Employer of Record Romania
Infotree Global Solutions assists organizations planning for expansion in Romania by providing employer of record services in Romania. If you wish to recruit professionals in Romania, you can easily accomplish it with us without even having an establishment in Romania. Our team of dedicated professionals would take up all the recruitment and payroll management responsibilities for your organization. From searching for ideal employees to hiring and onboarding them, we take every step on your behalf with total compliance.
Our Romania employer of record would give you insights into the compensation, benefits, and facilities required for your employees in Romania. Here are some of the important factors you need to know before you start hiring in Romania:
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Hiring in Romania
If you are looking forward to expanding your business operations in the Romanian market, it is equally necessary to understand all aspects of the process. To conduct the hiring process per Romanian law, the employer must have a national legal entity and establish an employment contract between their employees. According to the labor code, there are also certain restrictions on the application and interview questions. In addition, the law provides that only the employee must have the information concerning essential clauses of their employment agreement concerning the hiring process.
In addition to this, private companies are not allowed to perform background checks for candidates other than the essential information and recommendations from past employers. However, the employers can ask the candidate to submit any criminal record they might have in the name. Usually, the process is easy, but hiring and recruitment can get a bit difficult for a new business. Being your Employer of Record in Romania, we can assist you with local legal compliances and contracts so that you do not have to worry about the intricacies involved in the process.
Romania is one of the countries with strict rules and regulations concerning employment compliance. It includes maximum and minimum working hours, rules concerning compensation (minimum wages), probationary period, and termination. Employers need to abide by rules and regulations related to employment statutory benefits. If you plan to establish a subsidiary in Romania, there are a few factors to consider. Most important are the Business factors that make you aware of the employment contracts that should meet the local standards besides having professionally drafted. Some information that must be maintained in the contract is provided below:
Working Hours – The standard workweek in Romania is 40 hours over five days, but the limit is 8 hours for one day. The maximum legal working time limit is 48 hours per week, including overtime. However, the maximum working legal time, including overtime, can also be subjected to an extension of over 48 hours per week as an exception.
The case must fulfill the condition that the average working hours calculated for the four months must not exceed 48 hours per week. The concerned parties, including social partners, representatives of employees, and employers, can also negotiate for more than four months. Still, the same cannot exceed the limit of 12 months for certain activities.
Overtime – The country has stringent working hours regulations, often considered stricter than the European Union. The employers are responsible for compensating the employees in case of overtime within the next 60 days. If the compensation is not provided within this time frame, the employer is responsible for adding the same amount as a bonus to the existing salary. This amount must not be less than 75% of the base salary.
Employees less than 18 years, those already working as part-time employees, do not qualify for overtime. Moreover, the total working hours for one month belonging to an employee, including overtime, is included in the pay slip in written form.
Compensation – Some of the essential details concerning compensation as a part of employment compliance in Romania consist of the following –
• Minimum wage – In Romania, employers cannot pay lower than the minimum wage, which is the lowest remuneration requirement. Usually, the regular work schedule is less than 8 hours in a day. In that case, the minimum hourly basic pay for the employee is calculated by dividing the national minimum basic pay by the average monthly hours as per the employment agreement.
The government decides limits for minimum wages, but if the employment contract does not determine the same. Nevertheless, the employer cannot pay a worker below the national minimum gross hourly basic pay limit. Therefore, Romania has strict rules and regulations concerning minimum wage and regular pay criteria for employers to comply with.
• Regular Wage – Similar to minimum wage, the labor code also governs the rules and regulations concerning regular pay. According to the provisions, employers can pay wages in kind except for the case of minimum wage. The minimum wage period in Romania consists of one month. After that, the employers must pay the wages to their workers on a pre-specified date as agreed in the employment contract/ rules of procedure. The employers must pay the wages in monetary compensation, or they can also transfer it directly into the workers’ bank accounts.
According to the labor code of Romania, failing to pay the regular pay and minimum wages is a criminal offense and can lead to an increase in mint of up to six months or require the employer to pay the fine. Therefore, there are strict rules and regulations concerning regular pay and minimum wages in Romania.
Bonus – There are no strict rules concerning bonuses for employees in Romania. However, most companies offer performance-based bonuses, and it is a frequent/ commonly accepted practice. Moreover, the 13th-month bonus comes under gratuity, but it is not necessarily required and recognized by the law.
