According to KPMG survey on minimum wage requirements in all European Union (EU) and European Economic Area (EEA) member states and Switzerland, Romania has the third lowest EU minimum wage – EUR 416. Bulgaria has the lowest gross minimum wage (EUR 261), followed by Lithuania (EUR 400).
Luxembourg has the highest gross minimum wage (EUR 1,999), followed by Ireland (EUR 1,834) and Germany (EUR 1,818). The effective tax rate in Romania is 44 percent, the seventh highest compared to the effective tax rates in the 20 member states which have a minimum wage established at national level. The effective tax rates within the Member States range between 15 percent in Ireland and 87 percent in France.
In 2017, Romania had the second lowest minimum wage (EUR 323) after Bulgaria.
”This change in position is only due to the artificial increase in the gross minimum wage as a result of the shifting of the employer’s social security contributions to the employee. This can also be observed by looking at net amounts for 2018, as Romania is one place lower, with the second lowest net minimum wage (EUR 243), after its neighbor, Bulgaria (EUR 202),” KPMG survey reads.
Surprisingly, countries where the minimum wage is relatively low (including Romania) have high effective tax rates (over 40 percent) while countries with a high minimum wage (like Luxembourg, Ireland and the UK) have effective tax rates below 30 percent. When calculating the effective tax rate, the income tax rate as well as social security rates are taken into account, relative to the gross minimum wage.