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 well regarded, particularly in technical fields, though foreign and Romanian business leaders have urged reform of outdated higher education curricula to better meet the needs of a modern, innovation-driven market.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 to 6.1 percent in 2020 and 5.6 percent in 2021. It was 5.4 percent as of Q3 2022. The registered unemployment rate, which covers jobless individuals registered with the labor offices, stood at 3 percent in November 2022, up from 2.7 percent the previous year. At 65.6 percent in 2021, 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. The EC found Romanians were the largest working age group of EU citizens residing in other member states in 2021 (three million or 24 percent of all citizens living in another EU country). Many emigrants are young and well-qualified, constraining the supply of skilled labor remaining in Romania. Romania faces a shortage of healthcare staff as doctors and nurses continue to seek work abroad, motivated by higher salaries and 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, Romania introduced an additional income tax and social contributions exemption for a period of 10 years for construction sector employees. The provision also introduced a specific monthly minimum wage of $728 (RON 3,000) for construction workers. As of 2022, the same minimum wage rate and tax exemptions were extended to agriculture and food industry workers. In 2017, Romania 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 the contracting, jurisdiction, and 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. In accordance with EU measures, Ukrainian nationals benefit from temporary protection status, and may register with local labor offices, and self – attest for earned qualifications and certifications. For 2023, the government maintained the 2022 annual quota of 100,000 work permits for non-EU workers. Work permits are valid for one year and are renewable with an individual work contract. Employers pay a $106 (€100) tax for most foreign workers, except for seasonal workers and those present in Romania on student visas, for whom the tax is $26 (€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 notify the employer before striking and must take specific steps provided by law before launching a general strike, including attempting reconciliation with management representatives and organizing a warning strike. Companies may claim damages from strike organizers if a court deems a strike illegal. Labor dispute mechanisms are in place for the conciliation, mediation or arbitration of 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 2022, employees from the automotive manufacturing, shipyard industry, and 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 generally respects the right of association. Union officials state that registration requirements stipulated by law are complicated, but generally reasonable.
The Romanian government enacted Social Dialogue Law 367 on December 19, 2022. Among other provisions, the law requires employers with more than 10 employees to negotiate a collective labor agreement. Collective labor agreements can also be concluded within a company, by groups of workplaces, at the collective bargaining sector level, or at the national level. According to the Ministry of Labor, companies and employees had finalized 5,344 collective labor agreements as of Q3 2022 compared to 3,690 in 2021.
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 indicate 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. According to the National Labor Strategy for 2021-2027, Romania aims to ensure that its labor market is dynamic, sustainable, resilient, and based on quality employment by 2027 with a 75 percent employment rate for people aged 20-64.
The minimum wage has more than quadrupled in nominal terms since 2012, rising from $170 (RON 700) to $600 (RON 3,000) per month in 2023. Starting in 2022, employers can only pay the minimum wage for the first two years of an employment contract. Minimum-wage employees impacted by the new law will be eligible for wage increases in 2024. In 2021, Romania had the highest rate of employed persons at risk of poverty (15.6 percent) among EU member states.
Wage increases have outpaced productivity growth since 2016. This has led to a marked growth in hourly labor costs, which posted a 10.9 percent nominal increase in Q3 2022 as compared with the same period in 2021. On January 31, 2021, 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, Romania 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 reduce employee losses.
As of August 2022, part-time contracts mandatory payroll taxes are computed at the value of at least a minimum wage, unless part-time workers declare they are engaged in multiple labor contracts equating a full-time workweek.