Probationary Period – The provisions discussed in the labor code govern rules and regulations concerning the probationary period in Romania. The employees may be subject to a probationary period while entering into an employment contract with their employers. In most cases, the probationary period is 90 days, and up to 120 days for higher positions.
The duration of the termination notice lies between 5 and 45 working days in the cases of fixed-term employment contracts. Still, it can also depend on the length of the agreed employment period.
Termination and Severance – There are no standard mandatory regulations concerning termination in Romania. However, an employer can terminate an employee only for a valid reason with legal acceptance. These legally valid reasons may consist of a matter not directly or indirectly related to the employees and their performance/ competence for the job performance.
• The Employer’s POV – For termination, the employer must provide at least a strictly enforced 20-day notice and does not need to initiate a payment as a substitute for the required notice period. The employer can terminate an employee without prior notice if their actions lead to serious misconduct. However, it requires them to follow the prescribed process for disciplinary action.
• The Employee’s POV – An employee wishing to terminate the employment contract must also discuss the matter with their employer before approximately 15 to 20 days. However, there is no mandatory requirement for them to provide a legally valid reason for the same.
There are no legal mandates for severance pay in Romania. However, the employment contract between an employer and their employees requires through special collective agreement, specifically in the case of collective complications. Therefore, there is no standard requirement or amount, but it usually consists of one month’s salary, an appropriate and widely acceptable criterion.
Romania and its local rules and regulations present a favorable environment for employers and employees regarding employee entitlements. These typically cover relaxation and provisions concerning maternity leave, paternity leave, sick leave, vacation, health benefits, pension, and other entitlements.
Maternity leave – Pregnant employees working in Romania can claim maternity allowance for 126 calendar days. The entire duration of maternity leave is divided into two main periods: 63 days before birth, called antenatal leave. The 63 days after the child is born is called postnatal leave. However, the mother can choose not to take the leave for the remaining 84 days if she doesn’t feel the need for it. The maternity leave also allows for a Maternity allowance equivalent to approximately 85% of the mother’s average monthly income during the last six months before maternity leave. Moreover, the amount for Maternity allowance is not subject to income tax.
Vacations – Employees working in Romania are entitled to up to 20 days of paid vacation leave every year. However, the rules are different for employees belonging to comparatively dangerous work or belonging to a disabled or blind category. These employees get up to at least three other vacations every year. Furthermore, employees not using vacation leave in a current calendar year are accrued and must be taken within 18 days of the last day. Therefore, the employees are also entitled to compensation for not using the vacation leave once the employment ends.
Sick Leaves – Romanian employees are entitled to receive up to 183 days of paid sick leave every year. During this duration, the employer is responsible for paying for the first five days, constituting 25% of the average monthly compensation during the last six months. After five days, the employees are also entitled to the social security payment. However, the employee must also provide a medical certificate for the sick leave and submit it to their employees. The submission must also include the request for compensation.
Paternity Leaves – Within the first eight weeks of the child’s birth, the father can apply for a paid paternity leave for up to 5 days, extendable up to 10 days if they initiate their participation in childcare courses. However, it is necessary to note that the employer can ask for this extension only once. Moreover, parents can also apply for 45 days of paid leave if caring for a disabled child up to 18 years of age. In addition, the rule also applies in the case of caring for a chronically ill child up to 7 years of age.
Health Benefits – Under Romanian law, there are no mandatory insurance provisions for employees. It implies that employers are under no mandatory obligation to provide the same to their employees. However, they can choose to provide the benefits, but it is not mandatory. However, under the contribution for social security, the eligible employees can apply for health insurance giving them access to hospital care, ambulatory medical services, dental services, and intensive care.
Pension – The pension income in Romania can start at the age of 60 for individuals computing a minimum contribution period of up to 15 years with their employer. However, the entire period consists of 35 years for both men and women.
The existing employee entitlement systems concerning tension are covered under three different schemes in Romania.
- The first category refers to Pillar 1, consisting of mandatory contributions to the public pension systems. Under normal working conditions, the total employee contribution stands at zero. However, the employer must contribute up to 8% under difficult working conditions.
- Under the second category, Pillar 2, the employees’ mandatory contribution to private pension funds stands at 3.75%.
- Under the last category, Pillar 3, the contribution to voluntary private pension funds is optional. Employers can deduct these contributions from their salaries and choose to pay them monthly.
Other Benefits – Other employee entitlements include sick days and short-term disability benefits. However, the employer is only responsible for providing the benefit if the employee has completed a minimum contributory period based on the medical certificate issued by the medical healthcare professional. The entitlements also include a long-term disability pension, but the benefits are payable for only a few 180 days, and if the disability is prolonged.
