Benefits of a PEO in Romania & EOR in Romania
- Expand without an entity
- Flexible and cost-effective solution to outsource payroll and HR functions for international expansion
- In compliance with foreign local laws & regulations
- Minimizes employment liabilities and risks
- Reduced risk, as the risks of being an employer fall almost completely on the employer of record
- Saves you time to focus on your core business
- You manage your employees
- EOR and /or PEO takes care of registration and contact with local authorities
Employment Contracts Romania
By rule, the type of employment contract in Romania is an unlimited (open-ended) term contract. However, an individual employment contract may also be concluded for a limited duration. Any kind of individual employment contract must be concluded in writing, in the Romanian language and on the basis of both parties’ consent (employer and employee).
Fixed-term contracts may be concluded only for the limited cases provided by the Labour Code (requires that the agreement states essential information and the duration of the contract). The basic rule with a fixed-term contract is that an employee in the same position can only be offered three successive fixed-term contracts with a maximum period of 36 months.
Additionally, in Romania, there is an option of a trial period. This period starts at the beginning of the employment relationship and the length of it has to be previously decided by both parties and stated in the contract. The trial period cannot exceed 90 calendar days for standard positions and 120 calendar days for managerial positions.
PEO and EOR service providers in Romania will support you with the set-up of a local employment contract.
Employment Termination Romania - Notice Period Romania
In Romania, the provisions of the Labour Act stipulate that both the employer and worker may terminate the employment contract. The employer may terminate the employment contract based on the stipulated or agreed notice period if there is a justified reason to do so. This type of ordinary dismissal can happen in case of a:
- business-related dismissal such as redundancy (if the need for a specific job ceases due to some technical, economical, or organizational reasons);
- dismissal on personal grounds (the employee is not able to perform properly due to some permanent abilities or characteristics);
- dismissal due to dissatisfaction with probation work (the employee simply did not perform well during the probationary period).
- arrest of the employee for a period exceeding 30 days
The minimum notice period provided by the law in case of dismissal is 20 working days. Longer notice periods may be agreed upon and set out in the individual employment agreement. By law, notice is not required for disciplinary terminations, nor in case of termination due to the employee being under arrest for a period exceeding 30 days. The employer has the right to waive the notice period and to agree to terminate the contract due to the employee’s will, at any moment before the end of the notice period.
The employee can terminate the employment contract in line with the agreed notice period, without stating specific reasons.
Social Security Romania
Workers within Romania are required by law to pay social security contributions on their gross salary and all earnings in Romania. Similarly, the employer is also obliged to pay monthly contributions and income tax for its employees.
The social contribution liabilities are assessed in accordance with the EU social security coordination rules and the provisions of the social security agreements that Romania applies. The general rates of social contributions are established as follows:
- Social insurance contribution: 4% for particular working conditions or 8% for special working conditions; there is no employer pension social insurance contribution for normal working conditions.
- Labour insurance contribution: 2.25%.
- Total: 6.25% to 10.25%
- Social insurance contribution: 25%.
- Health insurance contribution: 10%.
- Total: 35%
Employee Income Tax: 10% Flat rate
Employers are required to compute and withhold the social contributions when paying salaries. Social contributions must be declared and paid by the salary income payer to the relevant state budgets by the 25th day of the month following the one for which such salary income is paid.
Average Salary Romania & Average Employer Costs Romania
The average annual salary in Romania as of the third quarter of 2021 was $32,279 USD. This is lower than the average annual wage in the United States, $65.835,58. As an employer, the actual employer costs are around 6.25% to 10.25% higher than the gross annual salary. Based on a $32,279 annual salary, the employment costs would be between $37524.34 and 36,313.88
To learn more about the average salaries in Europe and the actual employment costs in Europe, we invite you to read this article on the Costs of hiring European employees.
Working Hours Romania
The standard workweek is five days, eight hours per day. An employee may not work more than 48 hours in one week. Weekly rest is 48 consecutive hours, usually Saturday and Sunday. By law, maximum working time cannot exceed 48 hours per week, including overtime. Weekly working hours can be extended to 10 hours per day, provided that the employee does not work an average of more than 40 hours per week over a 24 week period. Work performed outside the standard 8 hours per day, 40 hours per week must be compensated with paid hours off during the 60 calendar days after the overtime has been performed. Workers under 18 years of age, part-time employees, pregnant employees who are unable to work normal working hours for health reasons are not permitted to work overtime.
Paid Vacation Leave Romania
Employees are entitled to up to 20 days of paid annual leave by law per year, pro-rated with the worked period. Employers are required to pay employees their allowance at least five working days before the leave starts.
If the employee cannot take all or part of the annual leave entitlement within the calendar year, the employer must carry over the outstanding annual leave to the first six months of the following calendar year. To learn more about the average paid vacation days in Europe and how Romania compares to the rest of Europe, we invite you to read our blog on paid vacation days in Europe.
Public Holidays Romania
Employees are legally entitled to have these 11 days as holidays in Romania, including:
- New Year’s Day
- Day After New Year’s Day
- Unification Day
- Labor Day
- Orthodox Easter Monday
- Orthodox Pentecost Monday
- Feast of the Dormition (St. Mary’s Day)
- Andrew’s Day
- National Day
- Christmas Day
- Second Day of Christmas
Maternity and Paternity Leave Romania
A pregnant employee is entitled to 126 days of paid maternity leave, paid at 85% of their average income for the previous six months; the leave is paid for by the National Social Security Fund. Maternity leave consists of two periods, prenatal leave, which is the period where a woman must take a minimum of 63 days before the expected due date and postnatal leave, where the employee must take the remaining 63 days after the birth of the child.
A father/partner is entitled to 5 to 10 days of paid leave; this leave increases to 15 days if the employee participates in an infant care course. The paternity leave can be taken at any time during a defined period after birth.
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Monique Ramondt Sanders
Executive Vice President | HR Outsourcing