written by The total salary cost represents the sum of all expenses an employer incurs to compensate an employee. In addition to the employee’s gross salary, it includes mandatory contributions, taxes, and employer-provided benefits. Below are the key components in more detail:
- Gross Salary: This is the amount stipulated in the employment contract and includes all earnings before deductions for contributions and taxes. It serves as the starting point in salary cost calculations.
- Employer Social Contributions: Employers are responsible for additional contributions, such as the Work Insurance Contribution (CAM) and other taxes mandated by local regulations.
- Income Tax: This is a portion of the gross salary deducted for payment to the state.
- Additional Benefits: In many cases, the total salary cost also includes non-wage benefits such as meal vouchers, private health insurance subscriptions, performance bonuses, training programs, and other forms of professional development.
Understanding Gross Salary and Net Salary
Salaries are paid in cash at least once a month, with the payment date specified in the individual employment contract, collective labor agreement, or internal regulations. The gross salary represents the total amount stipulated in an employee’s contract, payable in exchange for work performed. It includes all financial benefits an employer provides before deducting social contributions and taxes.
After deducting all mandatory contributions and taxes, the net salary is the actual amount an employee receives “in hand.”
Minimum Wage in 2025
As of January 1, 2025, the gross minimum wage has increased from 3,700 RON to 4,050 RON, reflecting an increase of 350 RON. Comparing the gross minimum wage from January 2024 (3,300 RON) to that of January 2025 (4,050 RON), we observe a difference of 750 RON.
The associated costs are detailed below to illustrate the employer’s contributions in 2025:
Contributions Deducted from the Employee’s Gross Salary:
- Social Insurance Contribution (CAS): 25% of the gross salary.
Calculation: 4,050 RON × 25% = 1,013 RON - Health Insurance Contribution (CASS): 10% of the gross salary.
Calculation: 4,050 RON × 10% = 405 RON - Income Tax: 10% applied to the taxable base (gross salary minus CAS and CASS).
Taxable base: 4,050 RON – 1,013 RON – 405 RON = 2,633 RON
Income tax: 2,633 RON × 10% = 263 RON - Total Employee Contributions Deducted:
1,013 + 405 + 263 = 1,681 RON - Net Salary:
Calculation: 4,050 RON – 1,681 RON = 2,369RON
Employer Contributions:
- Work Insurance Contribution (CAM): 2.25% of the gross salary.
Calculation: 4,050 RON × 2.25% = 91 RON - Total Cost for Employer:
4,050 RON + 91 RON = 4,141 RON
Thus, to provide a gross salary of 4,050 RON, the employer incurs a total cost of approximately 4,141 RON, including mandatory contributions, while the employee receives a net salary of 2,369 RON.
*Please note that these totals are rounded.
Latest Legislative Change
It is important to note that, as of January 1, 2025, full-time employees with gross earnings below 4,300 RON per month are exempt from income tax and social contributions on 300 RON per month. For more details on this change, refer to the latest Smart Update HERE.