Furthermore, employees in Romania can also apply for marriage leave for up to 5 days and up to 2 days for their child’s marriage. Therefore, we can say that the provisions concerning employee entitlements focus on their well-being, which is an ideal environment.
Payroll Tax in Romania
Romania’s payroll and taxation rules consist of different categories such as value-added taxes, sales tax, corporate tax, and other main categories. Although the categories are easy to understand, the process gets complicated in the implementation part, especially for a new business. Therefore, it is recommended to get help and expert guidance from an experienced Employer of record in Romania to remove the hassle.
VAT – The standard rate for value-added tax in Romania is 19%. It applies to the supply of goods and services, including imports that do not fall under an exception, with or without credit, nor qualify for the reduced VAT rate category.
Sales Tax – In Romania, consumers have to pay sales tax on the purchase price of goods and services. The current rate for sales tax in Romania is 19%.
Corporate Income Tax – Romania’s standard corporate income tax is 16% for Romanian companies and foreign companies working through a permanent establishment. The resident companies must pay the tax on their global income unless the double tax treaty applies. On the other hand, foreign companies must pay tax on all income generated from Romanian taxpayers, irrespective of whether they provide the services in the country or reside as a resident in the country.
Usually, the process is easy, but it can get complicated for a new business looking forward to expanding its operations in a foreign country. Therefore, we help our clients as their Employer of record Romania to make the process easy.
Individual income tax – The Individual Income Tax depends upon their residence status. Typically, individuals are liable to pay income tax on their global income, but non-Romanian tax residents have to pay the tax on their income generated within the country. It also includes the income generated from Services within the territory. As for the last amendment, the rate for individual income tax is 10%. However, married individuals have to pay the tax separately from their spouses, implying that no joint filing applies in the country.
Social Security Tax – The social security tax in Romania is called a social contribution. Both employer and employee have to pay and contribute to the salary income derived from their independent activities. The social security state budget law can modify the contribution rates, but the state budget law or any other amendment can also affect it.
- Employee contributions – Employees have to contribute towards the social contribution through social insurance contribution at 25%, while the contribution for health insurance is 10%. The gross income generated from dependent activities constitutes the monthly assessment page.
- Employer contribution – The social insurance contribution for employers is 4% under normal working conditions, but it goes up to 8% for special working conditions. Moreover, the rate is 2.25% for labor insurance contributions. Any income generated by individuals or resident/non-resident individuals as a gross salary serves the monthly assessment base.
Employment & Labor Laws in Romania
The employment laws in Romania undergo specific and constant changes intending to establish equilibrium between the employers and union organizations. Although it is a difficult task, Romanian legislation always ensures that the resulting rules and regulations favor both employers and employees in the country. Every employer working in the country has the right to regulate working hours, but they need to follow the special legal provision governing the right. The form of documents and employment agreement drafted by the employer also has great importance. It is vital for the organization and the court cases if the other party commits a criminal offense. Therefore, it is always ideal for working closely with a credible Employer of record in Romania to make the process seamless.
Strict rules and regulations apply to both individuals and organizations in case of unlawful dismissal of the rules and regulations specified in the employment laws. The employee has the right to reinstate and access their financial rights for the entire period of employment. On the other hand, the employer can also exercise their right within the limitations specified by labor and employment laws.
Challenges When Expanding into Romania
For a new business looking forward to expanding its business operations in Romania, it is necessary to consider the bureaucratic environment and other factors making the process difficult for them. Furthermore, since expanding in a new country requires extensive research on the locally applicable rules and regulations, it includes considering the challenges. Therefore, working with us as your Romania Employer of Record can help deal with the challenges to a greater extent.
Bureaucracy – The existing bureaucratic system in Romania is one of the biggest challenges for both new and old companies looking forward to expanding their operations in the country. For any new business looking forward to establishing itself and Romania, the bureaucratic environment may make it difficult to penetrate the market and make a distinct position among the domestic players.
The prescribed reporting requirements can create havoc for new businesses. The relatively stringent rules and high penalties for non-compliance can make global businesses second thoughts about expanding.
Compliance system – The legislation system in Romania usually undergoes critical challenges and evolutions. It undergoes frequent changes, making it difficult for companies and requiring them to put extra effort into keeping their activities and operations compliant. For a new business to undergo repeated amendments to the applicable legislation, rules, and regulations, it may get tricky, especially during the initial phases of business expansion.
