Romania has a moderately free and growing business environment, ranking 29th among 44 European countries in economic freedom. 

With a per capita GDP of $18,404, which is projected to rise to $27,102.13 by 2029 – Romania is classified as an upper-middle-income economy. This reflects a stable economic trajectory in which the purchasing power of the population is increasing, further enhancing its attractiveness for business expansion. 

A growing middle class with access to disposable income makes it a land of opportunities for businesses targeting retail, service sector, and consumer markets. 

Additionally, the workforce is highly educated and skilled, particularly in the fields of manufacturing, IT, and engineering. That gives businesses access to a quality talent pool driving innovation and growth. 

Romania’s strategic location, making it the gateway to both Eastern and Western Europe, further enhances its appeal as the hub for business expansion.

Today, it is a highly affordable place to live all over Europe and has high-speed internet to back you up in your business. However, setting up a business or branch in Romania comes with certain challenges. You’ll have to navigate through complex bureaucracy, complex and stringent labor laws, and language barriers to begin with.

This is why we need local partnerships with PEOs to mitigate the challenges and ensure a smooth and successful entry into the region.

The PEOs manage all HR functions, and hiring them has many benefits. Let’s learn more about them.

What Is a Romania PEO?

A Professional Employer Organization (PEO) provides a complete range of HR services under one roof.

When you hire the services of a PEO, you enter into a co-employment agreement with them. Thus, the PEO shares the employer’s responsibilities while you can focus on core business operations.

The key functions of a PEO in Romania include:

  • Payroll processing and managing employee salaries, taxes, and compliance with tax laws.
  • Giving the employees access to benefits like health insurance, retirement plans, etc.
  • Manage employee onboarding, record keeping, and performance evaluation.
  • Compliance with local laws, national labor laws, and regulations.
  • Guide about workplace safety and handle employee grievances.

Start hiring with a Romania PEO

Let us handle the complexities of hiring, compliance, and payroll in Romania while you focus on growing your team.

  • Hire employees in Romania with a Romania EOR
  • No local entity is needed
  • Pricing starts at USD 199 per employee
  • Remote People can also help you find the best talent in Romania
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How Does a PEO Work in Romania?

PEOs enter into a co-employment agreement with you and manage the HR and administration activities while the business can handle day-to-day matters.

All strategic decisions and operations remain in your hands, but the PEO handles HR and workforce-related troubles. 

Co-Employment Agreement

irst, the PEO and the company or business enter into a contract in which the PEO becomes the Employer of Record. The business handles all the operational and managerial responsibilities. Whereas the PEO performs the following functions:

Onboarding

Next, the hiring process begins, and the new employees are onboarded while complying with Romanian labor laws. It includes drafting the employment contract, getting the work permit, and completing the other documents or paperwork.

The PEO here will conduct the initial interviews and hire the individuals for the company.

Taxes and Payroll Management

The PEOs manage the payroll, including salary disbursements and tax calculation and deduction in compliance with Romanian regulations.

The average annual salary in Romania is $32,279 (as per the latest statistics in the third quarter of 2021). This is much lower than the US average annual wage of $58,260.

This disparity indicates a substantial cost-saving opportunity for businesses looking to hire skilled talent at much lower costs. That makes Romania an attractive place to outsource candidates remotely, too, via PEOs.

Employee Benefits Administration

The PEO looks after the employees’ health insurance, retirement plans, paid leaves, etc. Since they are already in the market and looking into all these aspects for their other companies, they can get you better terms, payroll costs, and services.

Compliance and Management

If there are any legal changes, the PEO also ensures that everything remains compliant with Romanian labor laws, including work hours, overtime, termination procedures, and employee rights. Since the legal environment changes over time, it keeps tabs on these changes and incorporates them as and where needed, which reduces the risk of non-compliance.

Overtime

In Romania, work done over 8 hours a day or 40 hours a week is considered overtime. The employer should compensate this time. Employees should be given a 75% premium over the base salary or paid time off after 60 days of consistently working overtime.

