How to hire and pay independent contractors in Romania

Remote work makes it possible for you to expand your job search across borders — whether you want to find a skilled professional to help with a one-off project or expand your team in a new market. Romania, with its strategic location and low employment costs, is a great choice if you’re looking to hire contractors in Europe.

But to hire independent contractors in Romania, you'll need to follow all the Romanian employment laws and be compliant with local regulations. The process of hiring independent contractors in Romania can be long and arduous — not to mention expensive. Your company will need to navigate employment contracts, pay your contractors on time, and correctly classify your workers.

Learning how to hire and pay independent contractors in Romania may seem difficult, but you’re in luck. This guide will give you all the information necessary to navigate the complicated legal landscape in Romania. You'll learn more about Romanian labor laws, tax and compliance practices, and the risks of worker misclassification.

Unique considerations of managing contractors in Romania

Under the Romanian Fiscal Code, there are two major types of working relationships: with independent contractors and with employees. To establish a freelance agreement between yourself and a contractor, you'll need both a civil contract for the provision of services and a collaboration contract.

Another consideration to keep in mind is the lack of at-will employment in Romania. This means your company won't be able to terminate a Romanian employee whenever you feel necessary. You'll need to provide at least 20 business days' notice for termination. There are, however, a few exceptions for professional incompetence or disciplinary issues.

The official language is Romanian, and about 85% of nationals speak this language. Only about 35% of Romanians speak English. You are likely to find remote workers who are bilingual, but you might need translation services for negotiations and to oversee official documents.

How do I pay an independent contractor in Romania?

Contractors are responsible for submitting their own invoices to an employer. No taxes or benefits will be withheld from payments, as the contractor files their own taxes. To pay a contractor in Romania, you may use any of the following:

• Direct deposit

• Bank transfer

• Money order

• Paper check

• Online money transfer services (Wise or PayPal)

However, these options may not be ideal as they charge high transfer fees or poor currency exchange rates. You might also be faced with the hassle of tracking and managing multiple payments at once.

Alternatively, you could consider using Remote's digital payroll system, which makes it convenient to pay and manage contractors in Romania. With one click, you can process multiple invoice payments and make contractor payments in over 100 currencies quickly and accurately.  Our contractor management solution effectively helps you to pay your contractors in Romania while ensuring compliance with labor laws and tax regulations.

What are the risks of misclassifying Romanian independent contractors as employees?

Classifying a worker as a contractor when they meet the criteria to be considered an employee is known as misclassification. Romania is infamous for its complicated laws around worker classification, which is why you need to be careful about misclassification. 

In Romania, a worker must meet at least four of the seven independent activities defined by the Fiscal Code to be classified as an independent contractor. These include:

• The freedom of where and how they do their work

• The ability to work for more than one client/company at a time.

• Assumption of all risks involved in the work

• Use of their own resources

• Use of their own intellectual or physical skills

• Membership in a professional body that regulates, supervises, and/or represents the profession

• The freedom to perform work by hiring people or collaborating with third parties.

If a freelancer meets four of these requirements, they are considered to be a contractor and have the freedom to decide when or where they complete their work. The contractor can also take time off from work without making arrangements with the employer, and they don't have to follow the employer's disciplinary procedures. However, contractors are not protected under Romanian labor laws and don’t receive statutory benefits.

If your company intentionally (to avoid offering benefits) or accidentally misclassifies an employee as a contractor (or vice versa), there can be serious consequences. The risks of misclassification include regulatory fines, business penalties, bans, loss of intellectual property, legal disputes with workers, and increased attention from regulators.

Remote's misclassification guide can help you understand more about the nuances involved with classifying workers and what you need to do to avoid misclassification. 

What are the labor laws in Romania?

Employment law in Romania is mostly sourced from the Labor Code which sets out the major laws and regulations around employment in the country. Employment legislation applies to the following kinds of workers:

• Workers hired under an employment contract

• Workers hired under a fixed-term contract

• Temporary workers

• Freelance workers

• Day laborers

An employment contract must be provided in writing and in the Romanian language. The contract must include:

• Identification details of employer and employee

• Salary, payment frequency, and method of payment

• Duration of employment and conditions of the probationary period

• Vacation days or other entitled days off

• Notice period

Before a contract is considered legal, the employee must undergo a medical check and be cleared by a medical professional.

