Romania’s Government is about to decide today (December 30) if it increases the minimum gross wage from the current level of RON 1,050 (EUR 233) to RON 1,250 (EUR 277) starting May 1, 2016. The RON 200 (EUR 44) increase (+19%) was set earlier this week after some harsh negotiations with the unions’ and employers’ representatives.

Looking at the numbers, the local companies will have to pay some RON 246 (EUR 54) per month for each employee they pay the minimum wage, as the total employer’s cost goes up from RON 1,292 to RON 1,538. The employees will get RON 135 more to their net salary (up from RON 777 to RON 912) while the state gets RON 111 more taxes (up from RON 515 to RON 626).

In Romania there are over 1.13 million employees paid the minimum wage, 1.09 million of which in the private sector, according to Romania’s Labor Ministry. This means that the minimum gross wage hike will increase the total salary costs for these employees by some RON 277 million (EUR 61 million) per month.

Given that the measure becomes effective on May 1, 2016, the local companies will have to pay some EUR 430 million extra next year to cover for the minimum salary hike. Some EUR 235 million will get to the employees while the state will get EUR 195 million in additional taxes.

This simulation, however, only covers the 1.13 million employees paid the minimum wage, so the overall costs will be even higher as there are probably a lot of people with gross wages between RON 1,050 and RON 1,250 who will also benefit from the wage hike. The number of employees paid the minimum wage will thus grow.

The local companies must also prepare for other employees to ask for wage increases. And this additional cost is hard to determine.

Romania’s Government decides to increase minimum wage in May

Minimum wage increase in Romania would create problems for companies

editor@romania-insider.com