 1 |
| Working hours per week | 40 |
| Working week | Monday–Friday |
| Typical hours worked | 8 |
| Personal Tax filing deadline | 25th May |
| Financial Year | 1st January to 31st December |
| Date format | dd-mm-yyyy |
| Currency | Romanian Leu (LEI) |
| VAT | the standard rate is 19% |
Employment Contracts in Romania
The Individual Employment Contract in Romania is a pivotal agreement between an employer and an employee, establishing the terms for work and compensation. In Romania, these contracts typically have an indefinite and unlimited duration, with exceptions allowed for fixed contracts under specific legal conditions. Legally, individuals as young as 15 can engage in employment with parental or legal representative consent. The requirement for a written agreement, signed by both parties before the employment start date, is essential. Employment contracts must be in the Romanian language, and it is the responsibility of the employer to furnish a written contract. Notably, failure to formalize the contract before commencing employment results in it being considered indefinite, with the start date of employment serving as the contractual initiation date.
All employment contracts in Romania must include the following information
- Parties' identities.
- Workplace details.
- Employer's headquarters or domicile.
- Job details according to occupational regulations.
- Job-specific risks.
- Contract start date.
- Duration for fixed-term contracts.
- Entitled leave duration.
- Notice conditions and duration.
- Wage details.
- Normal working hours.
- Reference to labor agreements.
- Probationary period length.
Any changes during the contract require an addendum within 15 days of notifying the employee unless allowed by law or labor agreements.
Information for Employees Working Abroad:
- (1) When an employee works abroad, the employer must provide the following information before departure:
- Duration of work abroad. (a)
- Currency and payment methods for wages. (b)
- Benefits related to work abroad. (c)
- Climatic conditions.
- Main labor laws in the foreign countries.
- Local customs are crucial for safety.
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Repatriation conditions if applicable.
- (1.1) The details in (a), (b), and (c) must also be in the employment contract.
- (2) Specific laws about working abroad may supplement the information in (1).
Effects of Failure to Inform:
If the employer fails to fulfill the information obligations outlined in Articles 17 and 18, the selected person or employee has the right to appeal within 30 days. They can seek legal redress for damages caused by the employer's failure to provide necessary information.
Special Clauses in the Employment Contract:
In addition to the essential clauses in Article 17, parties can negotiate and include other specific clauses in the individual employment contract. Specific clauses may include:
- Clause on vocational training.
- Non-compete clause.
- Mobility clause.
- Confidentiality clause.
Non-Compete Clause:
Parties may include a non-compete clause in the contract, restricting the employee from engaging in competing activities post-employment. The employer pays a monthly non-compete benefit. The clause is effective when specifics like prohibited activities, benefit amount, duration, restricted third parties, and geographical area are clearly defined in the contract. The non-compete benefit is not a regular wage, negotiated, and should be at least 50% of the average gross wage income of the employee over the preceding six months. The benefit is a deductible employer expense, and tax is collected from the employee.
Extension of Non-Compete Clause:
- The non-compete clause can last a maximum of 2 years after the contract ends.
- The rule in (1) doesn't apply if contract termination is automatic or initiated by the employer for reasons unrelated to the employee.
Limits of Non-Compete Clause:
The non-compete clause should not entirely prohibit the employee's profession or specialization. The competent court can, upon employee or inspectorate referral, reduce the non-compete clause effects.
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Effects of Non-Compete Clause Breach:
For deliberate breaches of the non-compete clause, the employee may need to return benefits and potentially pay damages based on harm caused to the employer.
Mobility Clause:
The mobility clause allows the employee to work in multiple locations, and, in return, the employee receives additional benefits, either in money or kind.
Confidentiality Clause:
The confidentiality clause requires parties to refrain from disclosing data learned during and after the employment. Breaching this clause may result in damages payable by the responsible party.
General Employee Register
Every employer is required to maintain a general employee register, officially registered with the relevant public authority. This register includes employee identification details, employment dates, job roles, contract types, and contract cessation dates. It must be kept at the employer's location and be accessible to labor inspectors or other authorities as per the law. Upon request, the employer should provide employees with a document certifying their activities and length of service. In case of the employer ceasing operations, the register is submitted to the competent public authority. The specific methodology for maintaining the register is determined by Government Decision.
Changes to Employment Contracts:
The amendment of an individual employment contract requires mutual agreement, except in specific cases outlined in the Code. Changes may involve contract duration, workplace, job type, working conditions, wage, and working hours/rest periods. The employer can unilaterally modify the workplace by delegating or posting the employee to a different location. Delegation involves temporary tasks outside the usual workplace, lasting up to 60 days (extendable with agreement). Posting entails a temporary workplace change to another employer, up to one year (extendable for specific reasons). The posted employee retains favorable rights and can return if obligations are unfulfilled. Unilateral changes by the employer, especially due to acts of God or safety concerns, are allowed under specified conditions in the Code.
