Independent contractors or freelancers are self-employed individuals who provide services to companies as a non-employee. This is one of the most common ways companies tend to hire non-local designers, engineers, support reps, etc.
For legal and tax purposes, independent contractors are not classified as employees. They may work for multiple clients, set their own work hours, negotiate their pay rate, and decide how a job gets done.
For example, the IRS says that if an independent contractor or freelancer does work that can be controlled (what will be done and how it will be done) by an employer then they are, in fact, classified as an employee.
As you can imagine, hiring someone as an independent contractor versus an employee is a fine line to tread.
While there are benefits when you choose the contractor route, there are quite a few drawbacks to consider and you’ll need to weigh them carefully to determine the best fit for your company.
A foreign subsidiary is a company that operates overseas as part of a larger company who’s HQ is in another country.
Establishing a foreign entity is great for having an international presence and accessing new markets. Though, setting up a subsidiary in Romania can be expensive, stressful, and time-consuming. It's not for the faint of heart.
To set up a subsidiary in Romania, you have to:
If you're lucky, this process can take months. If you're not so lucky, it can take up to a year. And on average, it costs about $50k-$80k, all-in-all, to get setup. And that's just for Romania.
An employer-of-record (EOR) is a company that hires and pays an employee on behalf of another company.
An EOR is typically used to overcome the financial and regulatory hurdles that often come with employing remote workers.
Each country has its own payroll, employment, and work permit requirements for non-resident companies doing business in their jurisdiction. Meeting those demands can be a huge obstacle when it comes to hiring remotely.
At Panther, we help companies employ and pay people in over 160 countries, without having to set up a foreign subsidiary. Payroll, benefits, taxes, compliance, and more are all handled by us, at a fraction of the cost.
Outside of saving you months and tens of thousands of dollars, other advantages of using Panther are:
Because you no longer have to set up your own subsidiary, you’ll save a ton of time and tens of thousands of dollars using Panther.
Paying employees in Romania is not the same as paying workers in your own country. Employees have to be paid using Romania’s employment and payroll standards.
This means that you have to know, understand, and keep up with 1) fluctuating currency changes, and 2) local payroll and tax laws in the countries you’re looking to hire in.
Outside of the laws and regulations around payroll, there may be different conditions surrounding leave, overtime, termination, and more. As you can imagine, maintaining this kind of regulatory knowledge can be challenging. But it is crucial and necessary to follow local legislation.
After, you’ll have to determine the best way to pay your international employees. This can be done in a number of ways, including but not limited to:
One of the most challenging (and expensive) parts of paying international employees is setting up the infrastructure to do so.
Before you start to run payroll, you have to register your company as the local employer in the country the worker resides in. As you can see in the “Set up a subsidiary” section, this is a multi-step process that can take up to a year and put you on your way to bankruptcy.
Outside of EORs acting as the full admin employer, many also provide remote payroll.
For example, at Panther, in just 1-click, you’re able to pay your entire global team, anywhere in the world. We send you an invoice each month, charge you in US Dollars, and pay your employees the same amount in their local currency.
We factor in currency fluctuations and use the mid-market rate plus any applicable fee passed on by our provider at cost at the time of billing.
A full workweek in Romania is 8 hours a day and 40 hours a week. For employees under the age of 18, work is limited to 6 hours a day or 30 hours a week.
The Employer has the obligation to keep a record of the daily work hours performed by each employee, highlighting the start and end hour of the working program, and shall present such records to the labor inspection control when required.
Employees are allowed to work a maximum of 48 hours per week including overtime. After working a 12 hour day, employers must give a 24 hours rest period. Work performed outside the standard 8 hours per day, 40 hours per week must be compensated with paid hours off during the 60 calendar days after the overtime has been performed. If the compensation with paid time off is not possible, the overtime shall be paid to the employee by adding a benefit that must not be lower than 75% of the basic wage, pro-rated to the overtime performed.
