Why Romanian business owners don’t rush to hire the unemployed and the young on public money
Opinion 5 minute read

Why Romanian business owners don’t rush to hire the unemployed and the young on public money

01 October 2014

Madalina Pana of Dailybusiness.ro speaks with our Romanian managing director Camelia Nita about government subsidies available to employers in Romania - and why more businesses don't take advantage of them.

Read the original article (in Romanian)

Employers can benefit from much cheaper labour for one year if they recruit young graduates or unemployed people. Although the state offers monthly incentives of 500 lei per person, entrepreneurs do not really go for the generous help. What are the reasons that keep them away from this "charity"?

There are three situations in which employers can benefit from various forms of incentives granted from the unemployment insurance budget, according to experts at TMF Group Romania, an outsourcing company specialising in accounting, HR and payroll.

Thus, employers may receive incentives up to 50% of expenses made during professional training programs. To qualify for these benefits, training must be organised by authorised companies and reach a maximum of 20% of staff.

Employers can benefit from this amount only once during a calendar year and are required to keep the people that have participated in the company at least one year from the date of the grant amount, says Camelia Nita, managing director of TMF Group Romania.

The state also provides incentives between 500 and 750 lei per month for employers who recruit graduates of educational institutions. The amount of aid varies depending on the type of graduated school (high school, secondary superior or superior).

To qualify for these incentives, hiring must be done for an indefinite period of time and labor relations must be maintained for at least 18 months.

Employers benefit from this incentive for a period of 12 months. The period is extended to 18 months if the employees are disabled. If, after the expiry of the 18 month period, labour relations will continue, employers can receive financial aid equal to the amount of the social contributions that they pay for each employee in this case.

Such aid is received for a further two years. Money that is due is recovered from the unemployment insurance budget through an application form submitted in this regard.

A third situation in which the state stimulates the employers with money is aimed at employers hiring unemployed aged over 45 years or sole family fosters. This incentive amount is 500 lei per month. And in this case, the employment contract shall be for an indefinite period and labour relations must be kept a minimum of 18 months.

Employers benefit from this incentive for a period of 12 months. For the unemployed who qualify within five years for retirement. Incentive amount is 500 lei per month.

And yet, what displeases employers so that they do not use these incentives very often? Specialists of the TMF Group Romania have mentioned for DailyBusiness.ro six possible reasons.

The first reason is the obligation of keeping labour relations for at least one year. Otherwise they have to return the amounts awarded plus the NBR reference interest and they cannot qualify for incentives for a period of two years after.

The second reason would be the requirement of hiring people for an indefinite period, which affects the degree of flexibility and the ability to adjust to economic realities.

Experts add that, normally, incentives are deducted from the contribution that an employer remitted monthly to the unemployment insurance fund. If this contribution is less than the amount due, the employer shall recover the difference from the workforce employment agency. The process can take time.

Another reason is the need to conclude contracts with the agency for employment, therefore some bureaucracy.

Also, if the documents are not properly completed (in this case monthly statements) the amounts will not be granted until the correct documents are submitted.

The risk is that if the amounts are deducted from the monthly contributions, late fees will be calculated.

The sixth reason is that the incentives mentioned above shall not exceed the amount approved in the annual budget. Therefore, it is possible that not all employers are entitled to benefit from such incentives, experts from the TMF Group Romania warn.

Young employees on European money

A financial incentive similar to those mentioned above is the one announced by the Ministry of European Funds (MFE). In the spring of this year, the Ministry launched the public consultation documents for the implementation of a minims scheme whereby companies receive subsidies to hire young graduates.

Through this minims scheme, we support youth employment, but also private sector activity. Specifically, we subsidise the payment of salaries of young graduates and students of the class of 2014. Payroll subsidies will be granted for a period of minimum six months and maximum 12 months, stated the Minister of European Funds, Eugen Teodorovici.

"Employers who will benefit from these grants will be required to maintain the newly-created posts a period of time at least equal to that for which they received the grant. I emphasise that companies will be required to maintain the newly-established position, not the person that was employed initially, given that by this measure, we want to encourage competition in the labor market," added the minister.

Indicative of the new subsidy is 900 lei for young employees with secondary education or 1,300 lei for young employees who have higher education, according to the Applicant’s Guide Specific Conditions “Subsidised employment”.

The company that submits the file should not be insolvent or have debts to the state or local governments. Money can be accessed until March 31 2015. Firms must have fewer than 250 employees and a turnover of up to 50 million euros.

What next?


Insights and updates delivered to your inbox.

Sign up now