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deLiliana Savin January 5, 2021

70 lei in addition to the minimum wage from 1 January 2021

The new year begins in Romania with an increase in the minimum wage in the economy.
The measure to increase the minimum wage will be certain after January 6.

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The new year begins in Romania with an increase in the minimum wage in the economy.

The extent of the minimum wage increase will be certain after January 6, when the government decides on the project to raise currently in public discussion on the website of the Ministry of Labour and Social Protection.

According to that draft, as from 1 January 2021, the gross basic minimum wage per guaranteed country, as referred to in Article 164 (1) of Law 53/2003 – Labour Code, republished, with subsequent amendments and additions, must be determined in cash, not counting the increases and other additions, for an amount of 2,300 lei per month, for a normal working time on average of 169,333 hours per month, equal to 13,583 lei per hour.

The exception applies to staff of a grade for whom the level of higher education is fixed, who have worked for at least one year in the higher education sector, where the minimum gross basic salary per country guaranteed as payment, excluding allowances and other additions, it remains at 2,350 lei per month for a normal working time of 169,333 hours on average per month, equal to 13,878 lei per hour.

The measure is aimed at approximately 1.4 million employees who will receive 70 lei more for their gross salary.

We cannot contradict the specialists who motivated this decision and estimated that it will have a positive effect on economic growth by stimulating employment, increasing the purchasing power of workers and reducing undeclared work.

However, we have doubts that the additional 70 lei for gross salary, which in reality means 40 lei for net salary, will be able to help employees too much, because the employees are not paid by the state, but we have reasons to believe that they will induce employers to reduce other wage costs so that they will in total maintain the level of staff budgets already approved for 2021.

The positive impact will be more in the pockets of the state than in the pockets of employees, as with this increase:

  • the contribution for non-employed disabled persons is increased as this calculation relates to the minimum wage;
  • the annual basis for the calculation of the social contribution for intellectual property rights/self-employment will be amended;
  • the ceiling will be increased by making social and health contributions payable by natural persons in receipt of non-wage income;
  • will increase the income rules for self-employment income tax on the basis of income rules.

Therefore, while the measure of the minimum wage increase will affect many sectors of activity such as trade, transport and small and medium-sized enterprises, and will lead to an increase in labour costs and a decrease in profitability, It remains to be seen whether this measure is a good step towards raising living standards and reducing social inequalities.