Looking to understand how payroll works in Romania, and what the main employment and salary taxation rules are?

If you want to establish a business presence in the EU (European Union), Romania is a good country to do it. Romania still uses its own currency — the Romanian Leu (RON) — and has not joined the Euro Zone yet. But it has employment and payroll processes similar to other EU countries. Nevertheless, certain details make setting up payroll in Romania and hiring employees quite complex.

This is mainly due to the demanding statutory requirements, and the frequent changes in employment and tax legislation. All these factors make HR and payroll administration a challenging and resource-consuming full-time job.

Romanian employment contract – types, minimum conditions and required documentation

Types

As per Romanian labor law, there are 2 types of employment contracts that an employer can use. This is regardless of whether the employee is a Romanian national or foreign-national. These are:

  • employment contract for indefinite period (has no expiring date in time)
  • employment contract for definite period (can be signed for a limited period)

As a basic rule, the employment contract has to be concluded for an indefinite period. The indefinite period of the contract is a measure of protection for the employee (to ensure employee’s social rights).

By way of exception, for limited in time (project-based) work, the employment contract may also be signed for limited duration. Nevertheless, the Romanian labor law expressly restricts the conclusion of a limited-duration employment contract to 12 months (for one contract). Also, the maximum number of limited-duration contracts is restricted to 3. Therefore, a Romanian company ca sign a limited-duration contract with an employee for a maximum total duration of 36 months.

After reaching the 36 month limit, the employment must be transformed into an indefinite period contract.

Also, depending on the daily working schedule, the employment contract can be signed with the employee for:

  • full-time employment (for 8 hours per day, and 40 hours per week)

or

Minimum conditions and required documentation

As per the rule established by the Romanian labor law, an employment contract must be signed by the involved parties (employer and employee) in written form. Otherwise, the contract will not be valid. Also, the language of the contract must be the Romanian language. Contract can also be translated into any other foreign language, but the Romanian form will always prevail.

An employee must be of minimum 15 years of age to be able to work. Otherwise, the employment of individuals who are less than 15 years old is completely forbidden. As per the rules of the Romanian labor law, written consent of the parents (or legal guardian) must be given for employing individuals of 15 years old. For those who are at least 16 years old, consent is not required.

By way of exception, there are certain types of jobs (that involve physical effort, potential risks, etc.) for which the minimum age is established at 18.

Basic elements that a Romanian employment contract must contain are:

  • employer and employee identification details (full name, address, tax ID, etc.)
  • duration of the employment contract
  • salary details
  • paid leave entitlement
  • trial period of the contract
  • notice period

Employee must always go through standard labor medical check before signing the employment contract. This is mandatory requirement by law. If this obligation is not fulfilled, the employment contract will become null.

Payroll reporting and taxation rules

As per the Romanian law, the minimum monthly gross salary that a full-time employee must be paid in 2022 is set at the level of RON 2,550. A company cannot pay a full-time employee with a lower monthly salary.

As a special rule, employees in agriculture, food production, and construction industries must be paid with a minimum monthly gross salary of RON 3,000. Also, for these specific industries, certain special salary tax exemptions apply.

The Romanian Labor Code entitles an employee to at least 20 days of paid leave per year (working days, not calendar days). National holidays (which are non-working days if they do not fall weekend days) are not included in the annual paid leave entitlement. Parties can agree on a higher number of days of annual paid leave – the actual number must be reflected in the employment contract.

Any employer must comply with certain payroll and tax reporting rules in Romania. On a monthly basis, the employer has the obligation to calculate, withhold and pay salary income tax and social contributions to the state budget from each employee’s salary.

All payroll and salary tax reporting and payment obligations must be fulfilled until the 25th of the following month for which the salary is paid.

The salary taxes are applicable as follows:

  • health fund contribution: 10% of the gross salary (due by employee)
  • pension fund contribution: 25% of the gross salary (due by employee)
  • income tax: 10% of the taxable base resulted after deduction of the above contributions
  • employer’s contribution (work insurance contribution): 2.25% of the gross salary
Employment of other EU or foreign (non-EU) citizens

Any citizens of EU member countries have the right to work on Romanian territory, with no obligation of obtaining a Romanian work permit for this purpose. If the employee’s period of stay in Romania exceeds 90 days, the individual has the obligation to register with the Romanian Immigration Office and obtain a certificate of registration (“Certificat de Înregistrare”).

For any citizens from countries out of the EU, the Romanian employers are required to obtain work permits. The work permit can be obtained based on an employment agreement concluded for indefinite period, as main rule applied by the Romanian authorities.

To get a work permit for a non-EU employee, the Romanian company must fulfill a series of procedures with the local Romanian Immigration Office.

After the conclusion of the employment agreement, all non-EU employees benefit of the same rights and obligations in relation with their Romanian employer.

Author

Tax & Legal consultant since 2005.

Write A Comment