Moreover, the labor laws are strict; overtime only comes with employee consent, and people less than 18 years of age are strictly forbidden to work overtime.

Ongoing Support

The PEO provides ongoing HR support, including managing employee relations, conflicts and disputes, performance management, and workplace policy. They also provide guidance on the local culture and workplace norms.

Offboarding and Termination

Regarding employee termination, the PEOs provide seamless offboarding support, ensuring everything remains in compliance with Romanian laws, including managing their severance pay and assuring all the documents are complete as per the regulation.

Who Can Use a PEO in Romania?

Businesses from literally any domain can benefit from a PEO. Those companies looking to keep themselves free from the hassles of going through the local employment laws and managing the HR functions can avail of the services. 

Business structures like the following can benefit from PEO services:

SMEs or Small and Medium Enterprises

SMEs looking to expand to Romania can use the services of PEOs for payroll management, compliance, and employee benefits.

Startups

Entrepreneurs or those beginning their businesses can also use a PEO to find and hire new talent in the region.

Multinational Corporations

MNCs expanding globally into Romania can also outsource the HR functions, which can look after the local labor laws and manage the workforce for them.

Remote Teams

Since COVID-19, there’s been a drastic shift in the traditional work environment. In 2023, 28% of white-collar employees began working in a hybrid system in Romania. In 2020, 69% of employees reported positive remote work experience since the pandemic, which shows an adaptable and resilient workforce ready to join global businesses.

Seasonal or Project-Based Businesses

Companies that need staff for projects or temporary purposes can also rely on PEOs for hiring, payroll management, termination, etc.

Benefits of Using a PEO in Romania

There are several benefits of outsourcing the administrative and legal responsibilities of HR to a PEO. For starters, it lets the business focus on growth-driving strategies that enable it to operate successfully without the administrative burden of handling human resources. Here are some other benefits of using PEOs in Romania:

Easy Market Entry

Whether you are a new firm or a well-established organization, the PEO allows easy and quick market entry in the new place in Romania. Businesses can easily hire employees and begin their operations without needing a legal entity. This removes the administrative hurdles of setting up the legal entity and eases the market entry procedure.

Legal Compliance

The labor laws are quite complex, and there are distinct regulations governing the social contributions of employees, employment contracts, tax regulations, and employee rights. The PEOs ensure you comply with all the laws and minimize the risk of fines and penalties.

Cost-effective

By outsourcing HR tasks like employee benefits, payroll hiring, termination, and tax filing, the business can save considerably on the in-house HR staff cost and avoid hidden or overhead costs.

Competitive Employee Benefits

PEOs are in a better position to negotiate employee benefits packages, so benefits like retirement plans, health insurance, etc., can be negotiated, and you can find much better and more favorable rates. This way, you can attract and retain a top talent pool all over Romania.

Short Term Projects

Businesses that need to find human resources for short-term projects can also hire PEOs. They can also scale up the workforce or let the workers go once the project ends.

Local Expertise

In-depth knowledge of Romania’s business culture, legal environment, and labor laws is much needed in Romania. So, all companies new to the region and unfamiliar with all these aspects can take the guidance of PEOs.

Cultural Environment

One very important factor here is that Romania has a different culture from other countries.

There is a lot of emphasis on work-life balance, and the Romanians are very formal when it comes to business. The people here highly respect integrity and hierarchy in the office, so it is very important to respect the chain of command.

You must keep things extremely professional in the office, so it is all the more important to get a PEO to handle all these matters for you so that you can avoid any disputes or frustrations that occur due to cultural differences.

Tax and Employment Contributions

In Romania, the tax is charged at a flat rate of 16% on corporate income. The tax rate also depends on the business type and number of employees. 

For example, companies meeting specific criteria, like having a turnover below €500,000, may qualify for a microenterprise tax rate of 1%. If they have at least one employee or 3% if they have no employees

If the company has no employees, it is 3%, and 1% if it has one full-time employee. Then, the employees are also required to contribute to the social security system, and the percentage goes up to 2.25% of the gross salaries for the employers and 25% for the employees. 

