Romania has traditionally boasted a large, skilled labor force at comparatively low wage rates in most sectors. The labor pool has tightened in highly skilled professions, in particular the information technology and health sectors, due to emigration and a deteriorating primary and secondary education system that fails to adequately prepare many graduates, particularly in rural areas, for university. The university system is generally regarded as good, particularly in technical fields, though foreign and Romanian business leaders have urged reform of outdated higher education curricula to better meet the needs of a modern, innovation-driven market. Payroll taxes remain steep. As a result, an estimated 25 to 30 percent of the labor force works in the underground economy as “independent contractors” where their salaries are neither recorded, nor taxed. Even for registered workers, underreporting of actual salaries is common.
The total unemployment rate in Romania increased during the COVID-19 pandemic from 4.9 percent in 2019 to 6.1 percent in 2020, and was 5.3 percent as of Q3 2021. The registered unemployment rate, which covers jobless individuals registered with the labor offices, stood at 2.8 percent in October 2021, down from 3.3 the previous year. At 69.2 percent in 2020, the labor force participation rate – the portion of the working age population (15-64 years) who are employed or actively seeking employment – remained among the lowest in the EU. Romanian employers in the engineering, machinery, IT services, and healthcare sectors reported difficulties in hiring and retaining employees as Romania faces a shortage of medium- to high-skill workers. As Romania’s emigration crisis deepens, other industries, including food service and construction, also face worker shortages. According to the EC, Romanians were the largest working age group of EU citizens residing in other member states in 2020 (18.6 percent of the working age resident population, up from 11.5 in 2010). Many emigrants are young and well- qualified, constraining the supply of skilled labor remaining in Romania. The World Bank estimated that between 2000 and 2018, Romania’s population fell from 22.5 million to 19.5 million with emigration accounting for more than 75 percent of the decline. Romania faces a shortage of healthcare staff as doctors and nurses continue to seek work abroad, motivated not only by the higher salaries, but also by the country’s antiquated medical system. According to the Ministry of Health, roughly 10,000 doctors left Romania between 2017 and 2018.
The government lacks a comprehensive strategy to remedy labor shortages despite taking steps in recent years to attract and retain talent. Employees in some sectors benefit from fiscal incentives. For example, IT professionals are eligible for certain income tax exemptions. In 2018, the GOR introduced an additional income tax and social contributions exemption for a period of ten years for construction sector employees. The provision also introduced a specific minimum wage of RON 3,000 (USD 728) for construction workers. In 2017, the GOR adopted a unitary wage law to establish a more consistent framework for wages across the public sector. The law provided for a salary increase of at least 25 percent for most public sector employees; wages for some workers in the healthcare sector doubled in nominal terms as of March 2018. Unions and businesses continue to debate specific applications of the Unitary Wage Law.
The Labor Code regulates the labor market in Romania, controlling contracting, jurisdiction, and the application of regulations. It applies to both national and foreign citizens working in Romania or abroad for Romanian companies. As an EU member state, Romania has no government policy that requires the hiring of nationals, but it has annual work permit quotas for other non-EU nationals. As of 2020, employers are exempt from obtaining General Immigration Inspectorate (IGI) approval for nationals from Moldova, Ukraine, and Serbia for full-time labor contracts of up to nine months per year. For 2022, the government increased the annual work permits to 100,000, up from 50,000 permits approved for 2021. Work permits are valid for one year and are renewable with an individual work contract. Employers pay a EUR 100 tax for most foreign workers, except for seasonal workers and those present in Romania on student visas, for whom the tax is EUR 25. The government also reduced the cost of employing non-EU citizens in 2018, no longer requiring employers to pay a minimum wage equivalent to the gross average wage. Normal minimum wage law applies with the exception that highly skilled non-EU workers must receive at least twice the gross minimum wage. Foreign companies still resort to expensive staff rotations, special consulting contracts, and non-cash benefits.
Since the 1989 revolution, labor-management relations have occasionally been tense, the result of economic restructuring and personnel layoffs. Trade unions, much better organized than employers’ associations, are vocal defenders of their rights and benefits. Employers are required to make severance payments for layoffs according to the individual labor contracts, company terms and conditions, and the applicable collective bargaining agreements. The Labor Code discerns between layoffs and firing; severance payments are due only in case of layoffs. There is no treatment of labor specific to special economic zones, foreign trade zones, or free ports.
Romanian law allows workers to form and join independent labor unions without prior authorization, and workers freely exercise this right. Labor unions are independent of the government. Unions and employee representatives must typically notify the employer before striking and must take specific steps provided by law before launching a general strike, including holding discussions and attempting reconciliation with management representatives. Companies may claim damages from strike organizers if a court deems a strike illegal. Labor dispute mechanisms are in place to mediate any conflicts between employers and employees regarding economic, social, and professional interests. Unresolved conflicts are adjudicated in court according to the civil code. An employee, employer, or labor union may initiate proceedings. In 2021, employees from auto manufacturing, transportation, and the medical sectors went on strike or protested publicly. They sought higher pay, better working conditions, and sufficient staffing.
