30/10/2009 - Labour relations need to be more flexible and creative in a changing economic environment

Sat, 31st July, 2010
PRESS RELEASE

Labour relations need to be more flexible and creative in a changing economic environment

Bucharest, October 29, 2009 – The British-Romanian Chamber of Commerce (BRCC) held a business breakfast meeting on Thursday 29 October at the Howard Johnson Hotel, Bucharest. The subject discussed in this well attended meeting was “Labour relations in a changing economic environment”. The debate, moderated by Ray Breden, BRCC Deputy Chairman, emphasised the need for Romanian authorities and foreign and local companies alike to consider more flexible and structured solutions for labour related issues in a time of crisis.

Ray Breden stressed, “Businesses in Romania need to have a survival strategy. Romania is one year behind the other European countries in terms of recession. The issues are lack of cash flow and the need to revise budgets to realistic targets for 2010. Human resources are critical, declared Breden.

Cost-efficiency policy is the priority for Romania’s labour market, stressed guest speaker Catalin Micu, Senior Associate, Zamfirescu Racoti Predoiu, who also mentioned the need to balance between cutting costs while keeping personnel employed efficiently and profitably. Micu identified voluntary internal restructuring and transfer between departments, outsourcing, subcontracting and personnel leasing as possible solutions.

Voluntary internal restructuring can be used to improve productivity and efficiency. Elimination of non-profitable departments is also a possibility.

Outsourcing and sub-contracting needs to be considered, said Micu. The main advantage is the transfer of liability for the quality of work to external suppliers. However, Catalin Micu warned that in using outsourcing, companies should determine the suitable situations and fields of activity. Also, personnel leasing provides flexibility in using human capital, its main advantage being the elimination of personnel management procedures. In this case, the liability is switched to the temporary labour agent.

Debates were taking place at present regarding the proposed law changes on the pension system and the authorities’ approach to taxation of social benefits, reminded Madalina Racovitan, Director, Taxation Services KPMG. As she remarked, the public pension system is at a turning point: one of the changes in the draft law due for 2010 is to define the taxable basis for employees as the monthly gross salary as compared to the current legislation which defines the taxable basis as the employee’s monthly gross income.

In the current context, Madalina Racovitan explained alternative remuneration structures as a key factor to human resources improvement. These remuneration alternatives include: rendering services as independent contractor with the ability to deduct expenses, sale of intellectual property rights (low effective income tax rate), rendering services via wholly-owned limited liability companies. However, as Racovitan pointed out, all may contain an element of risk regarding recharacterisation as an employment relationship, and professional advice should be taken.

Other types of benefits in kind with a potential favourable tax treatment under current legislation include: contributions to voluntary pensions plans; meal tickets; holiday tickets; entitlement to stock option plans; social benefits, exemption for IT specialists, professional training. Flexible benefits may also be considered by employers as a tool in motivating employees, by granting those benefits at their choice, while keeping employment costs at a minimum level by taking advantage of a favourable tax treatment, where applicable.

In summary, businesses in Romania face a significant challenge in the coming months not only to survive, but to restructure their use of personnel in an effective and efficient manner to ensure that their business emerges from the recession in good shape.

About the British Romanian Chamber of Commerce
The British Romanian Chamber of Commerce is a non-profit organisation, established in 1998. A registered company limited by guarantee and owned by its membership with the mission to use its good offices and activities to increase British-Romanian business and investments, to foster a better understanding between the two nations and encourage bilateral trade and industry, tourism, financial investment and cultural relations.