Understanding Payroll in Romania: What Global Companies Need to Know About Romania Payroll System
Sep 19, 2017 | Topic: Country Payroll
Known for its majestic natural beauty and rich folklore, Romania offers a culturally vibrant and financially attractive European home for multinational organizations. The country’s native workforce is well-educated, industrious and creative, with several significant inventions having come from Romanian citizens, from the humble fountain pen to the modern jet engine. Plus, with its EU membership and flat individual and corporate tax rate of 16%, Romania presents a fairly straightforward landscape for global payroll.
Although Romania is a member of the European Union, the country’s currency is the Romanian leu (RON). Foreign individuals and legal entities may establish a corporate presence in Romania, provided they have registered capital, management, registered offices, assets, bank account, and names of directors and shareholders. All organizations doing business in Romania must register with the National Office of the Trade Register within 15 days of commencing operations, at which time they must specify their main business activity and be allocated a code number relating to that particular activity. Additionally, all companies must register with the Labor Chamber when issuing the first employment contract.
To incorporate a company in Romania, you must provide your proposed company name, the director(s) full name, date of birth, address and nationality, all shareholders’ full names and addresses, and the business object of the company, along with proof of identity and proof of residential address. An in-country bank account is required to process payroll, and if company leadership is not based in Romania, you will need a power of attorney to allow a lawyer to open a bank account and set up the company on your behalf.
Employment Law & Employee Rights
The work week in Romania runs typically from Monday to Friday, with a standard of five eight-hour days. Total working hours may not exceed 48 per week, averaged over a four-month period, and overtime must be compensated with paid time off within 60 days or by paying the worker an overtime premium of at least 75% of their base salary. Night shift work is compensated at a premium rate, with work between the hours of 10 p.m. and 6 a.m. considered night work.
Employment contracts are mandatory and must outline the role and responsibilities, compensation and leave entitlements, probationary period, place of work, and other details. All new employees must register with the Labor Chamber at least one day prior to commencing work.
Collective bargaining at the national level was abolished in 2011. Collective agreements may still be negotiated at the industry and company levels; however, the Social Dialogue Act stipulates that any lower level agreements must achieve the minimum conditions agreed at higher levels.
Compensation & Severance
As of February 1, 2017, minimum wage in Romania is 1,450 leu (~$377, £280, €315) per month, based on an average 166 work hours per month at a minimum of 8.735 leu(~$2.27, £1.68, €1,90) per hour. Wages are generally paid once a month, by electronic bank transfer or in cash.
A 20-day notice period is mandatory for dismissals, and employers must compensate terminated employees for earned but unused vacation. Severance pay must be negotiated in the original employment contract and is not mandated by labor law.
Tax Requirements & Withholding
Income tax is run by the National Agency for Fiscal Administration (NAFA) and is calculated at a flat rate of 16%. Salary, allowances, bonuses, awards, and benefits in cash and in kind are considered taxable income; however, Romania does offer pre-tax allowances for childcare, education, and other key expenses. As of February 1, 2017, workers in specific seasonal activities, including tourism and food services, are exempt from paying income tax.
Whether processing international payroll themselves or using a contracted payroll solution, employers are responsible for correctly calculating and withholding their workers’ tax liability and must make monthly payments to NAFA by the 25th of the subsequent month.
Time Off & Paid Leave
The Romanian Labor Code specifies 12 public holidays and offers flexibility around religious holidays for people of non-Christian faiths, as long as their religion is recognized by the State. Additionally, employees receive a minimum of 20 paid vacation days per year, which may be taken in increments as long as the employee takes at least one unbroken period of ten working days. All vacation must be taken in the year earned.
Qualifying employees are eligible for up to 180 days of sick leave per year, paid at 75% of their average monthly income. New mothers may choose between one year of maternity leave at 85% average pay but not more than 3,400 leu (~$883, £655, €740) per month, or two years leave at 85% pay but not more than 1,200 leu (~$312, £231, €261) per month. Fathers are entitled to stay home for the first month of a child’s life at 75% of his average pay up to a maximum of 3,400 leu (~$883, £655, €740).
|Date||Romania's Public Holiday Schedule|
|January 1st||New Year's Day|
|January 2nd||Day after New Year's Day|
|January 24th||Unification Day|
|Monday after Orthodox Easter||Orthodox Easter Monday|
|May 1st||Labor Day|
|June 1st||International Children's Day|
|50 days after Orthodox Easter||Descent of the Holy Spirit|
|August 15th||St. Mary's Day|
|November 30th||Feast of St. Andrew|
|December 1st||National Day|
|December 25th||Christmas Day|
|December 26th||Second Day of Christmas|
A Straightforward System
Romania’s unique location and landscape offer great opportunities for international organizations looking to expand in Europe. While the tax system and payroll regulations appear simple enough, having a good global payroll partner is key to ensuring your payments and agreements are on point in Romania. Browse our other country payroll guides to learn how payroll in Romania compares to the rest of Europe and beyond.
This article is for informational purposes only and not intended to convey or constitute legal or any other advice. It is not a substitute for advice from a qualified professional.