Leveraging Employer of Record for Hiring & Business Growth in Romania

What is an Employer of Record in Romania?

An Employer of Record, also known as an international PEO, offers a streamlined solution for swiftly hiring and onboarding employees in Romania, often within just a couple of weeks. This approach eliminates the need to establish a local entity, saving both time and financial resources.

Romania, situated in Eastern Europe, presents a dynamic and burgeoning landscape for business endeavors. Despite past economic and political challenges, the country has made significant strides and now boasts one of the highest economic growth rates in Europe.

However, navigating Romania's intricate labor and commercial laws, influenced by EU directives, can be daunting for international companies. Legal complexities, compounded by language barriers, may impede progress, leading to potential revenue loss and increased expenses.

By leveraging a comprehensive and automated global HR platform, you can efficiently onboard your remote workforce while ensuring compliance with regulations regarding payroll, benefits, and employment matters. Through Mercans' extensive global network spanning over 160 countries, our Employer of Record services facilitate the expansion of your business worldwide, including into Romania.

Reasons to expand business in Romania?

With its robust economic growth, improved living standards, and access to European Union funding, Romania emerges as a promising destination for businesses seeking expansion. As one of Eastern Europe's fastest-growing economies, Romania offers a conducive environment for investment and growth, supported by factors such as currency stability and reshoring trends. In this article, we explore five compelling reasons why expanding your business in Romania could be a strategic move for long-term success and prosperity.

Investing in Romania is a great way to expand your business. Here’s why:

1. Robust Economic Growth: With a projected economic expansion of 3.1% by the International Monetary Fund and 1.8% by the European Commission, Romania is poised to outpace its neighboring countries. Supported by European Union funding, currency stability, and foreign investment, Romania offers a fertile ground for business growth.
2. Improved Living Standards: Romania has made significant progress in closing the economic gap with its European peers. In 2021, GDP per capita, adjusted for purchasing power, reached 74% of the EU average, marking a notable increase since 2010. This improvement reflects positively on the country's overall standard of living.
3. Access to EU Funding: As an EU member state, Romania benefits from substantial EU funding, providing significant opportunities for business development. With over 6 billion euros already allocated in grants and loans, Romania offers a conducive environment for accessing and leveraging EU resources for business expansion.
4. Currency Stability: The stability of Romania's currency, the leu, offers a favorable business environment compared to neighboring countries like Hungary. The relative stability of the leu minimizes currency risks and enhances investor confidence, facilitating smoother operations and financial planning for businesses.
5. Reshoring Opportunities: The recent trend of companies reshoring from Russia and Ukraine to Romania has contributed to a surge in foreign direct investment. This influx of investment, coupled with favorable intentions from foreign companies to set up or expand operations in Romania, underscores the country's attractiveness as a strategic investment destination.

Roles and Responsibilities of an Employer of Record (EOR) in Romania

Mercans specializes in delivering tailored Employer of Record (EOR) services designed to fulfill the unique roles and responsibilities required for businesses operating in Romania. Our comprehensive EOR solutions encompass a wide range of functions, including employee onboarding, payroll processing, tax compliance, benefits management, and HR support. By entrusting Mercans with your EOR needs, you can rest assured that your business operations in Romania will adhere to all legal and regulatory requirements seamlessly.

The role of an Employer of Record (EOR) extends to assuming the legal responsibilities associated with employing staff on behalf of another company. This involves managing payroll, taxes, benefits, and ensuring compliance with local labor laws and regulations. For companies looking to expand internationally without establishing a legal entity in Romania, understanding the significance of EOR services is crucial. Mercans simplifies the process of hiring and managing employees in Romania, enabling businesses to focus on their core objectives while we handle the administrative intricacies.

Responsibilities of the Employer of Record (EOR) in Romania

• Ensure strict compliance with local employment laws for all workers

• Manage the intricacies of the local payroll process

• Handle the filing of employment-related taxes and essential paperwork

• Provide workers with accurate and timely payslips

• Facilitate the seamless distribution of workers’ salary payments

• Optimize global expansion with our Global PEO services – a streamlined solution without the need for entity setup

• Guarantee legal presence, compliance, and Intellectual Property (IP) protection

• Facilitate smooth global mobility and work visas

• Build a diverse and efficient global workforce

• Choose Mercans, your trusted Employer of Record in Romania, for a compliant and efficient employment experience for your global workforce

Further elaborating on the roles and responsibilities of an Employer of Record... In the context of managing a diverse global workforce, Mercans acts as the registered employer of your workers in Romania, taking charge of local payroll administration, visa arrangements, contract management, and liaising with local authorities. This comprehensive support ensures compliance with all relevant labor laws and regulations, allowing your business to operate smoothly and efficiently in Romania's dynamic market.