Individual Employment Contract Suspension
The individual employment contract can be suspended in various ways: de jure, by agreement, or unilaterally. During suspension, work provision and wage payment are halted. Some rights and obligations may persist, as specified in laws, collective agreements, employment contracts, or rules of procedures. De jure suspension includes instances like maternity leave, disability leave, and acts of God. Employee-initiated suspension can occur for parental leave, care of sick children, paternity leave, vocational training, elective office participation, or strikes. Employer-initiated suspension may occur during disciplinary proceedings, as a sanction, during criminal proceedings against the employee, temporary business interruptions, or posting. In case of innocence, the employee is entitled to indemnification for lost wages and other rights during the suspension.
Employment Laws in Romania
Establishing a business in Romania holds immense potential, but navigating the intricacies of its employment landscape can be daunting. Understanding the key legal frameworks governing employee rights and responsibilities is crucial for ensuring a smooth and compliant operation. This section serves as your comprehensive guide to essential employment laws in Romania, covering areas such as:
- Minimum Wages in Romania: The minimum wage in Romania is RON 3300 per month
- Payroll Cycle in Romania: In Romania, payroll is processed on a monthly basis, with remuneration for work conducted from the initial to the final day of the month generally disbursed on the last working day of that month.
- Probation Period and Notice Period: In Romania, the probationary period for regular roles spans 90 calendar days, while for managerial positions, it extends to 120 calendar days. The notification period for both employers and employees is 20 days for standard positions and 45 days for management roles.
- Working Hours: Romanian labor regulations stipulate a standard 40-hour work week, distributed across five working days in 8-hour shifts. Permissible overtime is capped at 8 hours per week, ensuring that the total weekly working hours do not exceed 48.
- Overtime Pay: As outlined in Article 122 of the Labour Code, any hours worked beyond the standard 40 hours per week, categorized as 'overtime,' should be offset by an equivalent duration of paid free hours within a 90-day period. Should this adjustment be impractical, the employee has the right to receive an overtime allowance, constituting a minimum of 75% of the hourly base salary for each overtime hour, as detailed in Article 123 of the Labour Code.
- 13th Month Salary: Employers in Romania are not obligated by legal requirements to provide employees with a 13th-month salary or a comparable annual bonus.
- Termination and Severance Pay: There is no legal requirement for employers in Romania to pay employees the severance pay.
Personal Income Tax in Romania
In Romania, individuals pay a flat personal income tax (PIT) rate of 10% on their gross income. This applies to all types of income, including:
- Salaries
- Pensions
- Investment income
- Rental income
- Royalties
- Business income
There are no deductions or credits available for individuals who are resident in Romania for tax purposes. This means that you will pay income tax on your entire gross income, regardless of any expenses you incur.
However, there are some exceptions to the flat 10% rate:
- Non-residents: Individuals who are not resident in Romania for tax purposes are subject to a 16% flat income tax rate on their income from Romanian sources.
- Dividends: Dividends received from Romanian companies are subject to a 5% withholding tax.
- Capital gains: Capital gains on the sale of assets are subject to a 10% flat tax rate.
Here are some additional things to keep in mind about personal income tax in Romania:
- The tax year in Romania runs from January 1 to December 31.
- Individuals are required to file their tax returns by March 31 of the following year.
- Taxpayers can choose to pay their taxes in monthly installments or in a lump sum.
- There are penalties for late filing or non-payment of taxes.
Employee Benefits in Romania
Navigating the landscape of employee benefits in Romania involves understanding a comprehensive framework that encompasses various aspects of social security, healthcare, leave policies, and more. This section provides insights into the mandatory benefits offered to employees, shedding light on the intricacies of the Romanian employment landscape. From pensions to healthcare and beyond, we explore the diverse range of benefits that shape the employment experience for individuals working in Romania.
Pension
Romania operates three distinct pension schemes:
- Pillar 1: Mandatory contributions to the Public Pensions System (21.25% for employees, as of January 1, 2018). Employer's contribution is 0% under normal conditions, but it increases to 4% or 8% for difficult working conditions.
- Pillar 2: Mandatory contributions to Private Pension Funds (3.75% for employees, effective January 1, 2018).
- Pillar 3: Contributions to Voluntary Private Pension Funds, participation is optional (details under supplementary employee benefits below).
Contributions to Pillars 1 and 2 are remitted by employers to the state and are not typically a direct contribution made by Romanian citizens. Instead, these contributions are deducted by employers from employees' salaries and paid on a monthly basis. Income tax is calculated after deducting social contributions from the gross salary.
