Hire Contractors in Romania

Contracting work in Romania is picking up, but the traditional employment structure still dominates, with over 85% of employees. Statista reports approximately 10% of self-employed individuals in Romania. 

Contractors offer a flexible choice to reduce hiring costs if you're expanding in Romania. However, hiring and managing contractors remains a major business challenge, including misclassification risks, tax compliance, and cross-border payments.  

To effectively tap into this skilled workforce, you need a modern HR solution like Agent of Record (AOR) that specializes in Romanian labor law and employment regulations. 

The following sections will detail how to hire independent contractors in Romania and cover the necessary solutions required for compliance.

How to Hire Contractors in Romania

Hiring contractors in Romania can be simplified into two main approaches:

• Hire contractors directly
• Outsource contractor management 

Hire contractors directly

Here's how you can do it:

Step 1: Identify the Right Talent

Use job boards like eJobs.ro, LinkedIn, or local recruitment agencies to find skilled contractors. Clearly define the scope of work, skills needed, and project timelines.

Step 2: Verify Legal Status

Contractors in Romania often operate as sole proprietors or under a "PFA" (Authorized Natural Person). Ensure the contractor is legally registered to provide services and can issue invoices.

Step 3: Define clear contracts

Prepare a detailed agreement covering the following:

• Scope of work
• Payment terms (including VAT if applicable)
• Project timelines
• Intellectual property rights
• Confidentiality clauses

Learn more about freelance contract templates in Romania. 

Step 4: Handle taxes and payments

Contractors are responsible for their taxes in Romania, but you must verify their compliance to avoid potential liabilities. For seamless transactions, use international payment systems like Payoneer or direct bank transfers.

Most global companies are switching to an agent of record in Romania for labor law compliance and contract management. 

Hiring contractors through Skuad AOR

Using contractor management services like Skuad AOR, you can: 

• Handle all onboarding processes, ensuring compliance with Romanian labor laws. 
• Ensure contractors are classified correctly and that taxes, contributions, and reporting are handled appropriately, shielding your business from legal liabilities.
• Seamlessly track contractor time logs, invoices, and payments in local currency or other preferred methods. 
• Ensures all data-sharing practices comply with GDPR when working with Romanian contractors.

How to hire overseas contractors

In Romania, you can utilize agent of record services to hire overseas contractors. 

Once you have sourced suitable profiles of contractors, you must verify their contractor status— PFA or sole proprietorship. This will help you decide on taxation, social security contributions, and other statutory deductions. 

Further, you must draft a legally compliant contract with clauses covering scope, payment terms, termination, and intellectual property rights.

How to pay contractors in Romania

Paying contractors involves more than just processing payments. You must track work hours, manage invoices, handle compliance, and ensure timely payouts. 

• Using contractor software like Skuad AOR can simplify these processes by: 
• Monitoring contractor time logs for accurate payments and productivity tracking. 
• Automate invoice generation, handle tax requirements or verify the contractor's tax registration (e.g., PFA status).
• Set up recurring payouts or one-time payments based on project agreements.

Hiring Contractors Directly vs Hiring Contractors via Skuad

Here’s how hiring contractors directly differs from hiring contractors via Skuad:

Use this easy checklist to avoid employee misclassification.  

How Much Does It Cost to Hire a Contractor in Romania

The cost of hiring a contractor in Romania depends on mutual agreement. In most cases, you may fix contractor compensation with the statutory minimum wage for employees at RON 4,050. 

Hidden costs, compliance risks, and administrative burdens could exist. AOR solutions provide an effective hiring strategy to address these issues.

How to Convert a Contractor into an Employee in Romania

You can convert your contractors into full-time employees to better control their work schedules. This would also reduce your contractor compliance risks in Romania. 

US employers will find it relatable as it is akin to transitioning from 1099 to a W2 employee status. 

Here are two best approaches to follow for converting from contractor to employee in Romania: 

1. Establishing a local entity:
   • Set up a legal entity in Romania.
   • Draft employment contracts and register for tax and social security deductions. 
2. Outsource hiring to an EOR:
   • Collaborate with a reputed employer of record in Romania (EOR).
   • Leading EORs like Skuad can manage the complexities of contractor conversion without even establishing a local entity.

Challenges of Hiring Contractors in Romania

Hiring contractors in Romania gives you access to a skilled talent pool with lesser compliance requirements and more cost savings. However, here are some specific challenges that you must deal with:  

1) Laws to hire contractors in Romania

Romanian law doesn't explicitly define independent contractors, leaving you vulnerable to: 

• Misclassification in Romania: You must be careful when setting the work scope, as any means of direct control over work hours may classify them as employees. Learn how to distinguish between independent contractors and full-time employees. 
• Social Security Contributions: While contractors are generally not subject to mandatory social security contributions, there are exceptions and nuances, especially if the contractor works exclusively for one company.
• Labor Code Compliance: You may be obliged to ensure certain provisions of the Labor Code, particularly regarding health and safety regulations. Furthermore, you must set up robust policies, contracts to hire in Romania, and secure communication channels for compliance with data protection laws. 

2) Romania payroll challenges

Payroll in Romania for contractors may involve the following complexities: 

• If the contractor is a registered taxpayer, you may have to process VAT invoices. 
• You must maintain accurate records of payments, tax deductions, and supporting documentation to mitigate misclassification fines.
• Currency exchange rate fluctuations impact the overall cost of hiring contractors, especially for long-term engagements.
• Further, US employers looking to hire contractors in Romania must complete IRS Form W-8BEN to certify their country of residence. 

3) Hiring international workers in Romania

There are several risks to consider when hiring international workers in Romania, including:

• The current annual cap of 100,000 foreign workers needs to be increased to meet the growing demand in Romania. 
• You must sign work contracts with foreign workers within 15 days of arrival (previously 90 days). Any further delay results in fines between 5,000 – 10,000 Romanian leu.
• You must expect regular workplace checks by authorities to verify the legal employment of foreign workers. 
• You must also factor in local compliance costs to avoid fines and penalties when hiring contractors in Romania.

Hire Contractors in Romania with Skuad

Hiring contractors in Romania will help you maintain a lean global team. However, the risk of misclassification always remains a challenge in successful contractor management. 

Here is why you need AOR solutions like Skuad. It can simplify this process by providing a comprehensive platform to hire, pay, and manage independent contractors in Romania and over 160 other countries. 

With Skuad, you can scale your operations globally without the hassle of setting up local entities. Experience the ease and efficiency of international contractor management. 

‍Book your demo today to get started!

FAQs

1. Can I hire a foreign contractor?

Yes, you can hire a foreign contractor in Romania. However, The current annual cap of 100,000 foreign workers in Romania is creating a major roadblock for employers to engage with more overseas contractors. 

2. What is the tax rate for self-employed in Romania?

Anyone freelancing in Romania or self-employed as a sole proprietor pays a flat income tax of 10%. 

3. What is the employment contract in Romania?

An employment contract in Romania establishes a relationship between you and your worker. It follows the general principles of outlining working hours, overtime pay, salary, compensation, and leaves, including when and how to avail of Romania maternity leave, termination clauses, and more. 

4. How do I pay a foreign contractor?

You can pay a foreign contractor in many ways. The most usual method is direct bank transfer, but it involves high currency conversion costs. Modern solutions like Payoneer are a good alternative to paying foreign contractors. Further, you can rely on Skuad AOR to track and manage contractor invoices for automated payments.