Benefits of engaging Mercans as your Employer of Record (EOR) partner: Our EOR services offer numerous advantages for businesses seeking to expand into Romania, including streamlined hiring processes, efficient payroll and tax management, and reduced administrative burdens. With Mercans handling your EOR needs, you can navigate the complexities of international expansion with confidence, knowing that your operations in Romania are in compliance with local regulations and standards.

Whether you're planning to establish a presence in Romania or looking to optimize your existing operations, Mercans' expertise in EOR services can support your business objectives effectively. By leveraging our specialized solutions, you can unlock opportunities for growth and success in Romania's vibrant business landscape.

Employment Laws in Romania

Labor requirements in Romania, as outlined by the Labor Code of 2003, are quite comprehensive, covering various aspects of employment, including working hours, overtime, breaks, public holidays, annual leave, special leave, and more. Here's how these regulations might uniquely shape the workplace environment:

1. Structured Work Hours: The labor laws in Romania emphasize the importance of structured work hours, ensuring that employees are not overworked and have adequate time for rest and personal activities. This promotes a healthy work-life balance and enhances employee well-being.
2. Flexibility in Work Schedules: While there are standard working hours defined, there's also room for flexibility through individualized work schedules. This allows employees to tailor their work hours to suit their personal needs and preferences, fostering autonomy and satisfaction in the workplace.
3. Overtime Regulations: Overtime is carefully regulated to prevent exploitation and ensure fair compensation for extra work. Employees cannot be compelled to work overtime without their consent, and there are limits on the number of overtime hours allowed per week to prevent burnout.
4. Protection for Night Workers: Special provisions are in place to protect employees who work night shifts, including restrictions on the duration of night shifts and requirements for medical examinations. This demonstrates a commitment to safeguarding the health and well-being of workers in potentially challenging conditions.
5. Comprehensive Leave Policies: From maternity and paternity leave to sick leave and special leave for personal reasons, Romanian labor laws prioritize the welfare of employees in various life situations. This fosters a supportive and inclusive workplace culture where employees feel valued and cared for.
6. Training and Development Opportunities: Employees are entitled to leave for vocational training, highlighting a commitment to continuous learning and skill development. This not only benefits individual employees but also contributes to overall workplace productivity and competitiveness.
7. Recognition of Social Responsibilities: The provision for blood donation leave reflects a societal ethos of supporting altruistic activities and community well-being. By encouraging and facilitating blood donation, employers contribute to a broader culture of social responsibility and civic engagement.

Quick & Essential Facts:

1. During recruitment and selection, the focus should solely be on evaluating candidates' vocational skills and job performance abilities.
2. For indefinite-term contracts, the probationary period should not exceed 120 calendar days for managerial roles and 90 calendar days for other positions.
3. An employment contract entails an agreement where an individual (the employee) agrees to perform work for an employer (either an individual or a legal entity) in exchange for remuneration.
4. Employment contracts must be written in Romanian, signed by both parties before the employee starts work, and include specified information.
5. Fixed-term contracts cannot exceed 36 months, and parties can only enter into three successive fixed-term contracts with a combined duration of five years.
6. Wages must be paid at least monthly, either in cash or by bank transfer, with deductions governed by various rules.
7. A statutory national minimum wage applies to all employees.
8. Normal working hours should generally not exceed eight hours per day and 40 hours per week, with flexible work schedules available.
9. Overtime, generally compensated with time off in lieu, applies when work exceeds 40 hours per week, up to a maximum of 48 hours.
10. Employees are entitled to meal breaks and rest breaks if working for at least six hours, with minimum daily and weekly rest periods.
11. All employees have the right to at least 20 working days of paid annual leave.
12. Maternity, paternity, parental, adoption, carers’, and sick leave are provided to support work-life balance.
13. Sick employees may receive sickness benefit, set at 75% of their average pay, for up to 183 days per year.
14. Discrimination in employment based on various grounds is prohibited.
15. Harassment, including sexual and psychological harassment, is prohibited, and employers must take measures to prevent it.
16. Employees have the right to join trade unions, and employers must not discriminate against union members.
17. Employers with 21 or more employees are required to bargain collectively with trade unions.
18. Strikes are permitted only after exhausting statutory dispute-resolution procedures.
19. Employers have obligations to ensure employees' health and safety, while employees have corresponding rights and duties.
20. Termination of employment can occur for various reasons, with notice generally required.
21. Employment contracts terminate automatically in certain circumstances.
22. Employers must provide vocational training for employees, with frequency requirements based on company size.
23. Internal rules covering discipline, health and safety, discrimination, and other matters are mandatory for all employers.

Romanian labor laws are crafted to safeguard the rights of both employees and employers within the workplace. These regulations cover a spectrum of employment facets, encompassing hiring practices, employment contracts, working hour stipulations, minimum wage standards, occupational health and safety protocols, and termination procedures.

Hiring and Recruitment Practices

Employers operating in Romania are mandated to adhere to stringent hiring and recruitment norms to align with labor laws. Discrimination based on gender, race, religion, or nationality during recruitment is strictly prohibited. Additionally, securing work permits for non-European employees before recruitment is imperative. Employers must meticulously document the recruitment process for future reference.

