Payroll and Employment Taxes in Romania

Overview of Payroll Taxes in Romania

Understanding Romania's payroll and employment tax system is essential for businesses of all sizes operating in this Eastern European country. As an employer in Romania, you'll need to navigate several types of mandatory contributions, including social security contributions (CAS), health insurance contributions (CASS), and labor insurance contributions (CAM). Non-compliance with these regulations can result in significant penalties, strained relationships with employees, and potential legal issues. The Romanian tax system operates on a flat rate structure for income tax, but various deductions and special provisions apply depending on employee circumstances, industry sector, and income levels.

This article aims to help you understand the key aspects of Romanian payroll taxes, including calculations, deadlines, and filing procedures, ensuring your business remains compliant while efficiently managing employee compensation.

Fiscal Year in Romania

1 January - 31 December is the 12-month accounting period that businesses in Romania use for financial and tax reporting purposes.

Payroll Cycle in Romania

The payroll cycle in Romania is usually monthly, with employees being paid by the last working day of the month.

Minimum Wage in Romania

As of January 1, 2025, Romania's minimum wage rates are:

• RON 24.50 per hour and RON 4,050.00 per month. This represents a 9.46% increase from the previous minimum wage rate of RON 3,700 per month.

The minimum wage is reviewed periodically based on economic indicators and inflation.

Bonus Payments in Romania

In Romania, there is no legal obligation for employers to provide a 13th salary payment.

How is Payroll Calculated in Romania?

Payroll calculation in Romania involves several components that affect employee salaries. The process begins with the gross salary agreed upon in the employment contract. From this amount, mandatory employee contributions are deducted, including the Social Insurance Contribution (CAS) at 25% of gross salary and the Health Insurance Contribution (CASS) at 10% of gross salary. After these deductions, a flat income tax of 10% is applied to the remaining amount.

Personal deductions may apply for employees with lower incomes (up to 3,000 RON), ranging from 500 RON for incomes up to 2,000 RON to zero for incomes above 3,000 RON. Additional deductions of 150 RON per dependent are also available. Special provisions exist for employees with disabilities (exempt from income tax) and those under 26 years old.

Employers must also calculate their own contributions, primarily the Labor Insurance Contribution (CAM) at 2.25% of gross salary, which may vary by industry risk class (0.15% - 0.85%). Additional employer contributions include social insurance contributions of 4% for normal working conditions or 8% for special working conditions.

Types of Payroll Taxes in Romania

Romania has several distinct types of payroll taxes, each with its own regulations that businesses must adhere to. These taxes fund various social programs including pensions, healthcare, and unemployment benefits. Understanding each tax type is crucial for proper payroll management and compliance with Romanian law.

Social Insurance Contribution (CAS)

The Social Insurance Contribution (CAS) is a mandatory contribution that funds Romania's pension system and other social security benefits. For employees, the contribution rate is 25% of gross salary, calculated on the gross salary up to a ceiling of 24 times the national gross minimum wage per month. For employers, the contribution varies between 4% for normal working conditions and 8% for special working conditions.

This contribution is required to ensure employees receive pension benefits upon retirement, with the minimum contribution period being 15 years. The retirement age is currently 65 for men and 63 for women. CAS must be declared and paid monthly by the 25th of the following month. Non-compliance can result in penalties of up to 0.01% per day of delay.

Health Insurance Contribution (CASS)

The Health Insurance Contribution (CASS) finances Romania's public healthcare system. Employees contribute 10% of their gross salary with no ceiling for employment income. This contribution is mandatory and provides access to basic public healthcare services. While employers don't make direct CASS contributions, they are responsible for calculating, withholding, and remitting these amounts from employee salaries.

The CASS contribution must be declared and paid monthly by the 25th of the following month using Form 112 submitted to the National Agency for Fiscal Administration (ANAF). Failure to properly withhold and remit CASS can result in penalties and interest charges, as well as potential disruption of employee healthcare coverage.

Labor Insurance Contribution (CAM)

The Labor Insurance Contribution (CAM) is an employer-only contribution at a rate of 2.25% of the gross salary. This rate may vary between 0.15% and 0.85% depending on the company's activity risk classification. CAM funds work-related accident insurance and other labor market programs. This contribution is required to provide protection for employees in case of workplace accidents and to support various labor market initiatives.

Like other contributions, CAM must be declared and paid monthly by the 25th of the following month. Non-compliance can result in financial penalties and potential legal issues with labor authorities. Proper documentation of risk classification is important for companies that qualify for reduced rates.

How to Set Up a Payroll in Romania?

Setting up a payroll system in Romania requires careful planning and adherence to local regulations. This process involves several key steps to ensure compliance with Romanian tax laws and efficient management of employee compensation.

