New rules adopted on unemployment benefits and employment promotion

Download article in original language : RO0601104FRO.DOC

In late 2005, the Romanian government introduced new rules aimed at granting unemployment benefits in a more equitable manner, depending on the length of the contribution period, and at enhancing employment promotion measures.

The Romanian system of unemployment benefits and employment promotion, regulated by Law no. 76/2002, was recently amended by Government Emergency Ordinance no. 144/2005.

Main changes

Government Emergency Ordinance no. 144/2005 amends 23 articles of Law no. 76/2002 and adds new provisions to six other articles. The amendments aim to define the category of unemployed people more clearly and regulate the obligation of employers to submit monthly declarations listing the names of insured employees, including the dues paid to the unemployment fund (previously, employers were obliged to submit only a declaration of social security contributions). Unemployment benefit contracts with the National Employment Agency (Agentia Nationala pentru Ocuparea Fortei de Munca, ANOFM) can be concluded only for people insured through the public pensions and health insurance systems. The contribution of employers to the unemployment insurance fund is now set at 2.5% of the mandatory 'gross wage fund' for insured employees (down from the 5% stipulated by previous regulations), while individual insured people now pay a monthly contribution of 3.5% of the monthly income declared in the unemployment insurance contract (compared with the 6% stipulated by previous regulations).

Unemployment benefits are now granted for differentiated lengths of time depending on the period of contribution: for six months if the unemployed person has paid unemployment dues for at least one year (compared with a mandatory five-year contribution period previously); and for nine months for people who have paid unemployment contributions for at least five years (compared with the five to 10 years stipulated in previous regulations).

The monthly unemployment benefit now amounts to 75% of the national minimum gross wage in force at the date of entitlement (previously the phrase 'in force' was not included), for people with a contribution history of at least one year. Under the previous regulations, regardless of the period of contribution, unemployed people were granted a monthly, fixed, tax-free amount equal to 75% of the national minimum gross wage. According to the new regulations, the amount of the unemployment benefit differs depending on the length of contribution, by adding certain percentages to the national monthly average gross wage earned over the past 12 months (referring to the monthly income stipulated in the unemployment insurance contract): 3% in the case of a period of a contribution history of at least three years; 5% for five years’ contributions; 7% for 10 years’ contributions; and 10% for a contribution period of 20 or more years.

The unemployment benefit ceases when the recipient earns from authorised activities a monthly income higher than the national minimum gross wage (and not at the moment of starting a new job, as stipulated in the previous law).

It is mandatory for employers to inform public employment services of collective redundancies (the previous law used the term 'restructuring of activity and change in the number and structure of personnel'), at least 30 calendar days before redundancy decisions are issued.

The ANOFM may promote special fee-paying programmes in partnership with public or private entities, accredited and/or authorised according to the legislation in force, to increase the chances of unemployed people finding a job.

The new regulations also stipulate free-of-charge access of unemployed people to certain training courses, plus free transport or covering of travel expenses for unemployed people attending training courses.

Unemployed people who start full-time employment before the expiry date of the unemployment benefit period may receive 30% of the monthly indemnity for the remainder of their initially set unemployment benefit period.

Employers hiring school leavers over the age of 16 for a period of more than 12 months may receive an indemnity equal to the national minimum gross wage in force at the date of employment. School leavers entitled to unemployment benefits who start work before the expiry date of the unemployment benefit period will continue to receive the indemnity for the remainder of the initially set unemployment benefit period on condition that they remain employed for a minimum of 12 months from the date of employment.

Employers that hire school leavers on open-ended employment contracts are exempt for a period of 12 months from the payment of the unemployment insurance contribution for these employees (a new provision). Moreover, they receive an amount equal to the national minimum gross wage in force for each school leaver hired, on condition that they are retained for a minimum of two years. Further, employers that hire unemployed people and retain them for at least six months receive a discount on the 2.5% contribution due to the unemployment fund.

Application of the new legal provisions

In December 2005, two new Government Decisions (GDs) were passed on the 'application of the methodology norms' for the new regulations (amendment of GD 174/2002) and the procedures for access to the legal measures (amendment of GD 377/2002).

The prerequisites for applying the new measures include: documents certifying that a person is insured through the public pensions scheme and entitled to other social security rights, as well as through the health insurance system, both of which required for the unemployment insurance contract; documents specifying employment indemnities for school leavers and the unemployment benefits they were entitled to at the date of employment; exemption of employers from specific monthly dues; and a requirement, on termination of employment contracts, for employers to issue documents indicating the length of contribution to the unemployment fund. The norms in this area have also been harmonised with recent amendments to the Labour Code (RO0507102F).

The procedures on access to employment promotion measures (amendment of GD 377/2002) refer to: new ways of covering the cost of training programmes and related transport to and from company-based or regional training centres; setting and payment of unemployment indemnities and benefits for school leavers; the responsibilities of the employment services in monitoring newly employed school leavers for a 12-month period; and the ways of granting employers indemnities and exemptions from the payment of the 2.5% contribution to the unemployment fund for certain hired personnel.

Commentary

The new unemployment insurance and employment promotion regulations promoted by the government in are in line with the objectives set in its programme. Although they seem to be adding to the existing bureaucracy, especially in the case of employers and employment services, the new regulations have brought much needed transparency and rigour to the setting up and spending of financial resources.

The regulations seem to be encouraging for employers (unemployment insurance costs are reduced) as well as for potential unemployed people, especially recent school leavers.

Last but not least, the new legislation is beneficial for the promotion of active policies on a labour market made increasingly tense by Romania's economic transition. (Constantin Ciutacu, Institute of National Economy)

Useful? Interesting? Tell us what you think. Hide comments

Eurofound welcomes feedback and updates on this regulation

Add new comment