Removing the ceiling for the social contributions to the pension and healthcare systems for employees with a gross salary higher than 5 average salaries leads to higher labor costs.

The Romanian business environment is being exposed to a situation of increased labor costs combined with the reduced availability of labor on the domestic market, according to a study by EY Romania.

At the beginning of the month, the new Government has decided to remove the measure that capped the contribution to the public pension and healthcare systems to five gross average salaries, which means that people with very high wages in Romania will pay higher taxes. The current tax law doesn’t offer the employers affected by the new provision solutions to offset this cost increase, according to EY Romania.

In the new context, employers should focus more on measures that improve the workplace for their employees, such as flexible working programs and career development programs, said Claudia Sofianu, EY Romania partner.

editor@romania-insider.com