Union representatives allege that few incidents of anti-union discrimination are officially reported because it is difficult to prove that employers laid-off employees in retaliation for union activities. The government has generally respected the right of association, and union officials state that registration requirements stipulated by law are complicated, but generally reasonable. The current law permits, but it does not impose, collective labor agreements for groups of employers or sectors of activity. Companies with more than 21 employees may use collective bargaining, which provides for written agreements between employees and the employer or employers’ association. According to the Ministry of Labor, companies and employees had finalized 3,829 collective labor agreements as of Q3 2021 compared to 5,742 in 2020. Since 2014, parliament has periodically considered reintroducing collective bargaining nationwide, a practice that previously established minimum pay and working conditions for the entire economy, but which the Social Dialogue Act eliminated in 2011.
As an EU and International Labor Organization (ILO) member state, Romania observes international labor rights. National law prohibits all forms of forced or compulsory labor, but enforcement is not uniform or effective. As penalties are insufficient to deter violations, reports indicated that such practices continued to occur, often involving Roma, disabled persons, and children. The minimum age for most forms of employment is 16, but children may work with the consent of parents or guardians at age 15, provided the tasks correlate with their abilities. Employment in harmful or dangerous jobs is forbidden for those under the age of 18; the government maintains a list of dangerous jobs in which the employment of minors is restricted.
Romania does not waive or derogate labor laws and regulations to attract or retain investments. Since 2011, employers have had more flexibility to evaluate employees based on performance, and hiring and firing procedures have been significantly relaxed. Romania aims to ensure that its labor market is dynamic, sustainable, resilient, pro-active, and based on social innovation by 2027 with a 75 percent employment rate for of people aged 20-64. As of March 2022, Romania had yet to finalize its National Labor Strategy for 2021-2027.
The minimum wage has more than tripled in nominal terms since 2012, rising from RON 700 (USD 170) to RON 2,550 (USD 583) per month in 2022. Romania no longer requires a differentiated minimum wage for employees with a university degree. Starting in 2022, employers can only pay the minimum wage for the first two years of an employment contract. The measure has a transition period of two years, and employees currently paid the minimum wage will be eligible for wage growth in 2024. Despite these measures, Romania had the highest rate of employed persons at risk of poverty among EU member states: 14.9 percent in 2020.
Wage increases have outpaced productivity growth since 2016. This led to a marked growth in hourly labor costs, which posted a 6.39 percent nominal increase in Q3 2021 as compared with the same period in 2020. On January 31, the Romanian Competition Council opened an investigation into unlawful wage setting practices by the automotive industry. The Council investigated informal “no-poach” agreements that decreased competition among companies and created artificial labor market access barriers, particularly for automotive engineers.
In December 2017, the GOR shifted the burden of mandatory payroll deductions for pensions, healthcare, and income taxes from employers to employees. To avoid reductions in employee net pay and retain labor in a tight market, many companies increased salaries to offset employee losses. Other companies, wary of further possible changes, offered monthly bonuses rather than formally amending employee contracts.
Separately, in December 2019, parliament reduced payroll taxes for part-time workers. The bill reversed 2017 provisions when, in an effort to curtail underreporting of work, the government increased the minimum payroll taxes that employers must pay for their part-time employees to equal those for a full-time employee earning minimum wage. Coupled with the change in the legal tax incidence of social contributions described above, the law had the unintended consequence that some employees owed more in social contributions than their monthly earnings. In February 2018, the GOR issued an ordinance allowing part-time workers to pay social contributions for their actual gross income only, mandating that the employer make up the difference. Effective January 1, 2020, part-time employees are taxed based on their actual earnings, and employers do not cover additional charges. In 2018, the GOR passed new legislation specifying how the labor code applies to companies employing teleworkers and defining the distinction between teleworkers and employees who work full-time from home.
In response to COVID-19 restrictions, the GOR extended the categories of employees eligible for unemployment benefits to independently registered businesspeople, lawyers, and individuals with income deriving from copyright and sports activities. In August 2020, the GOR adopted a flexible work scheme model that required employers to cover half of full-time wages. In turn, the GOR paid 75 percent of the difference between the gross wage and the basic wage paid to the employee based on actual working hours. The law also allows for one caretaker of school-age children to receive paid days off during school closures. As of 2022, the GOR had extended furlough provisions for businesses affected by COVID-19 restrictions. The GOR has announced plans to ensure that additional medical staff hired on temporary contracts since the onset of the pandemic can remain in the medical system in the long run to cover staff gaps. On March 9, 2022, Romania lifted all COVID-19 pandemic restrictions.