Article

A well prepared workforce more important for investors than salary

Adeline Mihai of Ziarul Financiar, Romania's top financial publication, speaks to Camelia Nita and Emine Constantin about the needs of the Romanian workforce. This is an English translation; read the original article in Romanian here.

Finding a well-prepared workforce and the complexity of accounting and fiscal systems are the main difficulties for investors when looking to do business in Romania, according to a study conducted by outsourcing company TMF Group.

"Simplifying fiscal and accounting reporting systems and growing fiscal legislation predictability through announcing legislative changes 3-6 months ahead would give companies a stable environment to develop their business in. Moreover, it will facilitate the developing of plans long term, not just short and medium. Adapting the education system to the demands on the labour market and developing education programs focused on practical aspects will also boost the market in the direction hoped for by companies," said Camelia Nita, Managing Director of TMF Group Romania, a company present in the local market for 15 years.

More and more employers are complaining about the lack of qualified employees in Romania as vocational schools have fewer students and university graduates are not equipped with the sort of "practical" competences required by the labour market. As a consequence, currently, a Romanian employee’s salary is three times smaller than the average salary in the European Union.

"The salary is, without doubt, an important aspect, but not the main one when taking business decisions. Our study showed that companies are more concerned about the quality of the workforce and the qualifying level. This happens because a well-prepared workforce leads to growth in productivity, and the salary level must be linked also with the level of productivity. It is feasible to pay higher salaries if they are linked to high productivity," added Camelia Nita.

The minimum salary in Romania will increase in 2015 in two stages, according to Government measures; on 1 January 2015 it will increase from 900 lei gross to 975 lei gross, and from 1 July 2015 to 1050 lei gross.

Currently, one million employees earn the minimum salary and, according to data provided by the unions, another million is probably paid below the minimum salary.

"A company that pays only the minimum salary to its employees will find expenses will grow by 10%, or 18% compared to 1 October 2014 when CAS (Romanian pension fund) contributions were reduced," said Emine Constantin, managing Director TMF Group Romania. According to her, reducing the CAS paid by the employer by 5% must be seen in perspective, and the effects must be evaluated in correlation with other complementary measures. This way, the increase of the minimum salary expected this summer, but also the future increases, will reduce the impact of the measure, and for some employers could result in costs higher by 2%.

"From our clients’ perspective, we did not notice major changes in their fiscal behavior. For many of them, the two measures (decrease in CAS and increase of the minimum salary) seen together meant maintaining taxes paid to the state budget at the same level. It is obvious that the impact of salary expenses vary from employer to employer, depending on the percentage of employees paid with minimum salary of the total number of employees. These measures come in a moment when the business environment sees signs of recovery from the crisis, and at the end of a period characterised by slowing of incomes and profits," added Emine Constantin.

Read more about doing business in Romania