ROMANIA GUIDE
EMPLOY IN ROMANIA WITH EASE
- Access and hire global talent & deploy them anywhere in the world
- Remove restriction from only hiring from local markets
- Enter any international market without the requirement of opening a local entity
Global expansion is a step to make for any business, regardless of what you wish to achieve. The opportunities that can come with an expansion can be both incredibly exciting as well as intimidating and confusing, especially when you consider all of the registration procedures that needs to be done and documentation required.
Expanding to countries such as Romania – which is characterized by a productive and skilled workforce, complex employment and tax laws, a developing infrastructure network linking to the rest of Europe, as well as leading sectors in agriculture, mining, manufacturing, and services – can bring both excitement to the possibilities, but also significant stress to ensuring the entity with the country’s rigorous legal structures and laws.
Ensuring compliance without the sufficient knowledge of the country’s laws also adds to the stress of getting your new entity off the ground and ready to test new markets. Going at it without the proper support can increase the costs, time and risks involved.
Each new markets bring new challenges, and these can be worked through more efficiently and cost-effectively with the support of an International Professional Employer Organization (PEO) such as Bradford Jacobs, especially through our Employer of Record (EOR) framework. This can be best utilized when businesses are just beginning their expansion process and require more information before committing to incorporating an entity and fully establishing themselves in that market.
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Romania – The Economy
The economy of Romania is a high-income economy with a skilled labor force, ranked 10th in the European Union by total nominal GDP and 7th largest when adjusted by purchasing power parity.
Its economy is based predominantly on services. It is a producer and net exporter of machines and electric energy through companies like Automobile Dacia and OMV Petrom.
Romania’s economy ranks 36th in the world, with a $707 billion annual output (PPP). In recent years, Romania enjoyed some of the highest growth rates in the EU: 4.8% in 2016, 7.1% in 2017, 4.4% in 2018, and 4.1% in 2019.
In 2020, its GDP per capita in purchasing power standards reached 72% of the European Union average, up from 44% in 2007, the highest growth rate in the EU27.
Romania is a leading destination in Central and Eastern Europe for foreign direct investment: the cumulative inward FDI in the country since 1989 totals more than $170 billion.
Romania is the largest electronics producer in Central and Eastern Europe. In the past 20 years, Romania has also grown into a major center for mobile technology, information security, and related hardware research.
The country is a regional leader in fields such as IT and motor vehicle production. Bucharest, the capital city, is one of the leading financial and industrial centres in Eastern Europe.
The top 10 exports of Romania are vehicles, machinery, chemical goods, electronic products, electrical equipment, pharmaceuticals, transport equipment, basic metals, food products, and rubber and plastics. Romania has been a member of the United Nations since 1955, NATO since 2004 and the European Union (EU) since 2007.
Small and Medium-Sized Companies
SMEs play an important role in Romania’s overall ‘non-financial business economy’. They generate 52.7% of total value added and 65.8% of total employment, which is lower than the respective EU averages of 56.4% and 66.6%.
The average productivity of Romanian SMEs, calculated as value added per person employed, is approximately €15,100, significantly lower than the EU average of approximately €44,600.
Romanian SMEs employ an average of 5.5 people, exceeding the EU average of 3.9.
Romanian SMEs face high regulatory and administrative burden. Romania introduced a reform to make the payment of taxes less costly by eliminating five employer-paid taxes and contributions.
Romanian SMEs are also now enjoying better access to public funding. More than 5.3% of Romania’s allocation of the European Structural and Investment Fund 2014 – 2020 is being channeled to the ‘Regional’ and ‘Competitiveness’ operation programs.
| Country | Romania |
| Capital | Bucharest |
| No. of States/Provinces | 10 regions & 41 counties |
| Principal Cities | Bucharest, Iasi, Cluj-Napoca, Timișoara, Craiova, Constanța, Galati, Brasov, Ploieşti & Braila |
| Language(s) | Romanian |
| Local Currency | Romanian leu (RON) |
| Major Religion | Christianity – Romanian Orthodox |
| Date Format | dd/mm/yyyy |
| Time Zone | Eastern European Time (GMT+3) |
| Country Dial Code | +40 |
| Population | 18.9 million |
| Border Countries | Ukraine (north), Moldova (northeast), the Black Sea (southeast), Bulgaria (south), Serbia (southwest), and Hungary (west) |
| Tax Year | 1 January to 31 December (calendar year) |
| VAT % | 19% |
| Minimum Wage | €515.3 per month |
| Taxpayer Identification Numbers | Taxpayer Identification Number (Codul de înregistrare fiscală) VAT Number Unique Registration Code (CUI) – Businesses |
| Leading Sectors | electric machinery and equipment, textiles and footwear, light machinery and auto assembly, mining, timber, construction materials, metallurgy, chemicals, food processing, petroleum refining |
| Main imports | vehicle parts, packaged medicaments, cars, crude petroleum, and insulated wire |
| Main exports | vehicle parts, cars, insulated wire, electrical control boards, and rubber tires |
| Main trading partners | Germany, Italy, France, Hungary, Bulgaria, China, and Poland |
| Government Type | Unitary semi-presidential republic |
| Current Prime Minister | Klaus Iohannis (President), Nicolae Ciucă (Prime Minister) |
The Main Sectors of the Romanian Economy
Romania focuses on the following key sectors, which all have a significant impact on the country’s economy:
- Services – The service industry in Romania contributed 60.9% of the GDP in 2020 and employed 46% of the country’s labor force. Some of the main sub-sectors in the service industry include business activities, renting, financial services, transports, restaurants, and trade.
