SIMILAR ARTICLES

IMF report – Conclusions show that Romania has become a new and atypical growth model: through imbalances. Which will soon get to be paid

Romania’s macroeconomic imbalances have increased in the past year, and economic and fiscal policies have to change so that the population’s incomes and prospects of… Mai mult

Discharging imbalances on RON exchange rate could start even this year. Analysts’ scenarios and BNR’s uncertainty

Analysts’ scenarios on the evolution of the exchange rate are rather prudent for the coming months, but severe for the beginning of the next year… Mai mult

Stimulating over-indebtedness by stimulating consumption: Overdue loans trigger warning signal – Map of debtors

The policy of stimulating consumption has also distorted the degree of indebtedness in the territorial distribution, and rich counties are competing with the poor ones… Mai mult

Interview with Fogh Rasmussen: “NATO’s role is to keep Russians out, Americans in and Europeans involved”

The text below is a series of fragments from the interview that former NATO Secretary General Anders Fogh Rasmussen gave to CRONICILE Curs de guvernare… Mai mult

Gas and electricity prices: Romania in a European context

Romania ranked fourth in the second half of last year in the EU in terms of price increase in natural gas provided to the population,… Mai mult

Cronicile

Good news for deficit: Unitary pay law comes with all contributions transfer to employee. Effect – enthusiastic increases, largely neutralized by taxes

de Mariana Bechir 12.6.2017

The net wage increases generated by the unitary pay law will be neutralized, at least in the first year, by the transfer to the employee of all social contributions as of 1 January 2018.

That means that much of the wage increase will return to budgets in the form of taxes paid by the employee.

This is also the explanation for Minister Olguta Vasilescu’s statement, according to which some net salaries are to decrease following the wage increases – and the sensitive contradiction to the same minister’s statements, according to which the salaries below 4,000 lei would be doubled.

All that means that the salary increases will have a limited impact on the budget deficit, as the unitary pay law makes use of this innovation of transferring the contributions initiated last year by Secretary of State Gabriel Biris.

The mention appears in Grindeanu government’s view regarding the framework law on the remuneration of staff paid from public funds:

When estimating the impact of this law, states the document signed by the Prime Minister, “it was considered the fact that as of 1 January 2018, the provisions of the Tax Code will be amended so that the employee will take over the full state insurance contributions“:

How social contributions are paid now

At present, social contributions for normal work conditions account for 39.25% of the gross salary and are paid as follows:

Pension contributions26.3% for normal work conditions

  • 5% for the employee’s individual contribution
  • 8% for the employer’s contribution

Contributions to health insurance – 10.7%

  • 5% for the individual employee contribution
  • 2% for the contribution due by the employer

Unemployment contributions – 1%

The rates of unemployment insurance contributions that apply this year are as follows, also with the mention that they have also been applied in 2016:

  • 5% for the employee’s individual contribution
  • 5% for the contribution due by the employer

Contribution to the Guarantee Fund for the wage claims – 0.25%

  • paid by the employer

Holidays and social health insurance contribution – 0.85% (paid by the employer)

Work accidents and occupational diseases insurance contribution – 0,15% (paid by the employer)

Overall, calculations show that an employee (either from the state or the private sector) will pay from the gross salary additional contributions of 22.5%, instead of 15.75%. So, for the increase to also be seen in the net wage, it should be higher than the sum of the contributions transferred to the employee.

In the case that another measure from the government program will be complied with, total contributions of 39.25% will be reduced as of 1 January to 35% of the gross salary.

Regarding the state employees, the additional amounts implied by in this tax novelty will come exactly from the wage increases that appear in the pay scales.

The trend will also be followed for private employees

Once the transfer of contributions from the employer to employees takes place, the increase of gross salaries becomes pressing for private companies as well.

To maintain employees’ net salaries after the transfer of contributions, employers from the private economy will have to increase gross wages, in relation to the decrease of the companies’ costs for the contributions to state budgets.

Finance Minister: Impact on net salaries will be almost neutral

Ionut Dumitru, President of the Fiscal Council, has recently announced that the budgetary impact of the unitary pay law is almost double the one presented by the Government, amounting to about 60 billion lei, compared to over 30 billion, as in the Government’s estimation.

Now, after the transfer to the employee of all contributions has been added to the equation, things are easy to explain: basically, much of the “gross” increases granted to the state employees (by the unitary pay law) are neutralized by the increase in taxation on the employee side (by the Tax Code).

That has already been confirmed by Minister of Finance Viorel Stefan, who stated in his interview with Reuters that most of the wage increases will come back to the budget in the form of taxes:

“What the public opinion has not understood yet is that the wage increases from the public sector introduced by law include the social security contributions. That makes the impact on net salaries almost neutral.”

Also, the enthusiastic increases announced by the Minister of Labour, Olguta Vasilescu, by 50, 60 or even 100%, refer to the gross salary, which will also include the tax transfer. And anyway, the increases will be applied gradually, by 2022.

Staff costs in 2022 – nearly 107 billion lei

The impact is neutral only in the first year of application of the unitary pay law and in the coming years, with the 2022 horizon, it will grow year by year. According to the Ministry of Finance’s calculations, the financial effort for 2022 is 43 billion lei, which means a total of 106.9 billion lei staff costs in the state budget (a 67% increase in current expenditures of 64 billion lei).

