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Romania Makes Firing Easier: Termination rules relaxed – longer fixed-term employment contracts possible

The Romanian Labour Code has undergone substantial overhaul which went into force in May of this year.

(PresseBox) (Berlin, ) However, the amendments most anxiously awaited by entrepreneurs which would have added flexibility in termination of employment contracts were unfortunately left out.

The Labour Code in Romania stipulates cumbersome termination procedures, and many employers consequently hesitate to apply measures for termination of employment. However, in terms of collective procedure of termination of employment contracts there are some important changes.

For instance, the ban on employers hiring new people to positions previously held by the dismissed staff within nine months of a collective dismissal has been lifted. The new rules also establish work performance as the governing criterion for the selection of staff to be made redundant. Until now social criteria were primarily stipulated for choosing those staff members to remain employed after collective dismissal.

Collective procedures apply when, especially because of the economic situation, the employer is forced to terminate a significant number of employees relative to the total number of employees of the company.

Another change of potentially significant importance concerns fixed-term employment contracts. Under Romanian law so far, the possibility of concluding such contracts was limited to a number of specific situations and to periods of up to two years. By the amendments to the Labour Code the period was increased to three years, but more importantly, new situations have been defined under which fixed-term employment contracts can be concluded, namely "growth and/or temporarily change in the structure of the employer’s activity" or "in other cases specifically provided for by special laws or for carrying out works, projects or programs." Basically, this opens an unlimited range of situations in which employers may enter into fixed-term employment contracts.

Other changes concern the extension of the probationary stage. The employer now has the advantage that he can dismiss the employee in this period without further formalities other than a notice to that effect. The employer may also impose performance criteria for employees.

Concerning sanctions, companies can now be penalized for employing illegal labour, e.g. without employment contract, not only by substantial fines, but in certain situations also with imprisonment. In extreme cases, authorities now have the right to close down companies that use illegal labour.

Worth talking about
• How does the decision to establish work performance as the governing criterion for the selection of staff to be made redundant mean for me?
• Should we be thinking about extending some of our fixed-term employment contracts to a full three years?
• Are all our employees properly authenticated and registered or do we need to be worried about possible penalties?

Author: Felix Tudoriu, ECOVIS Monica Esterka Law Office, Bucharest, Romania

ECOVIS AG Steuerberatungsgesellschaft

Ecovis is a leading global consulting firm with its origins in Continental Europe. It has over 3,300 staff operating in 30 countries. Its consulting focus and core competencies lie in the areas of tax consultation, auditing, legal advice and accounting and management consulting services. The particular strength of Ecovis is the combination of personal advice at a local level with the general expertise of an international and interdisciplinary network of professionals. Every Ecovis office can rely on qualified specialists in its back offices as well as on the specific industrial or national know-how of all the Ecovis experts worldwide. This diversified expertise provides clients with effective support, especially in the fields of international transactions and investments - from preparation in the client's native country to support in the target country. In its consulting work Ecovis concentrates mainly on mid-sized firms. Both nationally and internationally, its one-stop-shop concept ensures all-round support in legal, fiscal, managerial and administrative issues. The name Ecovis, a combination of the terms economy and vision, expresses both its international character and its focus on the future and growth.