The net incomes of the employees that earn gross salaries in excess of 6,350 RON could go down as a result of a modification of the social security law. The salaries of approximately 600 of the 8,000 employees of BRD-Groupe Societe Generale, for instance, will be affected by the new legislative stipulation, that is 7.5% of the total employees of the bank, says Florin Luca, HR executive of BRD-GSG.
The NBR data show there are about 60,000 employees in the banking sector. If the 7.5% is applied to the entire banking market, almost 4,500 employees will pay more to social security.
"This modification means a cut of the monthly net income of the employees with gross incomes above 6,350 RON, due to the increase in the social security contribution," Florin Luca explains.
For instance, a person that makes 10,000 RON in gross income would pay 603 RON to social security before; after the change, they will pay 950 RON, that is 9.5% of their gross income. The net income will therefore go down by 291 RON.
The new law stipulates that the computational basis for the social security contributions will be the gross income a salaried employee makes every month. Until July 19, under law 19/2000, the computational basis for the social security could not exceed the cap set at five times the gross average wage in the economy, 6,350 RON.
"According to the National Pension Office, these changes will only enforce as of this August. What should an employer do? Raise the salaries of employees affected so as to avoid the reduction in the net income of the employees or let them take this loss?" Luca comments.
"I don't think employers will offset this by raising salaries. Companies negotiate the gross salary precisely because they do not want to be affected by the legislative changes. This 'strategy' is the result of the frequent changes between 1997-2002, when a new tax on salaries would pop up every six months," believes Eduard Radu, managing consultant of HR consulting company Acceder.
The legislative modification was made in order to get higher pensions in the public system and improve collection by increasing the contributions for those with high incomes. "There is a recoil in this that will be felt in 15 to 20 years. Those who contribute more now will have a larger pension and this way money will be taken from the budget in the long term," Radu says.
BRD's human resources manager says that the legislative change took employers by surprise. "Romania had had an image of a country with a low taxation level, of a 'tax haven for employees' for the last two or three years, which led to, among others, the return home of many talented Romanians from abroad and their integration into an increasingly more dynamic economy. Those hit by these changes are generally the rare talented people, key people, top managers, the loyalty of whom each company wants to secure," says BRD's human resources manager.
The employees in the banking-finance sector are among the best paid of the entire economy, with an average net income of 900 euros, but are not the only ones affected by the legislative change.
The representatives of the other banks in the system could not be reached for comment yesterday. Law 250/2007 amends Law 19/2000 on the public pension system and other social security rights and was promulgated on July 19.
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