The retail sector is the largest employer in the industry employing about 12% of the population. The retail sector is primarily concentrated in many small retail stores which are found mainly in the shopping malls. In the past few years, there has been a rise in the number of big stores like the hypermarkets and Carrefour which is a subsidiary of the French retail store. - Agriculture, Forestry, & Fisheries – Agriculture in Romania plays a significant role and employs approximately 21.28% of the country’s labor force which is one of the highest in Europe. Agriculture in the country contributes about 3.9% of the GDP. The country has an agricultural capacity of about 14.7 million acres, and only 10 million are arable.
Mechanization of agriculture in the country is still relatively low compared to other European Union countries. Romania has one tractor for every 54 acres of land, while the average for the European Union is one tractor for every 13 acres of land. There are about 170,000 tractors in the country, and 80% are either obsolete or aging and many farmers in the country use horse-drawn agriculture and other animal power.
The primary challenge facing agriculture in Romania is the lack of significant investment because of difficulty to access available funds, severe soil erosion, and obsolete technology.
Beef production is mainly concentrated in the central part of Romania, while other commodities like fruit, wine, and vegetables are primarily concentrated in the central and southern part of Romania. The country is a major producer of several agricultural products and is presently expanding on fisheries and forestry industries. - Manufacturing – Manufacturing in Romania experienced massive growth in 2017 compared to 2016 when it grew by 11.5%, and the new orders in the industry went up by 12.9% over the same period. Romania is now an emerging center in Europe, and the automotive market has been growing on an average of 18% annually. The sector contributed 16% of GDP and 30.15 % of employment in 2020.
The country is now the 4th largest manufacturer of automotive in the CEE, and some of the automotive companies in the country include the two big manufacturers based in Mioveni and Craiova, and they are Dacia and Ford. More than 600 OEMs manufacturers for automotive supplies established plants in Romania which meets the local market as well as for the export market.
Other large manufacturing companies in Romania include Petrom, Bitdefender, Mobexpert, and Romstal.
There are numerous other small and medium scale manufacturing companies which form the largest part of Romania’s manufacturing industry. - Mining – Romania ranks tenth in the world in terms of the diversity of minerals produced in the country. Around 60 different minerals are currently produced in Romania. The richest mineral deposits in the country are halite (sodium chloride).
Romania is an oil producer, but the level of production is not enough to make the country self-sufficient. As a result, it is a net oil and gas importer.
Other natural resources include coal, iron ore, copper, chromium, uranium, antimony, mercury, gold, barite, borate, celestine (strontium), emery, feldspar, limestone, magnesite, marble, perlite, pumice, pyrites (sulfur), clay, arable land, hydropower. In Roșia Montană area is the largest gold deposit in continental Europe, estimated at over 300 tons of gold and 1,600 tons of silver, having a value of $3 billion.
Several major new pipelines are planned, especially the Nabucco Pipeline for Caspian oilfields, the longest one in the world. - Construction – In 2020, construction represented 6.3% of GDP (6.4% in 2019). The number of companies in the broad construction sector in Romania experienced an increase between 2010 and 2020, with the growth was mainly driven by the increase in the number of enterprises in the architectural and engineering activities (+47.3%), followed by the real estate activities (+38.1%), and the narrow construction sub‑sector (+26.2%) sub‑sectors.
Compliance Highlights
- The National Agency for Fiscal Administration (Agenția Națională de Administrare Fiscală, ANAF) – the revenue service of the Romanian government.
It forms part of the Ministry of Public Finance, ANAF was established in 2003 and became operational the following year. - The Fair Work Ombudsman – The Ministry of Labor and Social Protection of Romania (Romanian: Ministerul Muncii și Protecției Sociale) is one of the eighteen ministries of the Government of Romania. The following institutions are under the authority of or subordinated by the Ministry of Labor and Social Protection:
- National House of Public Pensions
- National Agency for Employment
- The National Authority for Disabled Persons
- The National Authority for the Protection of the Rights of the Child and Adoption
- National Agency for Payment and Social Inspection
- National Agency for Equal Opportunities for Women and Men
- Labor Inspection, including the Territorial Labor Inspectorates
Labor Contracts Law
Contracts must comply with regulations laid down by the Order of the Ministry of Employment. Once Bradford Jacobs’ Professional Employer Organization (PEO) recruitment networks have located the best talent for your company, we step in to handle this crucial element of recruitment.
