The increase in the gross minimum base salary guaranteed by the state, from 3,300 lei to 3,700 lei per month, starting from July 1, 2024, will have multiple implications for both employees and employers.

These include the increase in net salary for those receiving the gross minimum wage, changes in the maximum value of the basic deduction, and the social contributions owed by employers for employees with reduced work schedules.

What Employers Need to Do

The decision was adopted on June 6, 2024, by Government Decision 598/2024 and refers to the increase in the gross minimum base salary without allowances, bonuses, and other additions. The measure was supplemented on June 7, 2024, by Emergency Ordinance 59/2024, which raises the amount of the monthly salary exempt from income tax and mandatory social contributions from 200 lei to 300 lei per month.

Therefore, employees who meet the legal conditions will continue to benefit from this tax relief until the end of 2024 (the exemption is valid only during the current year).

Key Impacts of These Measures

1. Net Salary Increase: Employees on the gross minimum wage will see an increase in their net salary from 2,079 lei to 2,363 lei per month.
2. Basic Deduction Value Modification: With the increase in the gross minimum wage, the value of the basic deduction applied to employees at their primary workplace, within a gross monthly income limit of up to 2,000 lei above the gross minimum wage, also changes. The maximum amount deductible from the net monthly salary increases from 660 lei to 740 lei, excluding the number of dependents. If an employee has one or more dependents, the basic personal deduction increases accordingly, up to a maximum of 1,665 lei for employees with four or more dependents.
3. Increase in Employer Social Contributions for Salaries Below the Minimum Wage: According to current legislation, employers must pay mandatory social contributions (CAS and CASS) at the level of the gross minimum wage for all employees earning below this threshold in any given month. Thus, the increase to 3,700 lei per month automatically raises the calculation base for these mandatory social contributions, leading to higher operational costs for employers, especially those with many employees earning below the minimum wage or working part-time.
4. Modification in Garnishment Values for Employees: For employees earning less than the net minimum wage, garnishments can only apply to the amount exceeding half of this threshold, according to Article 729 paragraph (3) of the Civil Procedure Code. Therefore, the increase in the gross minimum wage will also increase the "protected" part in garnishment cases, meaning the net amount remaining for employees after garnishments are applied.
5. Base Salary Minimum Application Period of 24 Months: According to Article 164 paragraph (21) of the Labor Code, "starting from January 1, 2022, the gross minimum base salary guaranteed by the state can be applied to an employee for a maximum period of 24 months from the date of concluding the individual employment contract. After this period, the employee will be paid a base salary higher than the gross minimum base salary guaranteed by the state." Employers must review how they will comply with this legal obligation for employees to whom this provision applies.
6. Increase in the Cap for Medical Leave Allowance: Since the calculation base for medical leave allowances is limited to 12 gross minimum wages per month, the increase in the minimum wage will also raise the legal cap accordingly. Employees can receive a medical leave allowance of up to 44,400 lei per month (gross), up from the previous cap of 39,600 lei per month.

Implementation from a Legal Perspective

Increasing the gross minimum wage does not require employers to conclude an additional act to the individual employment contract, as Article 17 paragraph (5) of the Labor Code stipulates that concluding an additional act is not necessary when the modification is expressly provided by law or in the applicable collective labor agreement.

Considerations for Employers

Beyond the punctual implementation of the national minimum wage increase, employers must assess whether paying higher wages to employees earning the minimum wage will require corresponding adjustments to the salaries of other employees already at or above this level.

The increase in the gross minimum wage from 3,300 lei to 3,700 lei and the increase in the tax-exempt amount from 200 to 300 lei per month have multiple implications for employers. It is crucial for employers to timely and carefully make the necessary adjustments in payroll systems, considering all elements influenced by these legislative changes. This ensures payroll specialists maintain salary calculation accuracy. (Photo: Dreamstime)

(Opinion piece by Ana-Maria Hoborici, Manager, Outsourced Services Solutions, Deloitte Romania, and Gabriela Ilie, Senior Managing Associate, Reff & Associates | Deloitte Legal)