The labor market around the world has been changing dramatically in response to the pandemic. More and more people started to work from home, but the labor force participation has finally reached new record highs. Despite many labor distortions and hardships in Europe, labor markets are returning to normal.
Labor Market Is Struggling
In the aftermath of the pandemic, the European Commission pressured the need to enhance employee support for hiring and retraining. The European job market has been shaken to the core by the pandemic and the green initiatives adopted in the EU and the ongoing efforts to transition to a digital business environment. Europe consistently struggles with labor market shortages, which are only expected to be heightened as the bloc’s population is aging.
While the focus during the pandemic was to protect jobs, the Commission started a new initiative in 2021 whose main aim was to help workers to adapt to the post-pandemic reality. In this respect, Nicholas Schmit, the Commissioner for Employment, declared that the active labor market policies in the bloc must be strengthened.
Regarding the future, despite the slow elimination of social restrictions, research shows that remote jobs will persist even in a post-pandemic future. This could trigger other important labor market changes, such as the disappearance of low-paid and low-skilled jobs because many jobs will be done remotely. For instance, as people work from home, the demand for office cleaning will decrease considerably, along with travel services. This could translate into higher unemployment for such jobs.
Because of this, it is predicted that more than 4.3 million jobs will disappear in the next 10 years in customer service and food service. In addition to this, as business travel is not expected to recover due to remote jobs, employment in commercial aviation and the airport industry, hospitality, and food service is expected to drop significantly.
Among these hurdles, Romania decides to strengthen its support to employees by amending the Labor Code.
New Changes to the Romanian Labor Code
Although the Romanian labor legislation has not undergone significant reforms for some time, smaller improvements have been made to further protect employees and ensure that the Romanian labor legislation is aligned with the EU’s objectives.
One of the key areas addressed by the Government Emergency Ordinance no. 117/2021 was the concept of gray work. Gray work or gray labor means that legally hired employees work more (and earn more) than what employers declare to the authorities.
The new amendments aim to discourage gray labor practices, according to which employees receive a net salary higher than that recorded in the payroll statement and the monthly declarations regarding social security contributions and income tax.
This is a new concept in the Romanian Labor code, which now allows authorities to sanction employers that practice gray labor. Underreported work does not only affect the tax system, but also the rights of employees.
On the one hand, employers pay fewer taxes for their employees since their work is underdeclared. On the other hand, employee rights are affected in terms of social contributions. Since their declared income is lower than the one they actually receive, social contributions are lower than what they should be in reality.
According to the legislator, employers giving a net salary higher than the one declared will be sanctioned with a fine ranging from 8,000 to 10,000 lei per employee whose work is underdeclared, without the total fine exceeding 100,000 lei. If the employees exceed the duration of working time written in their part-time contracts, there is a fine between 10,000 to 15,000 lei per employee, but without exceeding 200,000 lei.
Compensation for Overtime
The amendments also addressed the conditions and compensation for overtime work. Initially, the employee could have been compensated for their overtime work at any time in the following 60 days. This limit has been extended to 90 days instead.
In other words, after the employee works overtime, the employer has up to 90 days to offer them paid days off to compensate for extra hours. This aims to improve the flexibility of the labor relation.
Timely Salary Payments
Finally, the new amendments addressed the issue of late wage payments. The Labor Code stipulates that the salary must be paid at least once per month on a date as established in the employment contract, internal regulations, or the relevant labor agreement.
According to the new legislative changes, employers that fail to pay salary within one month are now sanctioned with 5,000-10,000 lei per unpaid person, except for cases in which the employer is in insolvency.
Overall, these are key changes made to the Romanian Labor Code to better protect employee rights. This helps Romanian legislation fulfill its main objective – protecting employees – and be better aligned with the EU law and objectives.