international employment law firm alliance L&E Global

6. Cost-Reduction Strategies

To what extent can employers implement the following cost-reduction strategies as a result of COVID, and what are the primary limitations on each? 

  • Furloughs

According to the Labour Code the employer can suspend individual employment agreements due to the temporary reduction of Company activities or to a temporary lockout of the Company. The reduction of activity or the temporary lockout both have to be caused by economical, technological or structural reasons, or by other similar reasons. The current socio-economic situation is considered a justified reason. During the suspension the employer should pay an indemnity of at least 75% of the employees’ basic salary. Also the employers can reduce the weekly work time from 5 working days to 4 working days with a corresponding reduction of the salaries, if the reasons for the reduction of the activity span for more than 30 days. These are general rules that do not depend on the pandemic situation.

  • Salary reductions

Salary is an essential part of the employment agreement and can only be reduced with the consent of the employee by signing an addendum to their individual employment agreement.

  • Redundancy

Both individual and collective dismissals can be used during this period without special restrictions. However the employer must still observe all mandatory rules when they make positions redundant. In cases where the employer benefited from state aid the dismissal is not forbidden, the employer is only required to return the amounts received and the legal interest rate if they did not keep the employment for the required period of time.

  • Facility closure

No specific limits on facility closures due to the pandemic.

Any questions

Ask our member firm Magda Volonciu and Associates in Romania