Outsourcing Payroll
in Romania

The B2B model differs in that your team member, i.e. a contractor, is responsible for payroll and taxes. As a rule, personal taxes are levied on the income and are not mandatory for compensation by the company. Still, here’s the breakdown.

In Romania, personal income tax for sole traders constitutes 10%. 

Social Security contributions include:

• Pension insurance contribution constitutes a quarter of the income over 24 minimum salaries. For a minimum income of RON 97,200, the 25% will equal RON 24,300 (~$4,986) per year.
• Health insurance contribution: 10% of the net income.  The rate is subject to a minimum threshold of 6 min. salaries, which is RON 24,300 (~$4,986) and a maximum threshold of 60 min. salaries, which is RON 243,000 (~$49,860), making the health insurance reach up to $4,986 per year.

As a result, the effective tax rate for an IT specialist with a monthly remuneration of $5,000 would amount to approximately 25% of their gross income (including  PIT and SSC obligations).

In Romania, employers must cover the costs related to mandatory pre-hire medical checks and Health & Safety training.

In Romania, companies engaged exclusively in innovation and R&D: 

• are exempt from profit tax for the first 10 years
• can deduct 50% of the eligible R&D expenses and apply accelerated depreciation for R&D equipment.

Payroll outsourcing services in Romania cover key day-to-day tasks, such as:

• Payroll tax planning, calculation, and consultation
• Preparation and allocation of statements
• Preparation and submission of payroll returns to local authorities
• Statutory payroll reporting
• Team benefits administration
• Processing payments for the tech industry

• It saves costs & time. Managing payroll internally requires your accountants to cover salary calculations of both in-house and outsourced development teams. Extra workload means additional hiring and staff training, not to mention that your payroll experts would have to learn the specifics of the foreign payroll management rules, labor laws, statutory regulations, tax systems, etc., to stay compliant. Thus, outsourcing payroll solutions can help you cut costs on payroll management for new team members. Plus, it frees up time for your internal team to prioritize core financial activities.

• It mitigates compliance risks. When hiring developers abroad, your tech business should follow all the local laws, especially regarding payroll and taxes. Cooperation with a local payroll provider can shield your company from legal issues and fines, as they know the ins and outs of the local tax laws, wage regulations, terminations, and compliance requirements and stay updated on changes.

• It’s safe for your data. Payroll deals with sensitive employees’ information like social security numbers, salaries, and bank details, which can make tech entrepreneurs reluctant to use payroll outsourcing services in Romania. However, a trusted payroll firm prioritizes security, investing in cloud-based servers, data centers, and cyber security software. The result? Maximum protection from embezzlement, identity theft, and other risks.
• It allows for scalability. The tech companies looking to rapidly expand their development team abroad often have complex payroll needs. Using outsourced payroll services can help them handle fluctuations in employee numbers, benefit plans, and tax requirements, providing scalability without the need for extra internal resources or infrastructure. This approach has been embraced by notable tech companies like People.ai, BigCommerce, ThredUP, Sift, and Dotmatics when expanding development teams abroad.

• Qualification & experience. Choose a vendor with experienced payroll and legal professionals in the tech industry. Also, check out their case studies, client reviews, and testimonials for social security.
• Pricing structure. Consider a payroll outsourcing provider in Romania with predictable pricing and detailed invoices to avoid hidden fees and, therefore, eliminate the risk of overpayment. 
• Technology & security. Check if your payroll outsourcing company in Romania uses modern payroll processing software that is reliable and capable of handling your payroll requirements. Additionally, make sure they apply data security protocols and encryption standards and comply with data privacy regulations to safeguard employee information.
• Guarantees. If your payroll outsourcing solutions company provides compensation for mistakes or missed deadlines, has outlined timeframes, and offers pricing transparency, this is a green flag to outsource payroll service in Romania with them.

Employer of Record (EoR) allows tech businesses to employ talented in-country experts without setting up a legal entity and receive all the needed operational support in one place.

This is the most viable way to legally employ A-players for your global expansion plans for the following reasons:

• You delegate the management of all the business functions, like employment, payroll, tax payments, and compliance, and don’t have to establish a legal entity.
• It saves you the hassle of outsourcing these operations to multiple vendors.