The permanent labour contract - Tips for entrepreneurs looking for labour
The employment relationship between employer and employee is governed by Romanian legislation in force and by the conclusion of a document between the two parties, known as an individual employment contract. This document, signed at the start of employment, contains a number of valuable details, including the duration of the employment relationship between the employee and employer. In most cases, this relationship does not have a final limit, so employment contracts are for an indefinite period. It should be noted that only in certain special circumstances can a clause be introduced at the time of termination.
Publishing date: 5 May 2023
Employers looking for labour need to know what a permanent employment contract is, the conditions under which it can be concluded and the advantages and disadvantages for both parties involved. They also need to know what methods they can use if they are looking for labour and want to employ workers on a permanent basis.
Contents:
1. What is a permanent employment contract?
1.3. Penalties applicable to persons employed for an indefinite period
2. Advantages and disadvantages of using the permanent contract
2.2. The contract for an indefinite period - benefits and disadvantages for the employee
1. What is a permanent employment contract?
Over the last twenty years, labour law in Romania has evolved in such a way that the parties involved in this essential relationship of human life have their rights protected. At the same time, the aim has been to provide ideal conditions in which normal work can be carried out. One of the most important provisions of this part of the legislation is the one on the conclusion of an individual employment contract.
Article 10 of the Labour Code stipulates that by means of an individual employment contract a natural person, known as an employee, undertakes to work for the employer in return for a salary. The same law also provides for the two types of contracts in relation to their duration. Thus, there are two circumstances: indefinite duration (no limit to completion) and fixed duration (maximum of 24 months or, in certain circumstances, 36 months).
According to this legislation, the majority of employment contracts concluded in Romania are for an indefinite period, with only the starting point of the employment relationship being stipulated and not its termination.
1.1. Legislative provisions relating to the conclusion of an employment contract of indefinite duration
The legislative document governing all aspects of the relationship between an employee and an employer is the Labour Code. It contains numerous laws that are designed to protect both parties involved in signing an individual employment contract. As far as the duration of such an agreement is concerned, the legislative details are set out in Law No 53 of 2003, which has been updated several times to date.
In this legislative document, the Romanian Parliament has introduced the clarification that individual employment contracts are normally concluded for an indefinite period. The purpose of this detail is to protect employees from employers, which was common in the period before the law was introduced.
Another essential part of this law is that it specifies the minimum information that must be included in an individual employment contract, as well as the circumstances in which employment for an indefinite period may be terminated.
1.2. Conditions required for the conclusion of an employment contract of indefinite duration + probationary period
When concluding an employment contract for an indefinite period, the employer is obliged by law to provide the employee with a document containing essential information that provides the employee with comfort and security for future work, but at the same time specifies what sanctions may be received if the terms of the contract are not respected.
A document signed by both parties should be drawn up when an individual employment contract of indefinite duration is concluded. Article 17 of the Labour Code requires the following elements to be included:
- Identity of the two signatory parties;
- The place or places of employment of the employee;
- The employer's place of business (if the employer is a natural person, then the employer's place of residence shall be given);
- The position to be filled and the corresponding job description (this document will specify the duties of the position);
- The job evaluation arrangements;
- Duration of working hours and rest leave;
- Salary and other employee benefits;
- Duration of the probationary period;
- Sanctions that may be applied to the employee.
As regards the length of the probationary period, there is some confusion which may lead to problems between the two signatories. The law clearly states that the probationary period for persons employed for an indefinite period may be a maximum of three months for regular employees and four months for persons in a managerial role. Throughout this period the employment contract can be terminated at any time without prior notice and without explanation by the employer.
1.3. Penalties applicable to persons employed for an indefinite period
An essential part of any employment contract that must be known by both parties is the sanctions and their effects. These penalties can be applied if the employee breaks the law and/or the company's internal rules. The range of sanctions is variable and must be in line with the offence recorded.
The simplest sanction is a warning which can be applied at any time without a disciplinary investigation. Other more severe sanctions are demotion, cutting part of the salary for a period of time, suspension or even termination of contract (dismissal). In the case of the latter sanctions, the law requires a disciplinary investigation to be carried out, during which the employee can present his defence to the charges.
