Romania has the seventh highest cost of the social insurance contributions among the 27 countries in the European Economic Area (EEA), after the basis of calculation capping has been deleted as of February 1, 2017, says a study by Deloitte Romania.
The analysis forecasts that Romania might get near the mid ranking on the 11th position, considering the reduction of the cumulated rate of the contributions from 39.25% to 35%, as stipulated in the current ruling programme.
Yet, the percentage rate reduction comes along with an increase of the gross income by 22.75% to maintain the net value of the salary. Deloitte states that if this increase wasn’t considered and a comparative cost analysis of the social insurances wasn’t conducted starting from a net income and not from a gross artificially increased, Romania might even climb the top three of the countries with the highest social insurance costs.
„Romania ranked in the second part of the classification when the Deloitte study on the social insurances’ benefits was released in January 2017. Considering the ceiling of the basis of calculation for the contribution has been capped as of February 2017, we updated the analysis and we saw Romania climbed 11 positions,” said Raluca Bontaș, Partener Deloitte Romania.
The study reveals that the highest social insurance costs, mounting to over 45% are in France, Hungary, Belgium, Greece and Italy. Malta, Bulgaria, Cyprus, Iceland and Ireland are on the opposite side.
According to the study, Romania ranked 18th in those 27 EEA states in January 2017, and it climbed to the 7th position in February after the ceiling capping.
The ruling programme says Romania would drop 4 in 6 categories of the current social insurance contributions as of 2018 and totally transfer them to the employee. Romania is also to reduce their cumulated rate from 39.25% to 35%, while the income tax would decrease from 16% to 10% (0% below gross RON 2,000).
Under these circumstances, the labour cost will be 70% compared to 75% at present. So, for every RON 100 received by the employee, the state will cash in RON 70 instead of RON 75.
„The concept-the full transfer of the contributions to the employee–is welcome for the employer has only obligations, without benefits now, while the employees will become more aware of the labour cost. At present, they know only the gross salary that includes their own contributions, not the total cost with their salary, including the employer’s contributions,” said Raluca Bontaș.
On the other hand, she said that the potential compulsion of the employers to increase the gross income so that the current value of the net income should be preserved would be legally arguable.
Deloitte manager Monica Țariuc also stated that Romania would become the second country in the SEE that would transfer insurance contributions exclusively to the employee. „Apparently, the decrease of the contributions by 4.25pp leads to the decrease of the employers’ costs, but the total salary fund could be higher compared to the previous period when the ceilings were enforceable. The reason is that the savings from the lower salaries will be counter-balanced by the sums additionally owed for the higher salaries,” explained Monica Țariuc.