The amendments are often related to the commercial, physical, fiscal, and civil codes, directly impacting business organizations and related stakeholders. Therefore, the ever-evolving complaint system becomes a massive challenge for businesses.
Economic state – Romania’s usual economic state is one of the reasons why doing business in the country it’s challenging for foreign businesses. Since 2012, the country has achieved significant growth goals with a rate of 3% every year, crossing 4.4% in 2018. However, the country has hardly recovered after the decline in growth rate by 4.8 % in 2020 due to the covid-19 pandemic. Therefore, keeping the current scenario in mind, entering the market in such a situation can be challenging for foreign businesses.
Social Outlook – Implementing different European and universal Human Rights treaties in the country, it continues to suffer from issues including human trafficking, forced labor, and severe discrimination against minority groups. It is a concerning issue for businesses because it does not allow our country to achieve socio-economic prosperity, making it difficult for new processes to survive and thrive peacefully. Therefore, foreign businesses may find it challenging to expand their operations in Romania, considering these socio-economic problems.
Visa and Work Permits in Romania
The rules and regulations concerning applying for a work permit and visa in Romania are quite different from other countries. Since Romania is a part of the European Union, candidates from member countries do not have to apply for work permits concerning specific categories. Hiring non-European employees in Romania getting assistance from the Romania Employer of Record with the process makes it convenient and compliant.
Obtaining the work permit – The responsibility to obtain the work permit lies with the employer. It includes the submission of necessary files and payment of applicable taxes at the General Inspectorate for Immigration offices. It implies that no foreign citizen can apply for a work permit in Romania independently. They will need their employers to obtain the same on their behalf. The process usually takes up to 30 days for the authority to process the request.
Moreover, it is also necessary to know that only the employer can obtain the work permit based on the documents they submit to the territorial units of the authority. They must also keep the documents safe if it is required later to prove the employment of foreign citizens. Therefore, keeping a certified copy of the work format on the residence permit obtained for work purposes is always recommended.
There are six major categories of work permits for a foreign citizen looking forward to working as an employee in Romania:
- Seasonal workers
- Permanent employees
- Nominal workers
- Cross-border workers
However, it is essential to note that only the employees who do not belong to member countries of the European Union have to apply for the work permits mentioned above.
Benefits of Romania Employer of Record
To simplify your expansion process let Infotree Global assist you to deal with all the complexities. Be it hiring employees, distributing payroll, or taking care of expenses, we are there to assist you at every step. Partner with us and start your global business without worries.
Market Access – Relying on the professional expertise of an Employer of Record is the best way to enter an unknown market quickly. By using EOR services, an international organization can avail the expertise of a Romanian employee to work for its company. Besides quick access to the Romania market, the employer of record also enables the client to ease off worries related to payroll and HR.
In-Country Laws – It is hard to ignore the importance of regulations and compliance in a foreign country. If you are operating a business in Romania, you need to be well aware of the payroll and taxation rules. With Romania Employer of Record services, a company can hire a foreign individual or local employees and deal with the complexities of the country’s rules. Be it income tax, social security contribution, expanse management, withholding charges, or business tax, an EOR or PEO company takes care of it all with total compliance.
Diverse Solutions – No matter whether you already have a company in an international location or you are going to establish one, an employer of record can help you significantly. The employer of record Company can hire staff on your behalf without setting up a subsidiary in Romania. If your firm is already operating, using EOR for managing payroll tasks can be a great idea as it can present an effective solution to tax and accounting responsibilities in the country.
Why Infotree Global Solutions?
Infotree Global is dedicated to providing professional assistance to help you set up a business in Romania. We provide the support of our in-country team of professionals to undertake all the legal formalities associated with employment in Romania and help you stay compliant with the country’s labor laws. As your employer of record, we can significantly help you streamline your business expansion plan into a foreign market. Our expertise in providing driver solutions comes from years of industry experience in managing payroll, compensation, hiring processes, country laws, market knowledge, and many other aspects of business expansion. Therefore, you can always rely on us for the broadest range of solutions to expect from an ideal employer of record.
With our global payroll and employer of record solutions, you can experience professional assistance at every step and expand your business without worrying about legal complexities. Take advantage of our professional assistance as your Employer of Record in Romania and avoid the challenges of working in a foreign country.
Make the most of our professional services and overcome the challenges associated with international hiring. For Employer of Record Romania details and demo contact us today!