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Our staff are experts in fields ranging from operations, payroll, accounting, and more. Learn what you need to expand your business and hire staff in Romania.
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Romania is a country located at the crossroads of Central and Southeastern Europe. It is the twelfth-largest country in Europe and the sixth-most populous member state of the European Union. Romania is a developing country with a high-income economy.
Employees can be majorly divided into two categories – Contractors and Employees and defining relation with the employee is very important to avoid risks associated with misclassification.
The courts in India have applied the control and integration test to determine whether a person can be classified as an employee or independent contractor. The prima facie test is the control test to determine whether an employer-employee relationship exists and it is not merely to direct the nature of work that has to be carried out but also to control the manner in which it is done.
Another difference between an employer and contractors is an employer is required to withhold tax at the time of payment of salary to employees. The salary paid to an employee may include benefits and allowances that the employee is entitled to, which is beneficial to the employee from a tax perspective. However, with respect to independent contractors, the employer must withhold the applicable taxes; however, the amount paid may not be in the form of salary, but as professional fees for services performed. In both these cases, the employee and independent contractor/s will be required to file their income tax returns as prescribed under law.
In Romania, the payroll frequency is monthly; work between the first and last day of the month is typically paid on the last working day of the month.
Mandatory employee benefits in Romania include a three-pillar pension system, paid time off, disability (sick leave) as well as maternity, paternity and parental leaves. Supplementary employee benefits in Romania include retirement, medical insurance, life and disability insurance, and business travel insurance. Common employee perks range from meal vouchers to company cars, to mobile phones and increased vacation days.
A flat personal income tax (PIT) rate of 10% is generally in place. However, there are certain exceptions from this rule (e.g. the tax rate for dividends, the tax rate for income from the transfer of immovable property, the tax rate for income from gambling activities depends on the income level)
Social contributions liabilities are assessed in line with the EU social security coordination rules and the provisions of the social security agreements Romania applies.
The general social contributions rates are established as follows:
Employee contributions:
Pension insurance contribution: 25%.
Health insurance contribution: 10%.
The monthly assessment base is the gross income derived from dependent activities.
Employer contributions:
Pension insurance contribution: 4% for particular working conditions or 8% for special working conditions; there is no employer pension insurance contribution for normal working conditions.
Labour insurance contribution: 2.25%.
The statutory minimum notice period is 20 working days and is applicable in case of dismissal for physical or mental incapacity, as well as dismissal for professional inadequacy, and/or individual or collective redundancies. Individual or collective labour agreements may require longer notice terms.
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