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Gov’t modifies Labour Code via Emergency Ordinance, introducing a minimum salary differentiated based on education level and seniority. Opposition and business environment criticize the measure

On Friday, the Government amended the Labour Code via Emergency Ordinance, introducing a minimum salary differentiated on the basis of education level and seniority. The level of the gross minimum salary will be established subsequently, via Government Decision.

The Government approved on Friday an Emergency Ordinance amending a series of legislative acts, including the Labour Code, Law no.53/2003 and Law no.279/2005 on on-the-job apprenticeship.

“One of the amendments to the Labour Code seeks to create the legal framework for establishing the gross minimum salary in relation to criteria concerning the employee’s level of education and seniority. The level of the differentiated minimum salary for certain categories of employees will be established via Government Decision: for employees employed on positions requiring higher education, as well as for those whose seniority surpasses a certain level,” Labour Ministry representatives announced.

Another amendment brought to Law no.53/2003 gives women the possibility to choose, in writing, to continue their activity until the age of 65, in line with Constitutional Court Decision no.387/2018. At present, the individual labour contract legally ceases the moment the retirement conditions are met, namely the standard retirement age and the minimum contribution period.

Likewise, following the amendments brought to Law no.279/2005 on on-the-job apprenticeship, persons who graduated primary education and are registered with the National Employment Agency, but also other categories of persons, will have access to level 1 apprenticeship programmes (general knowledge and basic skills).

“The goal of the measure is to urgently lower the labour deficit at national level, but also to improve the knowledge, skills and competences necessary to get a job. Thus, persons with primary education can enrol in the classes too,” the Labour Ministry’s representatives add.

Labour Minister Lia Olguta Vasilescu has announced that the minimum salary will be hiked on December 1st to RON 2,080 for employees without higher education and to RON 2,350 for employees with higher education.

 

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USR: Differentiated minimum salary, a poisoned apple from Olguta Vasilescu and Eugen Teodorovici, two ministers who do not understand how the real economy works

 

Save Romania Union (USR) states that the differentiated minimum salary is a poisoned gift from Olguta Vasilescu and Eugen Teorodovici, two ministers who do not understand how the real economy works, because this decision will generate employment problems for Romanians with higher education and for those with more than 15 years of seniority.

“The differentiated minimum salary is in fact a poisoned apple from Olguta Vasilescu and Eugen Teodorovici, two ministers who do not understand how the real economy works. Applying the differentiated minimum salary will lead to a series of employment problems for Romanians with higher education and with seniority of more than 15 years, because they will become more expensive on the labour market,” the USR explains.

House lawmaker Cristian Seidler warns that the new policy on a minimum salary differentiated based on seniority will block Romanians having more than 15 years seniority from changing their jobs. “What importance does 15 years of experience as salesperson have when you get a job as driver or clerk, or accountant? None,” he points out.

“Instead of encouraging especially unqualified workers with many years of seniority to enrol in professional training courses in order to find better-paid jobs, the PSD-ALDE Government is encouraging professional stagnation, paid for by private employers. This is Olguta Vasilescu’s vision, the Labour Minister who has worked for the state all her life. And the real reason for the Government’s approval of the hiking of the minimum salary based on education level and seniority is to attract more budget revenues in the form of taxes, considering that there is the danger of overshooting the budget deficit [target],” the USR claims.

“Less than 200 days left until the next elections, when we can give the PSD a lesson,” the USR concludes.

 

PNL’s Orban: Gov’t shouldn’t have anything to do with establishing the gross minimum salary

 

National Liberal Party (PNL) President Ludovic Orban stated on Friday, after the Government adopted the Emergency Ordinance introducing the differentiated minimum salary, that the Executive should have nothing to do with establishing the gross minimum salary.

“PNL’s official position on the minimum salary is that the Government shouldn’t have anything to do with establishing the gross minimum salary. The decision mustn’t be administrative-political, taken by the Government, the decision regarding the minimum salary must be the result of negotiations between employers and unions, between social partners, and it must be based on objective economic indicators that would prevent fluctuations. More precisely, you either establish the economic growth, or the growth of the gross average salary, or the productivity index, the option we prefer, on economy branch. And the raising of the minimum salary, in our view, must be done per economy branch, based on the productivity growth index, through negotiation between employers and unions. As long as it remains at the Government, the decision will be subjective and won’t be based on considerations of economic nature but solely on considerations of political-electoral nature,” Ludovic Orban stated at a press conference.