Employers have to observe the following employment terms as a minimum:

Minimum wages: All employees are required to receive a minimum wage of at least RON 3,000 per month.

Working time: In Romania, the workday is defined as eight working hours, with five working days available each week for a total of 40 working hours. 

Paid leave: Employees are entitled to a minimum of 20 vacation days per year. That means working days, not calendar days.

Rest period: The weekly rest period is 48 hours. Including overtime, you cannot require an employee to work more than 48 hours in a given week. 

In addition: 

Notice periods: Notice periods are required when terminating a contractor or employee. All workers must be given 20 days' notice or 45 days for management positions.

Sick leave/maternity leave: Employees are entitled to five paid days of sick leave, maternity leave of 126 days, paternity leave of five to 10 days, and parental leave of up to two years.

Social contributions: Employees are responsible for a 10% income tax rate, as well as a 10% health insurance contribution and 25% social insurance contribution. Employers are only required to pay 2.25% in work insurance contributions, and 4% to 8% for pension insurance contributions, depending on working conditions.

Finally, all employees are entitled to health, pension, and labor insurance, funded by withholdings from their salary. Since employers don't make payroll deductions from contractors' wages, contractors are responsible for keeping up with all payments to the Romanian government on their own.

Tax and compliance practices for hiring independent contractors from Romania

All independent contractors are required to keep up with their annual tax filings and compliance practices. 

If your company is based in the US, you will have to submit relevant tax forms to the US Internal Revenue Service (IRS) to maintain tax compliance, whether you're hiring contractors or employees.

Depending on your company's situation, you may need to submit forms 1096 and W-8 BEN to the IRS. The 1096 Form is used to show the government proof of the payments you made to a foreign national for work. It's essentially a cover sheet to the government detailing payments.

The W-8 BEN Form is used for a non-citizen living outside the US, who is otherwise known as a non-resident alien. Some countries have tax treaties with the US, which lowers the overall tax obligations for employers.

The process of hiring international contractors and employees from overseas can be complicated and present risks for companies. But Remote’s contractor management tool includes a handy feature that makes tax compliance easy for US companies.

How do I convert an independent contractor in Romania to an employee?

Working with a contractor offers great value to your team in the short term. However, there may be instances where you may want to convert your contractor to an employee.

Here are some possible reasons:

• The contractor is falling out of compliance with local laws and regulations.

• You have ambitions to give your contractor a bigger role in the company.

• You want to offer more benefits to your contractor to retain them.

• You are looking to improve the overall employee experience.

• The company has intellectual property that you are trying to protect.

• You are trying to save money in the long term.

• The current contract is outdated.

• Your contractor asks to become an employee.

To convert a contractor to an employee, you must create a new employment contract outlining new terms and conditions of employment and include details of statutory benefits. 

You’ll also need to update your payment processes and rely on a payroll system to ensure that your employees are paid regular wages, accurately, and on time. You must withhold the correct amount from each payment for health, pension, and social insurance. Plus, complete compliance with labor and tax laws is necessary to avoid expensive regulatory fines and business fees.

The process of converting your contractors to employees is complex, but Remote can handle this process for you quickly while helping your company remain compliant with local Romanian laws. Our expert team will update you on current regulations and automatically convert your contractors to employees if they fall out of compliance.

Use Remote to scale globally while still minimizing international risk.

The best way to hire international contractors in Romania

Hiring contractors from Romania is an excellent way to expand your global team, given its proximity to Europe and low living costs. However, the time and resources required to manage the hiring and paying of contractors in the country can be overwhelming. You’ll also need to understand complicated labor laws and tax regulations.

Instead of navigating political red tape and putting your company at unnecessary risk of noncompliance with Romanian law, you can use Remote's contractor management service to make your life easier. Our team offers full support for managing contractors in every part of the world, leaving you to focus on company growth. With Remote, you can: 

• Manage all your contractors within a single platform

• Use fully compliant contract templates checked by legal experts to onboard contractors in minutes

• Automate payroll to minimize human error and pay contractors in their local currency

• Stay compliant with all local Romanian labor and tax laws

It's never been easier to hire, pay, and manage international contractors. Remote makes contractor management effortless. Sign up for Remote's contractor management service today and begin onboarding your contractors in Romania in minutes!