Pension benefits can commence from the age of 60. Individuals who have fulfilled a minimum contribution period of at least 15 years are eligible for pension benefits, with a complete period requirement of 35 years for both men and women.
The standard retirement age is 65 for men and 62 for women.
Under Pillar 1 pensions, there is a current value assigned to each pension point, which stands at 1.785 RON. The benefit calculation involves multiplying the average lifetime-accumulated number of pension points (average rating) by this designated value.
The Pillar 2 private fund option is owned by the employee, and the employer makes the payment. Participation in Pillar 2 pensions is mandatory for all employees below the age of 35 who are either insured for the first time or contributing to the public fund. For employees up to the age of 45, contributing to the public retirement fund is optional.
Death and long-term disability benefits are integral components of social security for all contributing employees. In the event of death, the benefit is disbursed to the surviving spouse, tutor, or child, and this contribution is part of the retirement contribution.
Public System Healthcare
In accordance with Law 95/2006, all residents of Romania, including foreign citizens and stateless individuals residing in Romania, are obliged to participate in and contribute to the public health system, with certain exceptions. Insured individuals are entitled to a range of medical services, encompassing ambulatory care, hospitalization, intensive care, dental procedures, urgent medical interventions, prescription medications, preventive measures, rehabilitation, prenatal and postnatal support, treatment in spa resorts, plastic and reparatory surgery, as well as physiotherapy services. Spouses, dependent children, and parents without personal income who are under the care of the insured person can be included as dependents. The contribution to the public health system amounts to 10% of the employee's gross salary.
Time Off Benefits
Annual Leave
The legal minimum annual leave is 20 days per year, prorated based on the employee's length of service.
Public Holidays
There are 15 public holidays.
Sick Leave/Short-Term Disability Benefit
Sick leave is remunerated if the employee meets a minimum contribution period to the Health House in the preceding six months, supported by a medical certificate. The employer covers the initial 5 calendar days. From the 6th day onwards, the National Health Fund provides medical allowances. In practice, the employer advances the National Health Fund's portion and then seeks reimbursement. The payment, in case of sick leave, ranges from 75% to 100% of the calculation base (average monthly gross wages in the six months preceding the month of medical leave). This benefit is applicable for up to 180 days; for extended disabilities, a long-term disability pension
Maternity Leave
Maternity leave spans 126 calendar days (typically 63 days before and 63 days after childbirth), amounting to 85% of the calculation base (average monthly gross wages in the six months prior to maternity leave). A medical certificate from a physician determines eligibility. Insured individuals are also entitled to medical leave on the following terms:
- 45 days to care for sick children under the age of 7 or disabled children up to 18.
- Up to 90 days to care for children with contagious diseases or paralysis.
The National Health Fund provides the maternity allowance. In practice, the employer covers maternity leave expenses and seeks reimbursement from the Health House.
Paternity Leave
Fathers have a right to 10 days of paid paternity leave, usable until the child turns 8 weeks old. Participation in childcare courses allows for an extension of 5 days for each child.
Parental Leave
Parental leave is available until the child is 2 years old, or 3 years in the case of a disabled child. The state institution directly covers 85% of the employee's average earnings from the last 12 months of activity. During this period, the employment contract is temporarily suspended. The company can hire a temporary replacement for the same position during parental leave but is prohibited from terminating the parent employee.
Conclusion
Employer of Record (EOR) services in Romania provide an integrated solution to the intricate legal and administrative complexities involved in hiring and managing a workforce. Collaborating with an EOR allows businesses to efficiently navigate Romania's labor laws and regulatory landscape, ensuring compliance across employment contracts, tax obligations, and other administrative processes. This comprehensive service not only simplifies operations but also enhances the experience for both local and international workers. Whether businesses are expanding into Romania or engaging foreign talent, EOR services offer a reliable means to tackle the intricacies of the Romanian employment landscape, alleviating administrative challenges and ensuring adherence to legal requirements.
Balkan Peninsula: EOR Croatia | EOR Slovenia | EOR Bulgaria | EOR Romania |
Social Security in Romania
Social security contributions in Romania are mandatory for both employees and employers. They fund the public pension system, health insurance, unemployment benefits, and other social programs.
Social Security Contributions aka Contributia de asigurari sociale (CAS)
Employee Contributions
Employer Contributions
The pension insurance contribution is applicable under the following conditions: a) for earned income ranging between 12 and 24 times the gross national minimum wage, the minimum basis for calculating the pension contribution is set at 12 times the gross national minimum wage, and b) for earned income exceeding 24 times the gross national minimum wage, the minimum basis for calculating the pension contribution is established at 24 times the gross national minimum wage (currently set at RON 3,300 as of October 2023).