Romanian workers face brutal pay cuts as reforms bite

Written By: Kate Holman
Published: February 26, 2018 Last modified: February 26, 2018

by Kate Holman in Brussels

Hundreds of thousands of workers in Romania are seeing their wages slashed this month because of legal reforms that will cut bonuses and place the full burden of social security contributions on workers rather than employers.

Romanian trade unions are fighting the measures which they say are turning the country into a social experiment. “It’s a nightmare in both private and public sectors,” declares Petru Dandea (pictured), general secretary of one of the country’s biggest union confederations, Cartel-ALFA. Workers for private firms could lose up to 22% of their net wage if companies withhold contributions at source. Unions claim that Romania is now the only country in the world that exempts employers from responsibility for social protection.

Last July, the government promised a 25% pay rise for more than 1.3 million public sector workers. When unions warned of a shortfall in the budget needed to implement it, the government came forward with a fiscal revolution transferring social security payments away from employers, as from 1 January. “In this way, the 25% increase in gross salary in the public sector was reduced in real terms to less than 3%,” explains Dandea. “They are giving with the right hand, but they are getting it back with the left hand.” The impact is being felt this month, in February, as workers receive their first pay packets since the change came into force.

Although the reform could be expected to benefit employers, it has proved deeply unpopular in the private sector where some multinational companies are challenging it through the courts. “Human resources and finance departments in companies and public institutions no longer know how to apply this legislation,” says Dandea. “It is too complicated, and the red tape is very costly.”

One of the measures adopted by the government at the same time means that workers’ social contributions, even on part-time labour contracts which might be as little as two hours a day, must be paid at the same level as minimum wage earners. “It’s incredible. There are employees today with salaries of €200 and contributions of €300. That’s why it’s a nightmare,” reveals Dandea.

The new legislation also states that bonuses paid on top of salary must not go above 30%, although in public services like health, education and the police, some employees rely on bonuses to make up their income. “It’s clear that workers will lose money. We calculated last week that more than 400,000 employees will see their salary falling this month because of this. And there are many people who can no longer benefit from sick leave,” he adds. Under another new measure, staff must have paid social security contributions for six months before they are entitled to sick leave.

In a bid to halt the reforms, the unions launched a campaign: ‘No to social experiments on Romanians’. In November last year, some 50,000 people took to the streets in Bucharest and other cities. They claim that companies have a social responsibility towards employees under the Romanian constitution. Meanwhile, “nobody knows” what the long-term impact of the reforms will be on welfare systems, says Dandea, but already they mean a 17% cut on contributions to the pension system, which last year ran a deficit of €4 billion (£3.5 billion).

After surviving a vote of no confidence, the Romanian government last week rushed through an emergency order maintaining welfare payments for workers on disability, sickness and maternity leave. Last week the new Prime Minister Viorica D?ncil? was in Brussels meeting EU leaders, who have been putting pressure on the country to take stronger action against persistent corruption. But at home, political upheaval continues to undermine anti-corruption efforts, leading to major public demonstrations in support of the rule of law.

Trade union rights are further shackled by 2011 legislation imposing such harsh representation conditions that national or sectoral wage bargaining has been virtually destroyed. The majority of existing company-level agreements were concluded by “workers’ representatives” selected by managements. In addition, many multinational companies that negotiate in other countries refuse to do so in Romania, including Renault and Ford. “It’s a disaster,” insists Dandea. Despite EU pressure to restore social dialogue, “the government is under huge pressure from multinational corporations and is therefore afraid to act.”

Cartel-ALFA sees wider dangers from the situation in Romania. “With what’s happening on collective bargaining and wages and fiscal issues, we have the feeling that Romania is an experimental country,” warns Dandea. “These guys from the multinational giants want to see if it is possible to dismantle the European social model. They are saying no social model, no protection for employees, nothing. It is vital for trade unions across the EU to resist.”

About Kate Holman

Kate Holman writes for Tribune on European affairs