ORDINANCE NO. 3/08.02.2018 OF THE ROMANIAN GOVERNMENT
1. Benefit for employees exempt from income tax
- In Newsletter 2017/05 we informed that the transfer of employers’ contributions to pension and health insurance from the employer to the employee leads to higher expenditure on pension and health insurance for employees exempt from income tax. In order to compensate for this and to maintain monthly net income at the level of December 2017, special regulations have now been introduced.
- Accordingly, the following formula applies with regard to the calculation of the health insurance contribution for individuals who earn income from employed work and were already employed in December 2017 and who are in the category of persons exempt from wage tax disabled persons, persons who earn income from IT activity or from research and development activities):
Retained Health insurance contribution January 2018 = Gross income 2018 – Pension insurance contribution due 2018 – Net income December 2017
(see also Appendix „Calculation example January 2018”)
- These regulations apply only to persons exempt from income tax whose gross salary in January 2018, including bonuses, etc. according labour contract, has been increased by at least 20% compared to the salary valid in December 2017.
2. Social security contributions for part-time employees
- In newsletter 2017/07 we informed that part-time workers with a gross wage below the minimum wage must pay health (10%) and pension insurance contributions (25%) to the level of the minimum gross wage, i. e. 190 Lei health insurance and 475 Lei pension insurance contributions. We also pointed out that the application of this statutory provision may in individual cases lead to negative net wages for parttime workers. The legislature has now stipulated that the difference between the health and pension insurance contributions, as expressed as a percentage of the gross income of employees and the minimum contributions as stated above, must be paid by the employer for the employee. This means that the employee’s net wage remains unchanged compared to December 2017; the employer incurs additional expenses in the amount of the above-mentioned difference.
3. Pension insurance contribution in case of illness
- The basis of assessment for the pension insurance contribution in the case of sick pay has been changed. Previously, the pension insurance contribution was calculated at a flat rate of 25% for continued pay based on the average Romanian gross wage (1457 Lei in 2018). It must now be determined on the basis of the employee’s continued pay amount.
All provisions shall apply from January 2018 and the implementing rules shall be published within 15 days of the entry into force of the Regulation.
APPENDIX 1 „Calculation example January 2018”
- Formula: Retained Health insurance contribution January 2018 = Gross income 2018 – Pension insurance contribution due 2018 – Net income December 2017
- In the case of wage increases of more than 20% compared to the basic wage for December 2017, the benefit granted decreases degressively to 0, in proportion to the increase. If the retained health insurance contribution is equal to or higher than the health insurance contribution due, the provisions of Regulation 3/2018 no longer have any effect.