The Romanian labor market before the COVID-19 pandemic was very competitive. On the one hand, foreign companies closely monitored the opportunities of a developing market and local labor force, while on the other hand, the tradition of people traveling abroad in pursuit of happiness and the flood of young and bright minds out of the country had spread enough to make recruitment a difficult process and to significantly affect the labor market in general.
On a regulatory level, the principles of the current labor laws were set in 2003 and have been adjusted since then to accommodate market conditions following the 2008 financial crisis and to implement new rules enacted at the EU level. Generally, Romanian labor law is aligned with the EU rules. Also, courts of law that traditionally had been sympathetic to employees have been working to develop a more balanced approach – one that gives even more consideration to the rulings of the Court of Justice of the European Union.
In this context, the COVID-19 outbreak found Romania on a path of steady economic growth.
The lockdown measures imposed starting on March 16 were strict, and many companies switched into survival mode. The Romanian Government quickly enacted several financial support measures to help companies keep their employees. Nonetheless, due to the lack of visibility on short, medium, or long-term developments, many companies decided to dismiss employees. Currently, more than 400,000 people in Romania are unemployed, accounting for approximately 8% of the active labor force – with the most affected industries being manufacturing, automotive, retail, and construction.
Another 600,000 employees are still temporarily laid-off (a number that has actually shrunk from more than 1 million in mid-April) and are expected to return to work soon. From March 16 to May 31, the state provided the temporary layoff allowance owed by employers affected by the pandemic to employees, irrespective of industry. As of June 1, the subsidy will be provided only in those industries that are subject to restrictions, such as retail, leisure, media, and entertainment. Upon returning to work, the state may continue subsidizing up to 41.5% of their salaries for another three months, while limiting the company’s right to terminate their employment until the end of 2020. However, the future of the current employment relationships for these workers, and many others, is still questionable, as many companies are now contemplating redundancies.
Paradoxically, a higher unemployment rate does not worry everybody to the same extent, as companies see potential for easier access to valuable human resources than they have had for years.
In terms of HR processes, the momentum created by the COVID-19 pandemic forced companies to find creative workarounds. The lockdown measures required employees to work from home where possible. Specific legislation in this area has existed in Romania since 2018, but tele-working remains uncommon. For companies that had previously started to implement it as a benefit or as a pilot project, the governmental measures requiring companies to suddenly implement work-from-home structures did not come as a major surprise. But many others needed to find the resources to implement the WFH policies that would allow them to remain efficient and profitable during the pandemic. Starting early next year, we expect to see court practice developing around tele-working arrangements, especially as regards the highly-debated matter of who bears the costs.
Also, in response to the pandemic, many companies digitalized their internal processes and revisited their policies, procedures, and practices to determine which were truly beneficial and created added value for the company and which just led to more bureaucracy. The HR function gained more visibility and a stronger say in company life. In addition, the pandemic also required public authorities to finally embrace digitalization, encouraging more efficient communication with businesses.
While companies and public authorities are both still coping with the legislative and business changes that have come as a result of COVID-19 – sometimes at a discouraging pace – we trust that the valuable lessons learned since March 2020 will significantly improve employment relationships in the long run.
By Mara Moga-Paler, Head of Employment, Schoenherr Romania
This Article was originally published in Issue 7.6 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.