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October 23, 2021

LabMin Vasilescu guarantees no salary in Romania will drop following contributions’ pay system change

No salary in Romania will drop when the system of contributions is changed, on the contrary, the employee’s net will increase and one will have a much higher amount in one’s pension account, Labour Minister Lia-Olguta Vasilescu said, Sunday evening, at private TV broadcaster Antena 3.

“I can guarantee that no salary in Romania will decrease when we change the contributions’ system. It is in the Governing Programme and whoever has read the Governing Programme saw some six months ago that this was going to happen. A palpable example: for a salary of 1,000 lei, there is a 26.3 pct contribution to the pension system, but 10,5 pct is currently the employee’s contribution and 15,8 pct is paid by the employer. This 10.5 pct amount goes straight into the pension account, and the money given by the employer goes into the national basket. (…) What are we exactly doing now? For the same 1,000 lei salary, the pensions’ contribution will be 25 pct, not 26,3 pct, but this contribution will go directly into the employee’s account. This means a higher contribution, a higher pension for the employee. At present, the contributions are 39.25 pct, they will be lowered and will reach 35 pct, and the salary tax will drop too, from 16 pct to 10 pct, so that we cover this transfer of contributions from the employer to the employee and not reduce the employee’s net,” the Labour Minister explained.

Although the minimum wage currently paid is 1,450 lei, Vasilescu pointed out that the real minimum wage in Romania is 1,750 lei, derived after the 39.25 pct contributions to the state are paid.

“We have the 1,450 lei minimum wage currently paid, the employee actually receives 1,065 lei of this salary, after paying their share of contributions and the employer pays 1,750 lei. Practically, the real minimum wage in Romania is 1,750 lei because after these 39.25 pct contributions are paid to the state, it ensures that this is the minimum wage. What have we done? We have transferred these contributions to the employee, we reduced them, the result is that in your pension account there will be more money when you retire, and also, for the next few years, the minimum wage will continue to rise. (…) The Governing Programme says that the minimum wage increases by 100 lei each year, so next year it will be 1,550, in 2019, 1,650 lei, and in 2020 it will be 1,750 lei, but in real terms, the minimum wage will actually be 1,850 lei next year, 1,950 in 2019 and 2,050 lei in 2020,” Mrs. Lia-Olguta Vasilescu further said.


Special pensions to be indexed with inflation rate


The Labour Ministry will issue an Emergency Ordinance through which the special pensions will not be updated with the salaries of the ones in activity, but will grow with the inflation rate, on Sunday night said the Labour Minister, Lia-Olguta Vasilescu at the private broadcaster Antena 3.

She specified that this ordinance will be enforced around 15 September.

“We have in mind to issue an Ordinance the very next week. We didn’t work on the contributiveness at the Pensions Law, where absolutely mandatory is to perform the increases we have in the governing programme. But, after the Uniform Pay Law has been issued, we realised that if we didn’t correct the system, meaning if we leave the professional pensions update with the level of the salaries in pay, we shall get to a very unpleasant situation as of next year, because unfortunately the economy cannot support such increases. Through this Emergency Ordinance (OUG) we have set up several principles. Firstly, we don’t downsize any paid pension. We have decided to make it come into force around 15th of September, so that nobody could say we have mocked the people. Meaning, whoever wants to retire, they could do that starting with tomorrow until 15 September, but they must know this: their pensions will not be updated with the salaries of the active people, but with the inflation rate y-o-y. I mean, we won’t freeze their pensions, we leave them grow, and this with the inflation rate,” Lia-Olguta Vasilescu explained.

She underlined that currently very many of the system (Defence, Internal Affairs etc) prefer to retire even at 40, because their pension could be of 120 pct of the salary.

The Labour Minister reiterated that this formula of updating is not correct neither toward the ones who have contributed to the pensions fund, nor to the state. She added, since she was quizzed, that this draft Ordinance was not talked with the trade unions, but added that there were discussions when the Uniform Pay Law was analysed “because I knew then very clearly its impact upon the pensions.”


Child-rearing benefits capped to 1,800 euro (project)


The child-rearing benefits will be capped at 1,800 euro, the maximum amount that is currently granted in Europe, and no one can receive above this level, the Labour Minister, Lia-Olguta Vasilescu stated on Sunday, at private TV broadcaster Antena 3, adding that the draft ordinance will be ready in two weeks’ time.

“We will look with celerity at these child-rearing benefits as well. The last time when this story came up, we were not ready, we were working on the pay bill, but at that moment, all the alternatives have been worked upon and we have reached the final version. We will cap the benefit to the maximum amount that exists in Europe at the moment, that is 1,800 euro in Germany. Nobody can receive above 1,800 euro. (…) I am saying that in two weeks’ time we will have the emergency ordinance draft,” the Labour Minister said.

She was asked why there still are child-rearing benefits of 159,348 lei per month, namely “an apartment for every month of child-rearing allowance”, although there have been discussions on this topic and nothing happened. The example of a less known footballer from Dambovita county who receives a monthly benefit of 60,549 lei was also brought up.

“I do not think anyone considered that we would get into the situation to pay more than 1.5 billion lei (old lei -ed.n) per month for a child. These benefits are still being paid. Everything was possible through the law. The state is currently there for both parts and for them, but we will change the legislation, and such straying will not be allowed to occur any more,” the Labor Minister said.

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