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Legal & Tax Alerts

Employment Updates as of October 2021

Publication: ZRVP

The new Government Emergency Ordinance no. 117/2021 brings new amendments to the Romanian Labor Code, mainly aiming at discouraging and combating the so-called “grey labor”.

The protection of workers’ rights on the Romanian labor market is generally linked to the nature of employment relationship between an employer and an employee. The Government focuses on strengthening the transparency on the labor market which will help develop the business environment and make the labor market more competitive.

Under-declared work

One important amendment refers to clarifying the concept of “grey labor”. In this sense, the legal term used is “under-declared work” which seems to comprehend distinctive employment practices which tend to discourage economic growth. Under-declared work is defined as granting, in fact, a net salary higher than the salary stated in the tax/payroll documents submitted to the competent authorities.

The measure will:

  • discourage employers to disguise an individual full-time employment contract as an individual part-time employment contract;
  • ensure that the employer does not grant a higher salary than the one highlighted in the financial-accounting documents. Grey salaries, often coming in the form of illegal cash payments, are no longer possible, and taxes and other social contributions will be thus applied to the real salary declared in the employee’s contract;
  • protect employees’ rights.

From the perspective of the applicable sanctions, the new legal provisions establish new cases that can be considered contraventions, mainly highlighting the need to comply with the new envisaged amendments. Granting a net salary higher than the salary stated in the tax/payroll documents submitted to the competent authorities may trigger an administrative fine between RON 8,000 – RON 10,000 per employee, without exceeding the cumulative amount of RON 100,000.

Undeclared work

Undeclared work in connection with a part-time individual employment agreement refers now to the non-observance of the working duration provided in such agreement, apart from exceptional cases when part-time employees perform overtime.

The related contravention and its sanction are also modified. Undeclared work is sanctioned with an administrative fine from RON 10,000 – RON 15,000 per employee, the cumulated value of the fines being limited to the amount of RON 200,000.

On the other hand, a more permissive approach is applied to the payment of compensations for overtime work. The period in which an employer can compensate an employee for overtime work has been increased from 60 calendar days to 90 calendar days.

Salary payments

Exceeding the due date (negotiated and set in the labor agreement concluded with the employee or imposed by the applicable collective bargaining agreement or by the employers’ internal regulation) of a salary payment by more than one month is now sanctioned with an administrative fine from RON 5,000 to RON 10,000 per employee, unless the employer is subject to Law no. 85/2014 regulating insolvency prevention and insolvency proceedings.

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