2. Advantages and disadvantages of using the permanent contract
Labour legislation has been designed in such a way that both parties (employee and employer) benefit from its provisions. There are advantages and disadvantages for all parties involved in permanent employment contracts.
2.1. Contract for an indefinite period - Benefits and disadvantages for the employer + conversion of the fixed-term employment contract into an indefinite one
Employers looking for labour are often forced to turn to permanent contracts. The other option, fixed-term work, can only be used under special conditions and for a limited period of time (two years at most). At the end of this period, the employer is obliged either to convert the contract from a fixed-term contract to a contract of indefinite duration or to terminate it altogether.
The main advantages for employers using this form of employment are:
- They get stability in their relationship with employees. Studies have shown that employers who have experienced workers are more successful in business than those who use temporary workers. Every business has certain secrets, which can only be known after significant experience has been gained.
- The organisational structure of a company is built up over time, and achieving efficiency in this respect is quite difficult. With this in mind, employers who use open-ended contracts have fewer problems in achieving a proper workflow.
- The bureaucratic side of hiring new workers instead of temporary workers who have left the workplace should not be overlooked. In the current conditions, it is quite difficult to find qualified staff who are available and willing to work in an exemplary manner. If such a situation arises, an ideal solution is to turn to firms specialising in the supply of labour, offering HR and payroll services, as well as accounting consultancy, administrative services, tax advice, etc.
Permanent employment contracts come with some disadvantages. One of these is the difficulty of making workers redundant. In some situations, employees can only be made redundant in certain circumstances, and moreover they can receive compensation when their employment contract ends.
2.2. The contract for an indefinite period - benefits and disadvantages for the employee
Permanent employees have a number of clear benefits over temporary employees. Job stability gives them the security of tomorrow and the possibility of advancement through further training. Also important is the relationship developed with the employer, which becomes stronger with each year of employment. In one way, a problem with an employer with whom you have worked for a long time is solved, and in another way, you work with a boss you have only just met.
Permanent employees also have the advantage of an easier relationship with lending institutions. Loans needed in many circumstances can be obtained more easily by such employees, and the loan repayment period can be significantly longer than that of temporary employees. The main disadvantage for employees is that they can only leave their job after giving notice, and may miss out on some labour market opportunities as a result.
3. Tips for contractors looking to hire indefinitely - what is the model to follow for contract, dismissal etc.
Most contractors are obliged to employ staff to carry out the business in the normal way. Undeclared work without a contract is not recommended and the fines that can be received can be significant. For the best possible working relationship between employer and employees, entrepreneurs should take into account some advice from human resources specialists.
The first precaution relates to the way the contract is concluded. A model employment contract for an indefinite period should be used and the future employee should provide at least the following documents:
- Copies of identity documents (birth certificate and identity card);
- Medical certificate attesting to the possibility of doing the work for which you are employed;
- Criminal record of the future employee (this document is very useful because it can be used to find out whether the future employee has a criminal record);
- Documents proving qualifications and studies;
- Letters of recommendation from former employees;
- Curriculum Vitae.
Particular attention must also be paid to the selection of the workforce. This can be done either through interviews and practical tests carried out by the employer, or by using the services of specialised HR firms.
Even if such a situation is not desired, there is sometimes a need to suspend or terminate the employment contract. The legislation sets out the circumstances in which these two elements may apply. With regard to the suspension of the contract, contractors should be aware that they can use this solution when some form of leave is required (maternity, caring for sick children, vocational training). Suspension can also be applied if an employee is under disciplinary investigation and a decision has not yet been taken on their guilt or innocence.
Dismissal of an employee can only be done in certain circumstances, and the law is designed to protect the employee, but also to give the employer the possibility to dismiss a worker who is not doing his job. Reasons for this include repeated minor misconduct or serious breaches of contractual agreements (lateness, absence from work, failure to perform duties, violent behaviour, alcohol or drug use, etc.), inability to perform work for physical or mental reasons and arrest for more than thirty days.
In conclusion, entrepreneurs who need to recruit additional labour need to be aware of the conditions under which they can conclude an employment contract for an indefinite period and the advantages and disadvantages they can gain from such collaboration.
*This material has been prepared for information purposes only and is not intended to provide tax, legal or accounting advice. We recommend that you consult with your tax, legal and accounting teams before making any decisions on the topics mentioned in this article.
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