Interested in learning about the functioning of payroll in Romania and the primary regulations for employment and salary taxation?
For those seeking to establish a business presence in the EU (European Union), Romania is a favorable country to consider. Romania still operates using its own currency, the Romanian Leu (RON), and has not yet adopted the Euro. However, it follows similar employment and payroll procedures as other EU nations. There are some specific factors that make the process of setting up payroll and hiring employees in Romania more intricate.
The primary reason for this is the rigorous legal obligations and the frequent modifications in labor and tax laws. These elements make managing HR and payroll a difficult and time-consuming task that requires significant resources.
Employment Contracts in Romania: Types, Minimum Requirements, and Necessary Documentation
Types of Employment Contracts
According to the labor laws in Romania, an employer has the option to use two different types of employment contracts, regardless of the nationality of the employee (whether they are Romanian or foreign). These options are:
The employment agreement without a specified end date (perpetual) and the employment agreement with a specified end date (can be signed for a specific length of time) are both types of employment contracts.
As a general guideline, the employment agreement should be arranged for an unspecified duration. This period serves as a safeguard for the employee in order to guarantee their social rights.
In certain cases, such as for short-term projects, an employment contract may be signed for a limited period of time. However, it is important to note that Romanian labor laws explicitly limit the duration of such contracts to 12 months for a single contract. A Romanian company can sign up to 3 limited-duration contracts with an employee, totaling 36 months. After 36 months, the contract must become a permanent one.
Moreover, the employment agreement can be according daily work schedule, for:
- A job that requires working for 8 hours every day, and a total of 40 hours per week.
or
- Part-time job (less than 40 hours per week)
Necessary Conditions and Required Paperwork
In Romania, employers and employees must sign a written employment contract in Romanian. Translations are allowed, but the Romanian version is always the official one.
According to Romanian labor law ,individuals under 15 cannot work. However, those who have 15 can work if they have written consent from their parents or legal guardians. For those who are 16 years old and above, parental consent is not necessary.
Some jobs, which may involve physical exertion or potential hazards, have a minimum age requirement of 18, as an exception.
The essential components that should be included in a Romanian employment agreement are:
- Personal information of the employer and employee including their full name, address, and tax identification number.
- Length of the employment agreement.
- Specifics of the salary such as the monthly gross amount.
- Number of days allotted for paid time off per year.
- Probationary period stated in the contract.
- Timeframe for giving notice of termination or resignation.
Before signing the employment contract, it is compulsory for the employee to undergo a standard medical check as per legal requirements. Failure to fulfill this obligation will render the employment contract void.
Rules for Reporting Payroll and Taxation
According to Romanian laws, in 2024, employers must pay full-time employees a minimum gross salary of RON 3300 per month, which will increase to RON 3700 starting on July 1, 2024. It is mandatory for companies to pay their full-time employees at least this amount each month.
In the construction sector, there is a requirement for employees to receive a gross salary of at least RON 4,000 per month. Additionally, certain tax exemptions for salaries are applicable to these particular industries.
From January 1st 2023, employers in Romania have the option to offer their minimum wage-earning employees a 200 lei increase in monthly salary, without any added expenses for income tax and social contributions.
Employers have the choice to grant this amount or not.
Yearly vacation time
Romanian labor laws state that employees get at least 20 working days of paid leave each year, not calendar days. The annual paid leave does not include national holidays, unless they fall on weekends. However, the employer and employee can mutually agree to a higher number of days for annual paid leave, which must be stated in the employment contract.
In Romania, employers must follow specific rules for payroll and tax reporting. It is the responsibility of the employer to determine, deduct, and remit income tax and social contributions from their employees’ salaries on a monthly basis to the state budget. Employers need to report and pay salary taxes by the 25th.
Here are the taxes that the company must pay from salary earnings:
The employee is responsible for paying 10% of their gross salary towards health insurance and 25% towards the pension fund. Additionally, they must pay 10% of their taxable base as income tax after deducting the above contributions. The employer also contributes 2.25% of your gross salary towards work insurance.
Hiring of non-EU or international individuals
EU citizens can work in Romania without a work permit. If staying over 90 days, they must register with the Romanian Immigration Office for a “Certificat de Înregistrare.”
Romanian employers need work permits for non-EU hires, except in rare cases. These permits require an indefinite employment agreement.
Romanian companies must follow local procedures to get work permits for non-EU employees. Once hired, non-EU employees have the same rights and responsibilities as Romanian workers.
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Taxation of corporations in Romania
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