The employees are also entitled to 20 days of paid annual leave. In Romania, leave that is not availed during the current calendar year is carried forward to the first 6 months of the next year. There are separate entitlements for maternity leave, paternity leave, employee pensions, and social insurance systems.

How to choose a PEO in Romania?

Finding and choosing the right PEO for your business is a critical decision that will impact your business growth. Here are some factors to consider when choosing a PEO partner:

1

Coverage

One of the first things to check when hiring a PEO in Romania is the area they cover. You need to see if the PEO understands the regional variations all over Romania and provides holistic local support in different parts of the country. You should also check if they have cross-module operation capability if you are looking to operate in other countries.

2

Key Services

Some provide holistic HR services while others provide limited support, so look up their services on the websites or ask them upfront to see if the type of services they provide aligns with your needs.

3

Compliance

 Also, the PEO must be registered and operate legally in Romania. Look for accreditations like Employer Services Assurance Corporation (ESAC).

4

Ongoing Support

Another thing that you must provide is ongoing support. Ensure they provide after-service support and offer assistance in Romania. Some PEOs appoint a dedicated account manager for your company. In contrast, others provide a team of personalized assistants.

Pricing Models for PEOs in Romania

PEOs usually follow either of the two models: the flat fee model or the percentage of the payroll, but certain factors impact the total pricing plan for the PEOs. 

The PEO cost correlates with your number of employees or the company size since if you hire more employees, there will be more work, and potentially higher prices will be charged by the PEO.

The type of services you require, like risk management, payroll administration, or holistic services, can also impact the overall cost of the PEO. 

Then, the rates also differ from state to state in Romania.

Flat Fee Model Vs. Percentage of Payroll Model

The percentage of payroll model is used by many PEOs, and it has several benefits. For one, it scales with your business, and the cost adjusts automatically as your size grows. 

Similarly, if you hire on a project basis, the cost will decrease as your business size shrinks. It is also quite simple to calculate and budget. However, on the downside, it can become quite expensive when your payroll increases, even if the service level stays the same. 

The flat fee model, on the other hand, has predictable costs, which make it quite easy to budget, and the payroll or salary can grow without any increase in the fee structure of the PEO. However, it’s not suitable for small-sized businesses with a limited number of employees as there are additional costs or services you may be taking that you don’t need, which add to your overall cost of hiring the PEO.

Access Top Talent in Romania with PEOs

Reliable PEOs in Romania can help you streamline your expansion and entry in Romania. PEOs are experts in payroll management, taxes, and employment law. They can guide you through the complexities of Romanian labor law and take on the co-employer role when hiring new talent. 

Many of these PEOs also provide cross-border support so you can expand to other nearby countries. Whether you are just starting your business or working on extending your footprint in Romania, PEOs can help ease the process and guide you through every step.

Unsure which PEO to pick in Romania? Contact Remote People, your trusted PEO, to be the best solution for your business. We provide top-rated PEO services that help unlock your business potential in Romania. Reach out today to get started!

Frequently Asked Questions

PEOs take on all HR functions, such as payroll management, benefits administration compliance, and more. They will hire employees for you without you needing to set up a local entity while keeping everything compliant with Romanian labor laws. 

 

In this way, you can focus on these strategic parts of the business while they take care of everything concerning your workforce.

The prime service of the PEOs in Romania is providing HR support. That's why they stay current with the latest local laws, taxes, and social security requirements. Hence, they are the first to know about any changes in the rules and incorporate them into the contracts, hiring process, and HR management services. 

 

This minimizes the risk of any penalty, legal action, or fine imposed on your business as you enter the Romanian market.

The cost of hiring a Romania PO in Romania usually depends on the number of employees and the type of services you want. Many companies have flexible pricing models like percentage of payroll and flat fee models.

 

They also offer package deals for the services you need or compliance requirements. Check for the cost by requesting a quote from them or consulting with PEO brokers and remote people.