As a member of the European Union (EU), Romania is an excellent location for companies looking to expand operations to Europe. While the country’s incorporation process is relatively straightforward, you’ll still need to handle the hiring process, set up payroll, and determine compensation and benefits. Here is an overview of the essential information you need to know about running payroll in Romania.
Taxation rules in Romania
In Romania, mandatory social security contributions on salaries are cumulated at 47.25% as follows:
- 25% social security contribution (CAS), borne by the employee.
- 10% social health insurance (CASS), borne by the employee.
- 10% tax on income from wages, borne by the employee.
- 2.25% of the contribution to Romania’s work insurance (CAM), borne by the employer.
Romania payroll options for companies
Companies have a number of options for setting up their Romania payroll. Since every business is different, it’s best to carefully consider each possibility to determine which is best for your company or industry. These include:
- Internal: Larger companies with a long-term commitment to Romania may run their payroll out of their subsidiary by hiring additional team members to handle HR and payroll needs. This option is the most expensive and time-consuming.
- Payroll processing company in Romania: Companies can also outsource payroll to a local Romania payroll processing company. With this option, you will still be held liable for any compliance mistakes.
- Partner with an Employer of Record: The easiest way to run a Romania payroll and stay compliant is through an Employer of Record like G-P. With us, you can rest assured that all employees will be paid on time, freeing you to focus on other important aspects of your business.
How to set up a payroll in Romania
Before you set up your own Romania payroll, you will have to incorporate a subsidiary. To do this, you’ll need registered capital, management, registered offices, assets, a Romania bank account, and the names of directors and shareholders. All businesses must register with the country’s National Office of the Trade Register and the Labor Chamber.
However, by choosing a subsidiary alternative like G-P, you can skip entity setup and start hiring immediately.
A probationary period of no more than 90 calendar days for executive positions and no more than 120 calendar days for managerial positions may be enforced by employers in Romania. During the probationary period, the employment contract can generally be terminated by either party with simple written notice, without any notice period.
After this period, there is generally a strict procedure to be followed when dismissing an employee. In addition to the required procedure, employers must provide a minimum notice period of 20 working days.
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