General requirements from the Labor Code apply to all contracts. These include:
- Employers are legally required to provide the new employee with a written contract at least one day before they begin work and presented to the employee.
- Contracts must be electronically registered via the Revisal online system in the General Register of Employees.
- Contracts must be concluded in Romanian. Bi-lingual contracts are permitted but must incorporate a Romanian version.
- A pre-employment medical check is mandatory, carried out by the company’s occupational health department, or else paid for by the employer.
- Contracts must be electronically registered via the Revisal online system in the General Register of Employees.
- Minimum contract terms must include:
- Full names and addresses of employer and employee
- the duration (if fixed term)
- any probation period or notice period
- salary and paid vacation entitlements
The main contract types/agreements that affect employment in Romania include:
- Permanent Employment Contracts: (Contract individual de muncă pe durată nedeterminată). Romania employment law assumes all contracts are open-ended and indefinite, which can be terminated by either party in accordance with statutory procedures.
- Fixed-term Employment Contracts: (Contract individual de muncă pe durată determinata). These are permitted only in specific situations as determined by the Labor Code. Contracts can be renewed twice but cannot exceed 36 months in total. Fixed-term contracts that exceed three years, or are renewed a third time, automatically become open-ended and indefinite.
- Part-time Employment Contracts: (Contract individual de muncă cu timp partial). These can be either open-ended or fixed term.
- Probation Periods: These can be included in a contract, only once per employment. They are generally for 90 days, although can be shorter if applied to fixed-term contracts or temporary employees. Probation periods for executives and managers can be extended to 120 days.
- Collective Bargaining Agreements: Collective agreements can be concluded through negotiations between employers, employees and their representatives or trade unions. All employees in Romania have the constitutional right to belong to a trade or labor union which, in turn, has equal rights to represent workers in any dispute with their employer or employers’ organizations.
The Social Dialogue Act of 2011 removed the right to negotiate agreements at national level.
Therefore, collective agreements are concluded at industry level or with individual companies or groups of companies. According to the Ministry of Labor between 20% and 25% of employees have union membership.
Payroll – Tax Contributions and Benefits
Income Tax:
A flat personal income tax (PIT) rate of 10% is generally in place. Individuals residing for more than 183 days in 12 consecutive months and those domiciled or having their commercial center of interest in Romania are tax residents. Married couples submit returns independently as joint returns are not permitted under Romania’s tax laws.
Withheld taxes and social insurance contributions are remitted to the authorities by the 25th of the following month. Residents are generally taxed on their worldwide income.
Health and Social Insurance: Legal residents have access to Romania’s national health system from the date they start contributions, covering basic medical services, including:
- Emergency medical and surgical procedures, acute illnesses, and chronic conditions
- Outpatient services including laboratory tests, at-home medical care
- Some medicines and medical appliances
- Hospitalization
Employees contribute to the funding through mandatory payroll taxes. Employees contribute 10% of their gross income to the healthcare system, plus 25% towards social insurance into pension and unemployment benefits. Employers contribute 2.25% of the gross income for each employee towards labor insurance and either 4% or 8% towards social insurance depending on working conditions.
Employee contributions are tax-deductible up to a limit of RON 1,980 (€400, US$490) for each category.
Sick Leave and Benefit: Employees who are incapacitated through illness receive 75% of their average salary over the previous six months, paid by their employer. Compensation can be 100% if the individual needs surgery or has a contagious disease. Benefit is up to 183 days a year but can be extended. In the case of tuberculosis, leave can be up to 18 months.
Paid Vacations: The allowance under the Labor Code is 20 days of paid vacation per year, adjusted pro rata for having worked less. Unused vacation is carried over to be used in the first six months of the next year.
Public Holidays: Employees required to work on a national holiday must be compensated with paid leave in the next 30 days and receive a 100% increase on their normal hourly rate. The national holidays in Romania include:
- New Year’s Day – January 1
- Day after New Year – January 2
- Unification Day – January 24
- Orthodox Good Friday, Easter Day, and Easter Monday – March / April
- Labor Day – May 1
- International Children’s Day – June 1
- Orthodox Pentecost and Pentecost Monday – June
- Descent of the Holy Spirit – June
- St. Mary’s Day – August 15
- Feast of St. Andrew (patron saint) – November 30
- Great Union Day – December 1
- Christmas Day – December 25
- Second day of Christmas – December 26
Maternity / Paternity /Parental Leave and Benefit: Leave for the mother totals 126 days, generally 63 days each before and after, including a mandatory 42 days post-natal. The balance of 84 days can be taken at mother’s discretion before or after the birth, or not at all if she does not feel them necessary. Benefit for 126 days is 85% of the average salary over the previous six months.
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