Employ Candidates Compliantly in Romania

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  1. Overview: Romania
  2. Global HR Compliance
  3. Global PEO and Payroll
  4. Expand without a company set up
  5. Contractor vs. Employee: Which Is Better?
  6. Work Permit for Hiring Expats in Romania via PEO
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Convert Independent Contractors to Employees in Romania

Find out how you can make an informed decision on whether you should engage and pay employees or independent contractors using our free ‘Employee vs. Independent Contractor’ Checklist.

Designed to be used by companies engaging the remote workforce in Romania, the checklist is the best way to define why and in what cases companies should onboard new hires or convert existing contractors/freelancers into employees without missing any crucial aspects.

 

What Our Clients Are Saying?

I want to share my experience dealing with Acumen International company.

Speed & responsiveness: Very prompt in response to my first inquiry about converting contractors into employees to follow-up questions.

Completeness of information: I like how detailed the estimates and the transparency make us feel more confident about where the money goes.

Overall experience: I am pleased and impressed with how fast they respond to my inquiries. We can trust the company to employ the contractors we want to keep.

Quah Shen Dee,
People Success Officer

I have always found Acumen International very supportive, professional, and helpful. They pay salary on time and are always ready to sort out any issues.

I must admit I truly enjoy my time as an Acumen International employee and feel like they care about me as an individual. I have a dedicated manager that provides me with detailed explanations when it's needed. Payments are always prompt, and the entire team does its best to respond to any of my questions.

I highly recommend Acumen International to anyone that requires their services.

Andrew Yanchurevich,
COO


Who Is an Independent Contractor?

An Independent Contractor is an individual who provides services or goods to other businesses or clients without being an employee. This person has complete autonomy over how the work is done and what tools or equipment are used. The client only has control over the final product or outcome.

The Independent Contractor is responsible for their own taxes and reporting; the client does not need to withhold any income from payments made. Finally, independent contractors do not receive standard employee benefits such as healthcare, workers' compensation, PTO (paid time off), or other benefits.

Employee Misclassification Risk Exposure in Romania

Today's global economy is a unique and exciting time for business. It's an era of remote work, constant expansion, and innovation, and the future looks bright for companies that can take advantage of the growing demand for their goods and services across borders.

However, the challenges of this new age are just as significant as global employment opportunities. One of the most formidable obstacles for employers is potential employee misclassification risk. Global companies without a comprehensive approach to managing their international labor force risk can be held liable for failing to meet local compliance regulations, tax requirements, and other legal obligations in Romania. These risks can cripple even the most well-run business or conglomerate.

Employee misclassification occurs when a company improperly classifies an employee as an independent contractor. Misclassifying employees can negatively affect a company's ability to effectively manage its workforce and expose the company to legal, financial, and reputational risks. It also opens up the possibility of lawsuits from former or current employees. An employer who misclassifies an employee can be liable for back taxes, fines, and penalties.

14 Signals to Determine the Threat of Misclassifying Workers in Romania

If you hire independent contractors regularly, it's essential to understand how they may be misclassified and what steps you can take to avoid potentially costly litigation. If you've already employed independent contractors in the past, you might consider reevaluating how correctly they were classified and reviewing contracts or business relationships with them.

You should consider three main factors when determining whether your workers are appropriately classified as independent contractors: behavioral control, financial control, and the parties' relationship. Behavioral control includes detailed instructions on how the work is to be performed. Financial control is demonstrated by withholding taxes and benefits from the worker or not reimbursing expenses incurred while working. The parties' relationship is demonstrated by having a written contract specifying no employer-employee relationship. When in doubt, follow the checklist below.

  1. How the parties treat each other.
  2. The amount of control exercised by the principal over the details of how the work is done.
  3. Whether payments are made by time or by results.
  4. Whether the work is part of the regular business of the principal.
  5. Whether the contract was entered into as a means of carrying on business or for any other commercial purpose.
  6. Whether the work requires special skills and initiative and whether the such skill is peculiar to any trade, business, or calling.
  7. The length of time for services to be provided, and more.
  8. Whether the worker is taking on financial risk.
  9. Whether the worker is providing their own equipment.
  10. Whether the worker is in receipt of employment benefits.
  11. Whether the worker can profit from their work. 
  12. Whether the worker has the right to terminate the contract.
  13. Whether the work performed requires special skills and initiative.
  14. The permanence or exclusivity of the relationship with the employer company.

Addressing Under-taxation Risk when Using Independent Contractors 

Many business owners don't know that hiring independent contractors can be fraught with legal issues. The most important thing to remember is that independent contractors are self-employed, and a company is only liable for the workers it hires if they're classified as employees.

However, as a business owner, you are responsible for ensuring that your company is registered for indirect taxes, such as Value-Added Tax (VAT),  Sales Tax, or other in-country taxes. While it is the responsibility of the independent Contractor (freelancer) to report and pay these taxes, it is up to you to ensure that everything is reconciled correctly.

Suppose you leverage a global PEO to assist with global employment operations in Romania. In that case, they'll handle many of the necessary responsibilities to ensure that all your independent contractors are engaged compliantly.

Acumen Global PEO in Romania can assist in managing HR compliance, contracting, and payroll issues related to independent contractors so that your business isn't at risk of being audited or liable for any penalties. We can help you convert independent contractors to employees if your business needs it. With compliance and payroll administration taken care of by a global PEO solutions provider, your focus can be on running your business while knowing that all the legal considerations are being addressed correctly and completely.

The Case of an IT Freelancer You Most Certainly Want to Avoid in Romania

Here is the litigation you would want to avoid… One American company worked with a Slovakian IT freelancer for approximately three years. The American HR director decided to contact Acumen International to employ this freelancer so that they would be in compliance with labor laws and avoid future misclassification issues.

The finance department of this US company did not approve of our offer to employ the Slovakian freelancer as it seemed higher than what they were currently paying the freelancer. An employee misclassification case did not seem imminent, so they decided not to act.

Half a year later, the company contacted us to employ a Slovakian freelancer. Our offer got approved, but the freelancer refused to sign our employment agreement. In this half-year, the relationship between the freelancer and the US company went sour. The freelancer decided to go to the labor authorities instead. We never heard the ultimate verdict, but from communication with the HR director, we understood that they risked owing social security taxes, vacation, severance payment, and additional fines totaling about seventy thousand euros.

Acumen International PEO: Protecting Businesses from Legal and Tax Liability

Tax and labor laws are complicated and vary globally, making it hard for companies to know what they're doing is right. Acumen Internation, a global PEO (Professional Employment Organisation), can handle these issues for you by providing local labor and tax law expertise. We help companies, especially those with offices in multiple countries, including Romania, to prevent legal trouble by ensuring they are not misclassifying employees as independent contractors.

Why Convert Independent Contractors to Employees in Romania via Global PEO Solutions

  1. Engaging and paying foreign talent via a global PEO solution is about 30% cheaper than engaging in-house.
  2. Saving over 50% of costs compared to working and paying through your entity.
  3. With the help of employment, employee loyalty grows by 47%, which is why you can retain the top minds long-term.
  4. Legal foreign employment eliminates 95% of legal, financial, and business risks. Leveraging the global PEO (Professional Employer Organisation) solutions, you can get flexibility and take up more projects of different duration.
  5. You can start a bare-bones operation in Romania with just one or a couple of employees and easily add any headcount as you move along.
  6. Less time spent on recruitment, evaluation, onboarding of globally distributed teams of professionals, or a learning curve.

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the 'Employee vs Independent Contractor' Checklist

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