6 April 2020 – The Romanian government is taking active measures to reduce the implementation of redundancies and support employers by bearing employee-related costs during the state of emergency declared via presidential decree on 16 March 2020.
One of the main measures concerns the decision of the Romanian government to pay the technical unemployment indemnity for qualifying employees on behalf of employers.
As a rule, the Romanian Labour Code provides that in the event of a temporary reduction and/or interruption of activity for economic, technological, structural or similar reasons, the individual employment agreements of the employees involved in a temporarily reduced and/or interrupted activity may be temporarily suspended. During the suspension of the individual employment agreements, the employees involved in the temporarily reduced and/or interrupted activity will not carry out any work duties (as their work obligation has been suspended). In such situations, the local law rule is that the employer is still required to pay its employees a monthly technical unemployment indemnity of at least 75% of their base salaries.
By way of exception in the given context, the Romanian government issued Government Emergency Ordinance no. 30/2020 ("G.E.O. no. 30/2020"), which entered into force 21 March 2020, whereby the technical unemployment indemnity shall be paid from the state unemployment insurance budget, as per the terms set forth therein.
Given that the implementation of G.E.O. no. 30/2020 required additional practical clarifications and further measures were deemed necessary, new amendments to G.E.O. no. 30/2020 entered into force 31 March 2020 via Government Emergency Ordinance no. 32/2020 ("G.E.O. no. 32/2020").
As per G.E.O. no. 32/2020, the above-stated indemnity shall be awarded to employers whose activity is reduced or temporarily totally or partially interrupted as a result of the effects of the COVID-19 outbreak during the state of emergency.
The following provisions are introduced by the new enactment:
(i) companies whose activity is totally or partially interrupted do not have to obtain a corresponding state of emergency certificate issued by the Romanian Ministry of Economy, Energy and Business Development during the state of emergency;
(ii) companies whose activity is reduced as a result of the effects of the COVID-19 outbreak do not have to indicate a specific decrease in turnover (i.e., a minimum of 25% of average turnover in January–February 2020); the new enactment also eliminates the following requirements: (a) that such companies must be motivated by the absence of financial resources to pay all their employees' salaries and (b) that employers can benefit from the state indemnity for a maximum of 75% of its employees with active individual employment agreements.
The above-mentioned formalities are replaced by an affidavit of the employer, following the template provided under the Order of the Minister of Labour and Social Protection no. 741/2020 ("Order 741/2020"), entered into force on 31 March 2020.
G.E.O. no. 32/2020 also clarifies the situation of employees with two or more individual employment agreements, providing that:
(i) these employees do not benefit from the technical unemployment indemnity if at least one full-time individual employment agreement is active during the state of emergency;
(ii) such employees benefit from the technical indemnity for the individual employment agreement with more advantageous salary rights.
Technical unemployment allowance
In the context of the temporary suspension of the employment agreements due to a temporary reduction and/or interruption of activity as a result of the COVID-19 outbreak, affected employees will benefit from an allowance of 75% of their basic salary corresponding to their job position, but no more than the capped amount representing 75% of the national gross average wage (i.e. not more than RON 4,072 / approx. EUR 850). Such technical unemployment indemnity will be paid from the state unemployment insurance budget.
The technical unemployment allowance will be granted by the Romanian government only for the duration of the state of emergency established under Presidential Decree no. 195 dated 16 March 2020 for a period of 30 calendar days. Nevertheless, considering the rapidly evolving health crisis following the COVID-19 outbreak, a further prolongation of the state of emergency for at least another month is expected.
A big question mark in relation to the technical unemployment allowance has been whether employers would be required to supplement the capped amount offered by the Romanian government with amounts representing the difference of up to at least 75% of the basic salary of the corresponding job position, in accordance with the provisions of Art. 53 paragraph (1) of the Romanian Labour Code.
This lack of clarity is addressed under G.E.O. no. 32/2020, which expressly sets forth that employers have the possibility to supplement the capped amount offered by the Romanian government up to at least 75% of the basic salary of the corresponding job position, if the employers' personnel budget permits. By way of interpretation, if this is not financially sustainable, employers are not obliged to supplement the capped technical unemployment allowance, as per the above provisions of the Romanian Labour Code.
The technical unemployment allowance granted as per G.E.O. 30/2020 and G.E.O. 32/2020 shall be:
(i) subject to taxation and other mandatory social contributions as per the provisions of Law No. 227/2015 – the Fiscal Code, as further amended and supplemented, which shall be paid correspondingly by the employers;
(ii) exempted from the work insurance contribution; nevertheless, the period during which the related employment agreements are suspended will constitute a contribution period without payment within the social health insurance system for days of leave and social health insurance allowances.
Procedure before the unemployment agencies
The new application procedure set forth under G.E.O. 32/2020 appears to be more flexible and to facilitate easier access to the technical unemployment allowance with less bureaucracy.
Following the template provided under Order. 741/2020, employers will have to submit electronically to the competent Unemployment Agency the following:
(i) a standard application form signed by the director of the company; along with
(ii) an affidavit comprising the related statement that the activity of the company has been temporarily reduced or interrupted due to the COVID-19 outbreak; and
(iii) the list of the employees whose individual employment agreements are suspended due to such reason.
No other underlying documents substantiating the reduced or interrupted activity needs to be submitted within the application procedure with the authorities. Nevertheless, employers take full responsibility for the accuracy and veracity of the related statement, which may be subject to an audit by the authorities after the state of emergency ends.
Employers will have to submit the above documents after the proper registration of the suspension of the envisaged employment agreements with the General Employees' Registry (REVISAL).
The technical unemployment allowance will be computed proportionally to the number of technical unemployment days as of such suspension date until re-activation of the employment agreements, provided that the state of emergency will not cease at an earlier date.
The documentation is to be submitted in the month following the month for which the technical unemployment allowance is due (e.g., documentation will be submitted in April for the technical unemployment allowance due in March).
The settlement method is not based on a cost claim. Therefore, employers are not required to advance such payments from the companies' personnel budget.
The settlement period for the technical unemployment allowance is reduced under G.E.O. 32/2020 (by half) to 15 days following the submission of the above-mentioned documents. Following receipt of the technical unemployment allowances, employers are required to advance the corresponding payments to the employees within three working days.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.