Registering with Romanian Authorities

To establish a payroll system in Romania, businesses must first register with several government authorities. Begin by registering with the National Trade Register Office (ONRC) to obtain a unique registration number. Next, register with the National Agency for Fiscal Administration (ANAF) for tax purposes and obtain a tax identification number. You'll also need to register with the Territorial Labor Inspectorate and the National House of Public Pensions.

For social security purposes, registration with the National Health Insurance House is mandatory. Each new employee must be registered in the General Registry of Employees (REVISAL) within one working day before they start work. This registration process requires submitting various forms and documentation, including company incorporation documents, proof of registered office, and information about company representatives.

Choosing a Payroll System

Selecting the right payroll system is crucial for managing Romanian payroll efficiently. When choosing a solution, consider factors such as compliance with Romanian tax regulations, ability to handle multiple types of contributions, and capacity to generate required reports for authorities.

 
• In-house payroll department using specialized software
 
• Outsourcing to a local accounting or payroll service provider
 
• Cloud-based payroll solutions with Romanian tax compliance features
 
• Playroll, which offers comprehensive payroll management specifically designed for Romanian tax requirements
 
• Integrated ERP systems with payroll modules

The best choice depends on your company size, budget, and specific needs. Smaller businesses may benefit from outsourcing or using cloud solutions like Playroll, while larger organizations might prefer in-house systems or comprehensive ERP solutions. Regardless of your choice, ensure the system can handle Romania's specific tax calculations and generate the mandatory Form 112 for monthly declarations.

Onboarding Employees for Payroll

Proper employee onboarding is essential for accurate payroll processing in Romania. When hiring new employees, collect all necessary documentation including identity documents, tax identification number, education certificates, and medical certificates. Employees should complete and sign a tax declaration form specifying their tax status and any applicable deductions.

For payroll purposes, you'll need to register each employee in the General Registry of Employees (REVISAL) and obtain their personal numeric code (CNP). Create individual payroll records containing employment contract details, agreed salary, working hours, position, and any special tax provisions that may apply (such as disability status or age-related benefits). Ensure employees understand the structure of their compensation, including gross salary, mandatory deductions, and net pay calculation methods.

Step-by-Step Payroll Processing in Romania

Collecting Timesheets and Attendance Data

Accurate time tracking is the foundation of compliant payroll processing in Romania. Employers must maintain detailed records of employee working hours, including regular hours, overtime, night shifts, and absences. Romanian labor law requires employers to track attendance for all employees, regardless of whether they are hourly or salaried.

Calculating Salaries and Deductions

Calculating Romanian payroll requires precision and attention to detail. Start with the employee's gross salary as specified in their employment contract. From this amount, deduct the mandatory employee contributions: 25% for Social Insurance (CAS) and 10% for Health Insurance (CASS). The remaining amount forms the basis for income tax calculation.

Apply the flat 10% income tax rate after considering any applicable personal deductions. These deductions vary based on income level and number of dependents. For employees with gross monthly incomes up to 2,000 RON, a personal deduction of 500 RON applies, gradually decreasing to zero for incomes above 3,000 RON.

Each dependent provides an additional deduction of 150 RON. Special categories like employees with disabilities or those under 26 may qualify for tax exemptions. Calculate the net salary by subtracting all deductions from the gross amount.

Generating and Distributing Payslips

Romanian law requires employers to provide detailed payslips to all employees. These payslips must include specific information: gross salary, all deductions (itemized by type), additions (bonuses, overtime), and the resulting net salary. Additional required information includes the calculation period, employee identification details, position, and department.

Submitting Payroll to Authorities

Romanian employers must submit monthly payroll declarations to the authorities using Form 112 (Declaration of social contributions, income tax, and insured persons). This comprehensive form includes details of all employees, their gross salaries, contributions, and tax withholdings. Form 112 must be submitted electronically through the ANAF portal by the 25th of the month following the reporting period.

Paying Employees

Romanian employers typically pay salaries once per month, although more frequent payment schedules are permitted if specified in the employment contract. The most common payment methods are direct bank transfers to employee accounts, which have largely replaced cash payments in recent years. Salary payments must be made by the date specified in the employment contract or collective bargaining agreement, typically between the 10th and 15th of the month following the work period.

How to Submit Payroll Tax in Romania

 
• Electronic submission via the ANAF portal: The most common method, requiring digital certificates for authentication. Form 112 must be submitted through this system.
 
• Through authorized tax consultants: Businesses can authorize certified tax professionals to submit declarations on their behalf.
 
• Using specialized payroll software: Solutions like Playroll can generate and submit the required forms directly to authorities.
 
• In-person at local tax offices: For small businesses without electronic capabilities, though this method is increasingly rare.
 
• Via the Virtual Private Space (SPV): A secure online environment for taxpayers to communicate with tax authorities.