The monthly minimum gross national wage is forecasted for the same year of 2022 to 2,500 lei.

Priority areas for wage increases

According to the explanations given Tuesday in the Chamber of Deputies, average increases will be 5 to 10%.

They will be applied first and to a greater extent to some categories of state employees (dignitaries, police officers, military personnel, doctors), as can be seen in the timetable of the unitary pay law.

Impact in 2017:

  • 55 billion for increasing the wages of police officers, military personnel and security guards, as well as dignitaries, and increasing the allowances for meetings granted to local councillors
  • 73 billion lei for holiday vouchers

Impact in 2018:

  • 3 billion lei for the increases (total for doctors and dignitaries, by 50% for teachers, by 25% – the basic salaries, military salaries and function salaries)
  • 3 billion lei, holiday vouchers
  • 8 billion lei, food allowance (in the equivalent of two minimum wages per state employee)

Publicly appointed office-holders:

  • The President of Romania (who will have a salary of 18,120 lei next year, because the minimum national wage will be 1,510 lei), the state advisers and presidential advisers
  • MPs (will have 13,590 lei next year)
  • Ministers, state secretaries and undersecretaries of state, secretary general of the Government, state advisers
  • The Ombudsman
  • The presidents and plenum members of CNSAS, Competition Council, the Permanent Electoral Authority, CNA, etc.
  • Mayors and deputy mayors, presidents and vice-presidents of county councils
  • Prefects and subprefects
Mergeți în homepage ›

Publicat la data de 12.6.2017

Lăsați un comentariu


NEWS

ANAF changes selection procedure for liquidators. Main changes

The new order on approval and selection procedures for insolvency practitioners is an important step to a very good direction, industry experts say. ANAF is… Mai mult

Romania loses competition for a seat at UN Security Council. MAE Excuse: Campaign started too late

Romania lost to Estonia in the final vote to get the non-permanent member position within the UN Security Council for the period 2020-2021. On Friday,… Mai mult

Business internationalization / eMAG makes a step to entry five new international markets and targets a business of EUR 2 billion

eMAG hopes to get the opinion of the Hungarian Competition Council over the next two months for the acquisition of Extreme Digital, the market leader… Mai mult

"At a distance from books": 85,000 teachers (one third of educational staff) are graduates of distance learning

Approximately 85,000 teachers are graduates of distance learning (ID) programs, Education Minister Ecaterina Andronescu said at a meeting with school inspectors from Caras-Severin County. The… Mai mult

Mugur Isarescu: We should make a film for Viasat History about treasure in Moscow

A book should be written or a movie should be made and sent to Viasat History about a treasure evacuated to Moscow, as it is… Mai mult

Rhythm of commercial vehicle registration increases 3 times faster in Romania than EU average

Today, the European Automobile Manufacturers Association (ACEA) announced the status of commercial vehicle registrations in EU member states + EFTA in April and cumulated after… Mai mult

4.2%, from 3%: BNR has increased inflation forecast for 2019

The National Bank increased the inflation forecast for 2019 by 1.2 percentage points, from 3% to 4.2%. Also, the forecast for 2020 goes up by… Mai mult

Emergency procedure at European Court of Justice for Romania’s question: Are MCV recommendations mandatory?

The Court of Justice of the European Union (CJEU) has decided that Bihor Court’s request to be discussed under the emergency procedure, which is a… Mai mult

Government decides to increase external borrowing ceiling by EUR 4bn. It has consumed program resources for two years

The Government's agenda for Wednesday also includes the draft decision to increase the foreign loans ceiling for 2019 and 2020 by EUR 4 billion, up… Mai mult

Preparations for Summit in Sibiu - European Commission’s recommendations for EU's strategic agenda

On Tuesday, the European Commission presented a series of policy recommendations on how Europe can shape its future within an increasingly uncertain and multipolar world.… Mai mult

Meeting between Prime Minister Viorica Dancila and Chinese Prime Minister Li Keqiang: talks on a possible involvement of Chinese companies in PPP projects in Romania

On Friday, Prime Minister Viorica Dancila had a meeting with Chinese Prime Minister Li Keqiang, during which she stated her interest in involving Chinese companies… Mai mult

So-called "Belina Law" was adopted. Opposition will refer CCR: it turns Belina Island into a fiscal paradise

The Chamber of Deputies adopted on Tuesday the bill that provides for a derogating tax regime, such as tax exemptions or reductions, for land and… Mai mult

Deveselu shield is undergoing an upgrade process; the US provides alternative defence capabilities with THAAD systems

Aegis Ashore anti-missile system installed at Deveselu 99 Military Base will go in the next period through a previously planned upgrade process, the MApN announced… Mai mult

How 2019 began: Investments, allocations by 78.5% lower than the same period of 2018. 21% decrease in co-financing for attracting European funds

The consolidated general budget recorded a deficit of 0.5% of GDP in the first two months of 2019 namely RON 5.2 billion, a "performance" only… Mai mult

Romania's GDP exceeded Portugal’s in 2018: which has a population two times lower and a GDP/inhabitant twice as high

Romania's economy exceeded, at current prices in euros, Portugal's economy in 2018, a country with a population and a surface two times smaller as Romania.… Mai mult