Employment Flash News No. 3/2018

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LEGISLATION

Government Emergency Ordinance no. 3/2018 regarding fiscal-budgetary measures has been published within the Official Gazette no. 125/8.II.2018.

The normative act is mainly justified by the amendments brought to the Fiscal Code through GEO no. 79/2017 and by the necessity of ensuring a unitary fiscal treatment as regards the mandatory social contributions due by the natural persons for salary income/assimilated salary income.

A new calculation mechanism for the social health insurance contribution (CASS) with respect to the employees that are exempt from the payment of income tax

The ordinance introduces a mechanism that applies exceptionally to natural persons that are exempt from income tax for salary income/assimilated salary income  (according to Art. 60 of the Fiscal Code).

The new calculation mechanism for CASS applies exclusively for income earned in 2018, either on the basis of individual employment agreements, either of a secondment document (when the salary rights are paid by the entity the employees are seconded to), under the following conditions:

  • the employment contract / secondment document was ongoing on 31.12.2017
  • their monthly gross salary in 2018 has been increased by at least 20 % as compared to December 2017

According to the Ordinance, the gross salary for December 2017 is defined as the base salary and the elements that have the nature of salary income, which are granted every month, according to the individual employment agreement valid in December 2017, and representing the calculation basis of mandatory social contributions.

The provisions of this article shall not apply to certain situations, such as:

  • during the period of time when the individual employment agreement is suspended;
  • in situations when, according to the parties’ agreement, the level of the monthly gross salary is diminished in 2018 below the level resulted from the increase of at least 20% – starting with the date of the amendments brought to the individual employment agreements.

Therefore, the employers of the persons that fulfill the above mentioned criteria shall retain and pay the social health insurance contribution (CASS) according to the following formula:

GROSS INCOME  December 2017 10 000 lei
Mandatory social contributions  due by the employee in 2017:

CAS (10,5%)

CASS (5,5%)

Unemployment contribution (0,5%)

Total: 1 650 lei

1 050 lei

550 lei

50 lei

NET INCOME December 2017 8 350 lei

Gross monthly  income 2018

(gross income 2017 increased by 20%)

12 000 lei
Mandatory social contributions  due by the employee in 2018  :

Owed CAS (25%)

Owed CASS (10%)

Retained CASS (calculated according to the formula)

Total: 4 200lei

3 000 lei

1 200 lei

650 lei

CASS deducted from state budget

(Owed CASS – Retained CASS)

550 lei
Net income 2018 8350 lei

Therefore, in order to maintain the same net salary in 2018 as in December 2017, given the present taxation system applicable starting with 01.01.2018, the state shall cover a part of CASS for the employees exempt from income tax, provided that the employer operates the above mentioned increases.

The employer shall provide the new calculations within the fiscal declarations, the difference between the CASS due in 2018 and the CASS retained from the employee’s salary being supported from the National social health insurance fund.

The normative act also provides specific rules that apply in case of suspension or termination of the employment contract and explanations regarding the newly introduced method of declaration and payment of the above mentioned contributions.

A new calculation method for the social security contribution (CAS) and of the social health insurance contribution (CASS) for part-time employees

According to the normative act, the CAS and CASS due by part-time employees shall be calculated based on the earned income. The difference resulted from the contributions calculated based on the minimum base salary at national level (in force during the month for which these  contributions are owed, in accordance to the number of working days of the month when the employment agreement was active) and the contributions calculated based on the earned income by these employees shall be supported by the EMPLOYER on the employee’s behalf.

These provisions shall apply starting with the reporting obligation for January 2018.

New rules regarding the calculation basis for social security contributions (CAS) with respect to the persons earning social health insurance indemnities  

These provisions shall apply starting with the reporting obligation for January 2018.

***

The ordinance entered into force on the date of its publication (February 8th, 2018).

Within 15 days from this date methodological norms shall be issued, stating  rules for the application of the new mechanism regarding the calculation of CASS for the employees that are exempt from income tax.

The situations the ordinance shall apply to shall be thoroughly analyzed on a case-by-case basis (and the appropriate approach), in order to determine if the presented benefits may represent an option.

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