Employment Contracts and Conditions

Employment contracts in Romania must be documented in writing, outlining key specifics such as job description, working hours, compensation, benefits, and tenure. Both parties must sign the contract in compliance with legal requirements, incorporating clauses pertaining to confidentiality, duties, and contract termination.

Working Hours and Overtime Regulations

Standard working hours in Romania are set at 8 hours per day and 40 hours per week, unless approved derogations are obtained from the Ministry of Labor. Overtime work necessitates compensation through extra pay or time off in lieu, as stipulated by regulations.

Minimum Wage and Benefits

The minimum wage in Romania is subject to legal regulation, subject to annual adjustments. Employers are obligated to ensure that employees receive remuneration meeting the prescribed minimum wage standards, along with benefits such as social security, health insurance, and paid leave.

Occupational Health and Safety Regulations

Maintaining a safe working environment is a paramount obligation for employers in Romania. Adherence to occupational health and safety regulations involves providing protective gear, conducting safety training for employees, and promptly reporting workplace accidents.

Termination of Employment Contracts

Employment contracts can be terminated by either party with due notice, albeit employers must substantiate terminations with valid reasons and adhere to legal dismissal procedures. Dismissed employees reserve the right to contest their termination in court.

Resolving Employment Disputes

Employment conflicts in Romania can be resolved through arbitration or litigation. Employers and employees can seek legal counsel to amicably settle disputes within the confines of the law.

Employee Benefits in Romania

Holiday Leave: Every employee in Romania enjoys a minimum of 20 days of annual vacation leave, in addition to national holidays. Specific circumstances warrant additional leave: employees under 18, those working in hazardous environments, or individuals with disabilities or blindness receive an extra three days. With the employer's agreement, Paid Time Off (PTO) anticipation is feasible, and any unused leave upon departure is deducted from payroll. Unused annual leave can be carried over for up to 18 months (extended to 3 years per jurisprudence).

Sick Leave: Employees are entitled to five days of sick leave at 75% of their salary, paid by the employer. Government-paid sick leave for up to 183 days is available, depending on industry and circumstances. A doctor's note and employer notification within 24 hours are mandatory, with reporting on a non-working day to occur on the next available working day.

Personal Leave: Employees have the option to take unpaid leave for personal reasons.

Careers Leave: Parents are entitled to 45 days of leave at 75% pay to care for a sick child (up to 7 years), a disabled child (up to 18 years), or a seriously ill child (up to 16 years).

Maternity Leave: Pregnant employees are granted 126 days off, beginning 63 days before the estimated due date, with 42 days being mandatory. Maternity leave is paid at 85% of the salary by the government.

Paternity Leave: Fathers receive five days of paternity leave, with an additional five days available for attending a childcare course or possessing medical expertise in childcare. Paternity leave is paid at 100% by the employer.

Parental Leave: Parents are entitled to 12 months of parental leave before the child turns two, with 85% of salary covered by the government. One parent's leave automatically grants the other one month; both parents must take at least one month. Failure to comply results in the other parent being eligible for only 11 months of parental leave.

Overtime Pay: Employers are required to compensate overtime either by providing paid time off within the following 90 days or by making an additional payment, which must be at least 75% of the base salary for the overtime worked. If overtime is performed on public holidays, the employer must choose between compensating the employee with paid time off within the subsequent 30 days or making an additional payment equivalent to at least 100% of the base salary. While paid time off is the primary mode of compensation according to law, most employees prefer overtime payment.

Termination, Severance Pay, and Notice Period:

Termination: Romanian law distinguishes between managerial and operational positions during the termination process. Termination of employment can occur at the contract or probation period's conclusion, at the employee's request, or upon the employer's request. If initiated by the employer before the contract concludes, valid reasons such as physical or mental incapacity, professional inadequacy, or redundancy must be provided in writing.

Constraints on Termination: Certain restrictions prohibit terminations during leaves, temporary disability, quarantine, or pregnancy if the employer was aware of the pregnancy.

Notice Period: Employees are entitled to a minimum notice period of 20 days before termination. Executives are expected to provide a 20-day notice for resignation, while managerial positions necessitate a 45-day notice.

Severance Pay: Severance pay is not mandated by Romanian law.

Conclusion

In conclusion, leveraging an Employer of Record (EOR) can be a strategic move for companies aiming to expand their operations into Romania. The complexities of Romanian labor laws, coupled with the challenges of navigating local regulations and compliance requirements, make it imperative for businesses to seek professional assistance.

By engaging Mercans as your Employer of Record partner, you can unlock opportunities for growth and success in Romania's vibrant business landscape while ensuring compliance with local regulations and standards. Whether you're planning to establish a presence or optimize existing operations, Mercans' expertise in EOR services can support your business objectives effectively.

Also read: Payroll Services in Romania