Asian employees – a temporary solution in the labor market

Florin Gherghel, Manager Tax Services of Ensight Finance, the fiscal and financial consulting company of Ensight

The migration of the workforce raises serious problems for the Romanian economy, exacerbating the difficulties recorded in several industries. On the long term, the decrease of the number of employees and the reduction of the taxpayers will generate significant constraints to the social insurance budget. While waiting for a national strategy, a short-term solution to cover the shortage of personnel is represented by foreign workers from outside the EU, especially from Asia. In the last two years, the annual quota approved by the Government for permanent or posted workers has increased steadily.

Types of work permits	2016	2017	2018
Permanent workers	3 500	3 500	4 000
Internship workers	200	200	100
Seasonal workers	200	200	400
Cross-border workers	100	100	100
Highly skilled workers	800	800	500
Seconded workers	700	700	1 200
People transferred within the same company (ICT)	–	–	700
TOTAL	5 500	5 500	7 000

According to the data published by the Labor Inspection, in August 2018, 17,089 employees were employed by non-EU-EEA foreign citizens (European Economic Area), most of them being from:

• Turkey – 3,627

• China – 2,120

• Moldova – 1,787

• and Vietnam – 1,554.

The main areas of activity in which they work are as follows: restaurants, shipbuilding and floating structures, wholesale, clothing and footwear and construction works for residential and non-residential buildings.

In the first half of this year, the number of issued work permits increased by 50% compared to the same period of 2017, and those issued specifically for permanent employees doubled. Thus, for this period 4,395 employment / secondment notices were issued, most for citizens from:

• Vietnam – 1,520

• Turkey – 568

• Nepal – 358

• Serbia – 275

• Sri Lanka – 261

• China – 253

• and Moldova – 181

In July, the annual quota of permits was used. For the period remaining until the end of 2018, the Government approved its increase with 8,000: 4,000 permanent foreign employees and 4,000 seconded.

More bureaucracy and higher costs with foreign workers

The process of obtaining the work permit obliges the employer to a wide bureaucratic process. The employer must effectively carry out the activity for which it is requested to issue the employment notice, must have paid the obligations to the state budget and have not been sanctioned for undeclared work or illegal employment in the last 6 months prior to the application for permanent workers / seasoned / trainees / cross-border / highly qualified, respectively in 3 years prior to the submission of the application in the case of seconded workers and ICT (persons transferred within the same company). Also, the future employee must fulfill the special conditions of professional training, experience in activity and authorization, be medically fit, carry out the respective activity and have no criminal record that is incompatible with the activity that he will carry out on Romania’s territory.

To these are added a number of other procedures and costs, such as the obligation to pay the taxes necessary to obtain the right to stay and the right to work (eg 100 EUR tax for obtaining the work permit for permanent, seconded, cross-border workers, trainees; 25 EUR for seasonal workers; 120 EUR long stay visa for work / posting purposes; 259 RON residence permit; 120 EUR consular fee for obtaining / prolonging the residence permit), travel costs and accommodation of foreign employees.

Until the beginning of November 2018 the minimum wage costs imposed by the legislation were higher than in the case of hiring a Romanian employee because the salary registered in the individual employment contract for a permanent worker had to be at the level of the average gross salary per economy, respectively 4,162 RON for year 2018. At the beginning of November 2018, however, the authorities amended the legislation in the field, so that the minimum gross wage that employers are obliged to enter in the individual employment contract for a permanent worker will no longer be reported at the level of the average gross wage on the economy, but at the level of the gross minimum wage, respectively 1,900 RON in November 2018. Employers are willing to accept a higher employment cost (actual wage costs and adjacent monthly expenses with foreign workers), provided they offer stability, predictability, learning and adaptability fast and constant against the standards of quality imposed.

From the moment the employment contract is concluded with a local employer, the workers are treated like any Romanian employee. Therefore, the wage tax and social contributions related to the wages of Asian workers will be calculated, declared and paid by the Romanian employer.

In the case of the seconded workers and of the persons transferred within the same company (ICT) it is to be analyzed whether the respective worker can be exempted from the payment of social contributions in Romania: in general, for periods higher than 6 months, the income tax must be paid and is need for an analysis of the Double Tax Treaty between Romania and the country of residence of the employee. Such analyzes are performed in the case of seconded workers / ICT, as these types of missions have a limited scope, and the respective persons continue to remain insured in the social security systems in the country of origin.

Romania is part of the European Regulations for the coordination of social security systems, but it has concluded some bilateral agreements in the field of social security and with some non-EU states (eg Israel, Canada, Albania, Korea, Macedonia, Moldova and Turkey). However Romania has not concluded such treaties with countries in mainland Southeast Asia, such as Vietnam, Cambodia, Laos, Thailand, Malaysia and Burma. In these cases, Asian workers detached from these countries cannot benefit from exemptions from the payment of social contributions in Romania.

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