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Legal changes to the regulations for the payment of social and health insurance contributions for employees

Background
Under the previous statutory regulation, the employer was obliged to pay 22.87% of the employee’s gross salary for social security contributions each month; the share to be paid by the employee was approximately 16.50% of the gross salary.

New distribution
The Romanian government has substantially changed the obligation to bear the costs of social security and health insurance contributions.

According to Government Emergency Ordinance 79/2017, the employer’s contributions to social security, health insurance, unemployment insurance, occupational disease insurance and accident insurance were substantially reduced from a total of approximately 22.87% of the gross salary of the employee with effect from 01/01/2018. In future, the employer will only have to pay a contribution of 2.25% for employment insurance (not to be confused with unemployment insurance). In return, the contributions for social security and health insurance to be paid by employees were increased from 16.50% to 35%. The employer must also continue to pay these contributions. The income tax to be paid as of 01/01/2018 is 10% instead of 16% as before.

As a result of these measures, an employee has to accept a reduction in his net salary while maintaining his gross salary. An increase in gross salary with the consequence that the employee would maintain the same net salary would have no or only minor disadvantages for the employee concerned.

As a result of the above-mentioned changes, there are therefore in practice three variants practiced by employers in response to the rush regulations:

  • The gross salary is not increased and the net salary of the employee is therefore considerably lower (in practice, this variant is more of an exception);
  • The gross salary is increased so that the employee receives the same net salary;
  • The employee receives monthly compensation in the form of bonuses granted by the employer without special consideration.

Since many employers originally practised the last of the above variants, the adjustment or increase in gross salary (second variant) is now predominantly to be found in practice.

Authors: Helge SchirkonyerMihai Turcu