Payroll Tax Due Dates in Romania

Payroll Contributions in Romania

Understanding the tax obligations for both employers and employees is crucial when operating in Romania's business landscape. This section explains how taxes and statutory fees affect payroll and individual earnings in Romania.

Employer Tax Contributions

Employer payroll contributions are generally estimated at an additional 2.25% - 10.25% on top of the employee salary in Romania.

Employee Payroll Tax Contributions

In Romania , the typical estimation for employee payroll contributions cost is around 35%.

Individual Income Tax Contributions

Individual income tax in Romania is calculated according to a flat rate of 10%.

Pension in Romania

Old-age pensions are granted to those who reach the standard retirement age and meet the minimum contribution period to the public pension system. Currently, the standard retirement age for women is 62 years, gradually rising to 63 years by January 2030, while men have a standard retirement age of 65 years.

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Managing Common Payroll Challenges in Romania

Global employers operating in Romania often encounter unique payroll challenges that can affect compliance and efficiency, like navigating evolving tax laws and managing employee data. With a need for real-time accuracy, modern organizations must develop strategies to overcome these challenges effectively. Below, we explore some of the most common payroll hurdles and provide actionable solutions to streamline payroll processes in Romania.

Maintaining Accurate and Detailed Payroll Reports

Maintaining accurate global payroll reports is often challenging due to currency exchange complexities, data integration issues, and the need to keep employee information up-to-date – including tax information, hours worked, leave balances, and any changes in salary or job status. Generating accurate reports is easy with a comprehensive payroll automation tool that consolidates fragmented data sources, and can keep track of employee payments and deductions.

Keeping Up With Ever-Changing Tax Laws & Compliance Laws

In Romania, tax laws and compliance regulations can change frequently, presenting a significant challenge for global employers. Monitoring updates to federal, state, and local tax codes is crucial to avoid non-compliance and costly penalties, but requires significant time and resources. Partnering with local experts or a reputable global HR platform is an effective way to maintain compliance. These services can help employers stay compliant with evolving regulations while freeing up time for more strategic work.

Consolidating Multi-Vendor Payroll Analytics

Managing payroll across multiple vendors often leads to fragmented data and inefficiencies, making it difficult to consolidate analytics. These challenges can hinder decision-making, especially when trying to gain a clear view of workforce costs and trends. To address this, organizations can invest in a centralized payroll management system that unifies data from multiple vendors. A consolidated platform simplifies payroll tracking, ensures data accuracy, and provides actionable insights into payroll expenditures.

Integrating Multiple HR & Payroll Systems

Global companies are prone to using multiple HR or payroll systems across regions, which can easily lead to fragmented payroll data, increasing the risk of delays and errors in employee compensation. To combat this, seamless integration between payroll and other systems is critical.

Payroll management systems that connect with existing HR and financial platforms can help streamline workflows by reducing manual inputs and ensuring that all departments operate with up-to-date, accurate information. In turn, this helps guarantee on-time, accurate payroll, boosting employee satisfaction.

What Does a Global Payroll Management Platform Cover?

A global payroll management platform is a software solution designed to streamline and automate the payroll processes for organizations with employees across multiple countries. It helps ensure accurate and timely payment while maintaining compliance with legal and regulatory requirements in Romania.

Key functions of a payroll management platform can include:

• Consolidate payroll data: Streamline fragmented payroll data into one source of truth when you’re operating in multiple regions.
   
• Analytics and reporting: Advanced capabilities to analyze payroll data and generate automated reports per region.
   
• Monitor and standardize payroll: Get an accurate view of employee costs, bonuses, and taxes per region, catch variances, and standardize payroll processes across regions to minimize errors.
   
• Compliance and record-keeping: Maintains accurate payroll records and ensures adherence to labor laws and regulations, reducing the risk of legal issues.
   
• Employee self-service: Provides portals where employees can access pay stubs, update personal information, and manage benefits selections.

How Playroll Can Streamline Payroll & Taxes in Romania

Expanding globally is an exciting milestone for any company, but it comes coupled with complex payroll challenges. It doesn’t have to be complicated. At Playroll, our easy-to-implement global payroll management software combines automation with hands-on support to make global payroll truly simple. Here's how Playroll helps:

• Multi-Vendor Integration: Our platform syncs seamlessly with your providers and in-house systems to unify global payroll services in one platform.
   
• Standardize Payroll Processes: Unify your operations in one dashboard to ensure payroll is running smoothly globally, with advanced approval flows and reports.
   
• Improve Governance & Compliance: Improve compliance by centralizing all your compliance tasks and processes. Easily track your payment obligations, with digitized audit trails.
   
• Advanced Reporting: Access and configure your data, your way, with a comprehensive suite of payroll analytics and reporting tools.