Romania: Latest working life developments – Q1 2017

Controversial hikes in wages and taxes on high earnings, new negotiations on the unitary pay system in the public sector and a spontaneous strike at the public railway company 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 2017.

Controversial socioeconomic policies

Following the elections of December 2016, a new government formed by a coalition between the Social Democratic Party and the Alliance of Liberals and Democrats was appointed in January. The new government, led by Social Democrat, Sorin Grindeanu, announced a set of generous socioeconomic measures, which have been the subject of considerable debate.

Following consultations with the social partners, the statutory monthly minimum wage was increased from RON 1,250 (about €275) to RON 1,450 (about €320), affecting the approximate 30% of employees in Romania who are the minimum wage. The wages of some categories of public employees, such of those working in the cultural sector and local public administration, have been augmented by 20%. The social minimum guaranteed pension was raised from RON 400 (about €90) to RON 520 (about €115) as of 1 March, a measure from which around 500,000 persons have benefited.

To finance the wage and pension increases, the government changed the rules on the taxation of high wages (that is, those exceeding the equivalent of five times the average gross wage). Previously, employees on high wages paid health and social contributions only up to the ceiling of five times the average gross wage, with the remainder of their salary not being subject to these taxes. The government has removed this ceiling, to the effect that health and social contributions are paid on the whole salary, with 36,000 employees being affected by the new taxation formula. The measures have been criticised by representatives of the business sector who called them ‘Robin Hood policies’ that are economically unsustainable.

Unions dissatisfied with draft law on unitary pay

Reducing wage inequality in the public system has been at the core of government’s efforts since 2015, when a first draft law aiming to correct existing imbalances was put forward by the then Social Democrat government. But the new technocratic government installed in November 2015 abandoned the draft law elaborated by its predecessor, engaging in a similar initiative, which materialised in the adoption of an emergency ordinance in June 2016 following a wave of street protests organised by public sector trade unions. A new draft law was submitted to Parliament in December 2016 in the government’s last days in office.

The new government ignored the technocrats’ draft law and began negotiations with the social partners on a new law on unitary pay in the public system. Minister of Labour and Social Justice Lia Olguta Vasilescu announced that salaries below RON 4,000 (€900) would double and those exceeding RON 4,000 would be 45% higher. However, the trade unions are unhappy about the new salary law, arguing it would not diminish the large differences in pay in the public sector. In an open letter in February 2017, Cartel Alfa asked the Minister of Labour not to create new imbalances in the system by linking the salary of dignitaries such as mayors and the presidents of country councils to the national average wage while the wages of other civil servants are rlinked to the minimum wage. In an open letter sent by Cartel Alfa to the government in March 2017, the trade union confederation expressed concern that the social partners had not been involved in drawing up the draft law and accusing the government of a lack of transparency. Unsatisfied with the proposals coming from the Ministry of labour, trade unions representing public sector employees and police are threatening strikes and other protests.

Collective action at railway company

Some of the employees of the Romanian state-owned railway company, CFR SA, spontaneously stopped working in March. The collective action, which was not coordinated by the company’s trade union (Feroviarul), was triggered by the refusal of the management to begin negotiations on a new collective agreement, proposing instead to sign an amendment lasting a minimum of 30 days and a maximum of 90 days. However, negotiations on a new collective agreement started at the end of March.

Commentary

The generous measures such as the wage increases and augmentation of the minimum wage announced by the newly installed government are far from dispersing the tension in Romanian industrial relations. The negotiations on the draft law on the unitary pay system in the public sector, which triggered a wave of protests back in 2016, are some way from reaching a conclusion and new collective industrial action is highly likely. Moreover, collective bargaining in some sectors (healthcare and medical assistance) and in some big public companies with powerful trade union organisations, together with the opening of consultations on a possible change in the Social Dialogue Act, are likely to escalate the tension.

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