Starting with 1st of January 2018, the Pension (CAS) and Health Benefits (CASS) contributions were transferred to the employees, a measure that would result in lower net incomes for both tax-exempt employees (including IT programmers) and for employees who do not earn incomes of at least 1,900 lei. In an attempt to resolve these issues, the Government has recently approved a normative act proposing that part of the CASS be borne by the state, so that those exempt from income tax will not have lower net salaries, while employees with gross salaries lower than the minimum salary on the economy will owe contributions at the level of the gross salaries, the difference up to the gross minimum salary will be borne by the employer.
The measures presented are included in Government Emergency Ordinance no. 3/2018, in force since February 8, 2018.
Regulating the calculation of the social health insurance contribution
Specifically, as of 1st of January 2018, pension and health contributions were transferred from employer to employee, and income tax fell from 16% to 10%. However, the effects of reducing the income tax rate did not have the benefit of the tax-exempt persons, in this situation for the following categories of employees:
For those people, maintaining the same net salary which they have obtained in December 2017, starting with the January 2018, is only possible if employers increase gross wages by at least 20%. Otherwise, IT programmers and other tax-exempt employees would receive net remuneration about 7-8% lower than before.
To remedy the situation, Government Emergency Ordinance no. 3/2018, establishes that part of the CASS due for employees benefiting from the tax exemption will be borne by the state. However, granting such a compensation is conditional on the increase in gross wage by at least 20% compared to December 2017.
In other words, the fiscal facility does not apply where there is no provision at least 20% for the salary in addition with permanent bonuses. The additional act establishes that deductions will be borne from the state budget for 12 months, during 2018. Then, in 2019, employers will be forced to bear the additional labor costs from their own budget.
In the case of wages increased with more than 20% compared to the gross wage level of December 2017, the difference between CASS due and CASS retained decreases to zero, as the salary is higher. If the CASS retained is equal to CASS due, the provisions of the normative act does no longer produces its effects. In such a situation, the employer ensures by his own effort a net income at least equal to that of December 2017, in which case the support of the respective state budget is no longer justified.
Example:
Gross Salary – December 2017: 10,000 lei
Compulsory social contributions – employee: 1,650 lei, out of which:
CAS (10.5%): 1.050 lei
CASS (5.5%): 550 lei
Unemployment (0.5%): 50 lei
Net salary 2017: 8.350 lei
Gross salary 2018: 12,000 lei
(Gross salary January 2018 = Gross salary 2017 increased by 20% = 10.000+ 10.000 x 20% = 12.000 lei)
Compulsory social contributions – employee:
CAS due (25%): 3.000 lei
CASS due (10%): 1,200 lei
CASS retained: 650 lei
(CASS retained= gross salary2018 – CASdue in 2018 – net salary december 2017 = 12,000- 3,000 – 8.350 = 650 lei)
CASS difference deducted from the state budget: 550 lei
(CASS difference deducted from the state budget = CASS due – CASS retained = 1,200 – 650 = 550 lei)
Net salary 2018: 8.350 lei
(Net salary 2018 = Gross salary 2018 – CAS due – CASS retained = 12,000 – 3,000-650 = 8,350 lei)
According to Government Emergency Ordinance no. 3/2018, starting with January 2018, the basis of calculating the social security contribution due to individuals receiving health insurance benefits is the sum representing the social health insurance indemnity, the social insurance contribution is sustained at the level rate of 25% and is deducted from the social health insurance indemnity. Prior to the publication of the Ordinance, the basis for calculating the social security contribution due to individuals benefiting from health insurance benefits was the sum representing 35% of the gross average salary corresponding to the number of working days of sick leave.
Solving the situation for part-time employees
Government Emergency Ordinance no. 3/2018 also solves the situation of employees who do not realize incomes of 1,900 lei, both from the private and the state, those who wore to receive reduced net salaries starting with January 2018 as a result of the transfer of CAS and CASS in full for the employees (moreover, employees with 2 hours a day were to register a negative net income, in which the contributions due at the gross minimum salary of 1,900 lei actually exceeded the level of the salary received). According to the normative act, part-time employees will owe their contributions to the level of the earned income, not to the gross minimum salary, and the contribution difference up to the level of 1,900 lei will be borne by the employer on behalf of the employee.
New accounting accounts
It is important to mention that the Order no. 1243/2018 regarding the filling in of accounting regulations containes the accounts for the registration of the contributions due for the incomes realized starting with the 1st of January 2018.
Thus, the accounts you enter are:
4315 “Social security contribution (P)”,
4316 “Health Insurance Contribution (P)”,
436 “Insurance Contribution to Work (P)”
646 “Expenditure on insurance contribution for work”.
All the mentioned modifications apply starting with the declaratory obligations related to January 2018, so if there were situations in which the salary calculations have been made up to this date, they should be redone exactly as stated above. Mention: the implementing rules of OUG 3/2018 are to be approved and published in the Official Gazette by order of the President of the National Agency for Fiscal Administration within 15 days from the date of publication of the emergency ordinance.
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