Workers under 18 years of age, part-time employees, pregnant employees who are unable to work normal working hours for health reasons are not permitted to work overtime.
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Romania has two minimum gross wages guaranteed in payment (both excluding bonuses and other additions): RON 2,230 for a work schedule of 8 hours per day, from Monday to Friday (full time employees). RON 2,350 for a work schedule of 8 hours per day, from Monday to Friday, for the employees assigned in positions for which higher education studies are required and have at least one year of seniority in the higher education area The minimum gross wage is amended yearly under the conditions of law.
The payroll cycle in Romania is monthly with the payment date stipulated in the individual employment contract.
20 days is the minimum holiday guaranteed by law per year, pro-rated with the worked period. The vacation days must be taken within the work year. If the employee for justified reasons cannot take all or part of the annual leave in that calendar year the Employer is obliged to grant the annual leave not taken, within a period of 18 months from the year following the one when the entitlement to vacation leave arose.
There are 15 public holidays.
Sick leave is paid only if the employee has a minimum contributory period to the Health House for the prior six months, based on a medical certificate issued by a physician.
The employee must inform the employer of his condition within 24 hours from the moment the medical certificate was issued. If the sickness occurred on the non-working days, the employee must announce the Employer about his condition on the first working day.
The first 5 calendar days are paid by the Employer. From the 6th day, the medical allowance is supported by the National Health Fund. In practice, the Employer is paying also the amount supported by the National Health Fund and then requests the reimbursement of the amount from the Health House.
The payment percentage in case of the sick leave allowance is ranging between 75% and 100% of the calculation base (average of the employees’ monthly gross wages during his last 6 months prior to the month the medical leave is granted).
The maternity leave is 126 calendar days (usually 63 days before + 63 days after the birth of the child). It represents 85% of the calculation base (average of the employee’s monthly gross wages during her last 6 months prior to the month the maternity leave started). The maternity leave is granted based on the medical certificate issued by the physician.
The maternity allowance is granted by the National Health Fund (in practice the Employer pays the maternity leave and afterward he requests the reimbursement of the amount from the Health House).
Fathers are entitled to 5 days of paid paternity leave and can be used until the child reaches the age of 8 weeks. If the father chooses to participate in childcare courses, leave can be extended for an additional 10 days. This extension can only be used once and on the birth of the first child.
Parental leave entitlement last until the child is 2 years old. In the case of a disabled child, leave is until the child is 3 years of age. The payment is made directly by the state institution and represents 85% of the employee’s average revenues during his last 12 months of activity. During this period, the employment contract is suspended.
Work-Related Injury Leave – The employer covers all work-related injuries that an employee has suffered either directly or through insurances.
The employee should receive 100% of their average monthly earnings in the 12 months prior to the disability for 14 days if not hospitalized.
After 14 days they shall receive 66.7%. As of September 1, 2020, all work-related medical leave must be reported to the Ministry of Manpower.
5 days for an employee’s marriage and 2 days for the marriage of a child.
2 days of unpaid leave is granted to an employee who has had a death within their immediate family.
The termination types are:
A written decision of the Employer is always required, except for terminations during the trial period. During the trial period, the employment contract may end based on the termination letter of either party (the Employer or the employee) and no notice period is required.
Notice period in case of dismissal is a minimum of 20 working days for all types of job titles, regardless of the employment contract is concluded for a limited or unlimited duration.
There is no statutory severance pay in Romania unless conditions have been set in a collective agreement.
Labor agreements in Romania must be set up for an indefinite period (i.e. as permanent contracts).
The probation period when having an employment contract for an indefinite period cannot exceed:
Fixed-term employment agreements can be used as exceptions, which are defined in the law: replacement of an employee whose labor agreement is suspended, temporary modification of the Employer’s activity, the progression of some seasonable activities, the employee meets retirement conditions within 5 years from the date of employment.
The probation period in case of a fix term employment agreement cannot exceed: