The Constitutional Court of Romania (CCR) again unanimously rejected the exception regarding the unconstitutionality of the provisions of Decree no. 16/2022 regarding “inflating” part-time employment contracts. According to its provisions, the social security contributions payable under short-time contracts may not be lower than those applicable to the gross minimum basic wage in the country in force in the month for which they must be paid . With the announcement of the CCR decision, the debate on this topic intensified, and since the expectations of the business environment were the greatest extent regarding the decision in the sense of returning to the previous form of taxation in the case of this type of contract (that is, proportionally depending on the income related to the reduced labor rate).

However, we remind you that such a decision is not new. As I wrote before, by the way, just two years ago, in 2020, KKR expressed its opinion on this matter, in exactly the same sense, so it was expected that it would stick to its point of view. Then the Constitutional Court by its Decision no. 46 dated 02.04.2020 regarding the rejection of the exception of unconstitutionality submitted by the trade union regarding the measure of “excessive taxation” of part-time employment contracts was formulated as follows: “Regarding the claim that part-time employees can achieve, thus, contributing more, than they receive as payment for their work, the Court notes that, in accordance with the European Social Charter, for the effective exercise of the right to work, the parties undertake to recognize as one of the main goals and obligations, the achievement and maintenance of the highest and most stable level of work possible in order to get a full-time job. Thus, the legislator’s measure to establish the same level of contributions for part-time workers as for those who work full-time seems justified in the context in which he tried to eliminate the situation where workers suffer from the instability of their jobs. and wanted to encourage full-time employment contracts, presumably to counteract certain practices unfavorable to workers in the labor market. The court notes that this measure applies to all persons in the same legal situation, so it cannot claim the existence of any discrimination.” We continue to believe that, in the absence of other (more flexible) contracting/remuneration options, the best alternative for workers is for their employers to resort to full-time employment contracts, specifically in the context of CCR. decision, reiterating the idea that they have at hand, regardless of turnover, according to current Romanian legislation, a number of benefits that they can provide to employees as part of the remuneration package, as support and to supplement the salary.

Clearly, the discussion needs to shift from starting salary to the entire compensation package that employers can consider. They have a number of options through which they can offer benefits that make the remuneration package attractive, for which there are different tax rules (deductibility in the calculation of income tax and/or non-taxation at the employee level). In particular, a large part of the additional payments currently provided will remain tax-free from January 2023, as long as they do not exceed a cumulative monthly limit of 33% of the basic salary.

The premise from which the State, through its authorities, has initiated measures whereby this provision of the Fiscal Code is specifically amended, according to which part-time contracts are taxed in the same way as full-time contracts from the point of view of social security contributions, appears to be a purely increase in state budget revenues and an increase in the degree of transparency and compliance with legislation on labor and employees.

Article by Claudia Sofianu, Partner, Head of Income Tax and Social Contributions, EY Romania

Article supported by EY Romania