 

CCIFER: Minimum salary modifications may affect the entire national economy; SME test is mandatory

 

In the form announced by the Government, the modifications to the minimum salary may affect the entire national economy by raising labour costs, which will eventually be reflected in price hikes, the representatives of the French Chamber of Commerce, Industry and Agriculture in Romania (CCIFER) point out in a press release.

“The French Chamber of Commerce, Industry and Agriculture in Romania (CCIFER) warns that in the form announced by the Government, the modifications to the minimum salary may affect the entire national economy by raising labour costs, which, in the end, will be reflected in price hikes. These modifications, announced in a very short time horizon, impact fiscal predictability and stability,” the press release points out.

According to the representatives of French investors in Romania, such a measure affects the ability of companies – especially SMEs – to appropriately adjust their budgets, which were established at the end of the previous year.

“Here we are talking not only about the minimum salary hikes, but about the entire pay grid, which must be adjusted given the new conditions, without being correlated with the productivity of labour,” the document emphasises.

Likewise, the CCIFER recalls that in terms of productivity Romania is last in the rankings of European Union countries, against the backdrop in which the productivity rate adjusted based on salary has dropped in most sectors, precisely as a result of disproportionate salary hikes. The effects of this hike will be felt in the long term through a drop in the country’s attractiveness as investment destination, through a rise in labour costs.

On the other hand, establishing the minimum salary on the basis of seniority will create excessive red tape and will represent another argument in the disfavour of performance, the CCIFER communique also shows. In this context, the CCIFER points out that the financial stimulus offered to employees for seniority must remain regulated via the seniority bonus and offered on the basis of negotiation between social partners, in line with economic realities and the market of each industry and company.

“We estimate that such a measure will unreasonably and unjustifiably affect the possibility of some persons whose seniority exceeds 15 years to find jobs that correspond to their training and competences, these persons representing the biggest labour force pool in Romania,” the CCIFER underscores.

Moreover, investors invoke the lack of sustainability of public sector salaries, considering that the Government Decision does not refer to the source of the funds that will cover this hike, and the labour force employed in public administration represents on average 26 percent of the total number of employees and is currently on the top three positions in the rankings of the highest salaries.

“Considering such a measure’s implications for SMEs, we consider that carrying out the SME test is mandatory for the correct assessment of the draft law’s impact on this category of enterprises from an economic and social standpoint. Moreover, the specific country recommendations regarding economic, employment and budgetary policies, issued by the European Council in the last 2 years, sought the establishment of the minimum salary on the basis of a mechanism based on objective criteria, not on political criteria,” the communique reads.

The French Chamber of Commerce, Industry and Agriculture in Romania (CCIFER) is a business association that represents the interests of the French-Romanian business community that comprises more than 3,000 companies, totalling a turnover of 17 billion euro and 120,000 jobs.

 

CDR: Romania needs transparent mechanism based on stable and predictable macroeconomic indicators that would determine the evolution of the minimum salary

 

The member organisations of the Coalition for the Development of Romania (Coalitia pentru Dezvoltarea Romaniei-CDR) support the rise in the Romanians’ incomes and living standards but reiterate that a sustainable long-term development must be implemented based on a profound understanding of all implications for the economy and society. Arbitrary hikes, not correlated with productivity, which in Romania falls below the average level of competitive economies, in the end fuel the inflationary curve.

For correct functioning and for the prevention of economic imbalances, any administrative modification of the base of the companies’ costs must allow a period of at least 12 months from approval to implementation.

The introduction of the minimum salary differentiated based on a higher education diplomas does not guarantee the professionalisation of the employees. On the contrary, it creates the premises of a groundless hike in the demand for university-level education. Such a dynamic disfavours vocational and technical education, precisely the branch that must be developed in order to respond to the needs of the labour market, as indicated by the Labour Force Barometer that PwC has recently conducted for the CDR.

“At the same time, the hierarchical system of the minimum salary based on seniority deepens the problem of productivity, contributing to the rise of inequity between employees with seniority and those who have recently entered the labour market, by rewarding years of work instead of performance,” the CDR points out.

“This modification and the speed of its implementation continues the series of unpredictable decisions adopted by the Government, deepening the business environment’s distrust, which puts a brake in Romania’s economic development supported by the citizens and the business environment. Establishing the minimum salary on the basis of objective criteria is also found among the country recommendations that Romania received from the European Commission as part of the European Semester.

“Romania needs a transparent mechanism that would determine the evolution of the minimum salary based on stable and predictable macroeconomic indicators, approached by the authorities in dialogue with all the parties concerned, such as employers and unions, also ensuring a sufficient interval before its enforcement,” reads a CDR press release.

 

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