Romania: Latest working life developments – Q1 2018
The shift of social contributions from employers to employees, the renegotiation of collective agreements in major companies, and the application of the Unique Pay Law are the main topics of interest in this article. This country update reports on the latest developments in working life in Romania in the first quarter of 2018.
Minimum wage increases but minimal change for employees
In January 2018, the gross minimum monthly wage increased by 31% (PDF), from RON 1,450 (€313 at 24 May 2018) to RON 1,900 (€410). This is the highest increase the country has seen in 10 years, significantly reducing the gap between the Romanian gross minimum wage and the gross minimum wage of other countries in the region, such as Croatia (€462), Hungary (€444), Latvia (€430), Lithuania (€400) and Slovakia (€480). However, at only 8%, the net minimum wage increase is less striking. This is due to the transfer of social contributions from the employer to the employee, resulting in higher taxation for employees. The net minimum monthly wage in Romania in 2018 is €252 per month, closer to the net minimum wage paid in Bulgaria (€200).
Despite a significant increase over the last five years, the net minimum wage is only 46% of the net average (€540) and it does not fully cover the costs of a decent standard of living. The Romanian parliament is currently debating a draft law aiming to establish a correlation between the minimum wage and the cost of living.
According to data from the Labour Inspection, 50.5% of employment contracts pay the statutory minimum wage or less.
Tensions rise amid collective bargaining in industry
Following the expiry of collective agreements in several big companies, a number of protests and strikes took place in Romania in the first quarter. The tension that marked collective bargaining was amplified by the impact of the transfer of social contributions from employers to employees. This decision, made by the government at the end of 2017, took effect on 1 January 2018. Failure to come to an agreement on wage increases led to labour disputes in Ford Craiova and Dacia Pitesti, two of the most important production plants in the automotive sector. While the parties at Ford Craiova managed to reach a collective agreement valid until 2019, negotiations continue at Dacia Pitesti, with the company's trade union Sindicatul Automobile Dacia (SAD) ready to announce a general strike should the parties fail to reach a consensus. The automotive industry is one of the most important pillars of the Romanian economy, accounting for 47% of Romanian exports in 2016 and employing about 150,000 people.
The metal and steel industries have also experienced difficulties in labour relations. In January, workers at ArcelorMittal Galaţi participated in a spontaneous protest during collective agreement negotiations. The company’s management declared the strike illegal and sued 55 workers who allegedly protested illegally. The collective agreement was concluded at the end of January and provided for a 15% wage increase (equivalent to around €50). Workers at Cromsteel Targoviste called a general strike at the end of March, after management refused to increase gross wages in line with the Valahia trade union’s requests.
Data provided upon request by the Labour Inspection indicates an overall decline in collective bargaining coverage in 2017 – only 949,000 employees were covered by a collective agreement, compared to 1.2 million in 2016.
Public sector protests over conditions of Unique Pay Law
In the first quarter of 2018, major unrest occurred in the public sector over the application of the Unique Pay Law. The two biggest union federations in the healthcare sector, Solidaritatea Sanitară and Sanitas Federation, organised protests in March and threatened to hold a general strike if the government failed to fulfil their demands. In line with the Unique Pay Law in the public sector, from 1 March 2018 the wages of medical doctors and medical assistants increased between 70% and 170%. The unions’ leaders acknowledged that the increase would prevent brain drain and the migration of medical doctors from Romania; however, they opposed the 30% threshold for bonuses as specified in the law.
The application of the Unique Pay Law triggered similar unrest among employees in the education sector, who protested against the inequalities created by the new law among public sector employees. The Federation of Education Trade Unions (FSLI) claim that, due to the transfer of social contributions from employers to employees, the net income of some employees in the education sector decreased, instead of increasing as intended.
Tensions between the government and trade unions are expected to continue over the coming months due to the application of the Unique Pay Law. Regarding the transfer of social contributions, trade unions are warning workers of a possible decline in net wages; however, until more data becomes available, the full impact cannot be assessed.