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News from Members Deloitte Legal survey: Costs of dismissal in Romania, among the lowest

Deloitte Legal survey: Costs of dismissal in Romania, among the lowest

by Reff & Asociatii April 10, 2018

Romania counts among the countries with the lowest costs of dismissal for employers in Europe, either due to individual or economic reasons, according to the fourth edition of the International Dismissal Survey published by Deloitte Legal, represented in Romania by Reff & Associates.
The analysis compares six costs of dismissal in 45 countries. The survey data represents three separate cases with different seniority and remuneration packages.

“Our survey shows that the costs of dismissal in are generally lower than in other countries and are not influenced by the variable seniority. An explanation for this is found in the provisions of the Romanian Labor Code, which makes no distinction in the dismissal conditions due to seniority,” said Florentina Munteanu, Partner and head of the employment law practice at Reff & Associates. “Many employers have regulated dismissal conditions within collective bargaining agreements and from our experience we can confirm that seniority is a variable influencing the severance package. However, such agreements are of limited applicability (at employer or sector of activity level), therefore we cannot consider this practice as generally applicable at the level of employers in Romania.”

Raluca Bontas, Partner Global Employer Services Deloitte Romania added: “The computation base is an explanation for which Romania ranks with lower dismissal costs in the case of the employees with medium pay, according to the survey. Besides the ranking, one has to also look for how dismissal is translated into local legislation of the countries surveyed, which varies a lot.”

What is also interesting to see from the results of the survey is that there are a number of countries where post-dismissal review by the courts cannot result in reinstatement of the employees and in those countries costs of dismissal are among the highest. In Romania, as well as in France, Germany, Greece, Italy and many other countries, the courts of law may reinstate the employee upon an illegal or unfair dismissal decision and such a decision will ultimately have an influence to the total cost of the dismissal. Nevertheless, such cost cannot be anticipated in advance and it is difficult to quantify it from the beginning.

Key highlights of the survey:

• A number of countries, i.e. France, Italy, and the Netherlands have reformed their dismissal legislation in order to increase labor flexibility and/or financial predictability of dismissal cost.
• In over 75% of the surveyed countries the employee may be reinstated by the courts if the reasons for dismissals are deemed unjustified. Upfront approval is only required in two of the surveyed countries, the Netherlands and Ecuador. In only a limited number of countries, the employer has absolute power to dismiss without any possibility of reinstatement.
• In almost all surveyed countries, seniority (the length of service within a certain company) is the key factor in determining the level of dismissal cost. However, over 60% of all participating countries have capped either the notice period or the severance indemnity or both.
• Basic dismissal concepts such as dismissal for serious cause and protection against dismissal of certain categories of employees (e.g. maternity, educational leave, political mandate, etc.) are present in almost all countries. Among others, dismissal of employees in Romania is forbidden during maternity leave, paid leave or during exercising of an eligible position within a union body.
• In some countries, termination is only possible for the reasons stipulated explicitly by law (Romania is amongst these countries).
• If we compare all scenarios for dismissal with an objective individual reason or economic reason, we see that the dismissal cost varies widely between legislations, without any geographical preference.
• If we compare all scenarios for dismissal without any objective reason, employers in certain European countries encounter the highest costs, even though huge regional variations continue to exist.
• The highest increase in dismissal cost is triggered by the severance indemnity or indemnity for unlawful dismissal which is due if an employee is dismissed without an objective reason.
• A limited comparison for Latin American and Asian participants―with this baseline sample it is difficult to compare the regions and draw general conclusions.

To read full results of the survey, please see here


About Reff & Associates

Reff & Associates SCA is a law firm member of Bucharest Bar, independent in accordance with the Bar rules and represents Deloitte Legal in Romania. The firm has 73 lawyers and is recognized both locally and internationally as one the top law firms in real estate, banking & securities and mergers and acquisitions. Deloitte Legal means the legal practices of Deloitte Touche Tohmatsu Limited member firms or their affiliates that provide legal services, which currently counts over 1,800 lawyers in 75 countries. For more information please see www.reff-associates.ro

© 2018. For further details please contact Reff & Associates SCA

About Deloitte in Romania

In Romania, the services are provided or supported by Deloitte Audit SRL, Deloitte Tax SRL, Deloitte Consultanta SRL, Deloitte Fiscal Representative SRL, Deloitte Tehnologie SRL, Deloitte GES Support Services SRL and Deloitte Shared Services SRL. Deloitte is one of the leading professional services organizations in Romania providing, in cooperation with Reff & Associates, services in audit, tax, legal, consulting, financial advisory, risk advisory, business processes and technology services and other related services with more than 1100 professionals. Please see www.deloitte.com/ro/about to learn more about our global network of member firms.

© 2018. For information, contact Deloitte Romania

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