Fiscal consultants warn about social contribution change in Romania
The Romanian Government’s intention to transfer all social contributions to the employees may cause problems in the private sector, where companies should have to increase their employees’ gross salaries to keep net salaries unchanged.
The state has no legal ways to force companies to do this, which may result in lower revenues for employees, according to local fiscal consultants.
The Finance Ministry wants to cut the overall social contributions from 39.25% to 35% and to move this burden to the employees alone, starting January 1, 2018. The employees currently pay social contributions amounting to 16.5% of their gross salaries while the employers pay the remaining 22.75%, which is not included in the employee’s gross salary but is included in the company’s overall personnel costs.
If the Government decides to transfer all social contributions to the employees, then companies should increase their employees’ gross salaries by at least 22.75% so that the net salaries are not affected. This would not increase the companies’ overall personnel costs compared to now. However, some companies may see this as an opportunity to reduce their wage expenses.
“This decision is probably a bit easier to put into practice in the public sector, but it is questionable whether and how it can be mandatory for the private sector,” said Raluca Bontas, Deloitte Romania partner.
Private employers can’t be forced to artificially increase their employees’ gross salaries. “Maybe most of the employers will understand to cover this extra cost for employees by increasing their salaries, but this may not happen in all cases. Thus, there may be situations in which the employees will see their net salaries go down by some 22%,” said Mihaela Mitroi, PwC Tax and Legal Services Leader.
The Government’s intention to cut the individual income tax from 16% to 10% may compensate part of that salary decrease, she added.