Government to freeze public sector hiring and bonuses, halt pension hikes and introduce new property tax

Romanian public sector employees will receive no vacation, gift or meal vouchers until 2014, no bonuses until 2013 and will only be compensated for overtime with time off in lieu, under the Government’s fiscal-budgetary strategy for 2012-2014

September 2011 - From the Print Edition

The Government has also vowed to call off some pension raises scheduled for 2012 and wants to introduce a new property tax system that will generate more money for the state budget. Under the strategy, only one in seven vacant public sector positions will be filled through to 2013 and public institutions will not be allowed to purchase cars, furniture or office equipment until 2014. Meanwhile, state officials will postpone certain pension raises that would have taken effect next year until 2014, arguing that the lack of a “sustainable framework” for the application of the pension law will increase the social security budget deficit. The new pension law, which came into force on January 1, 2011, stipulates that workers who met certain conditions after April 1, 2001, would receive a 25 percent increase in their monthly pension base, calculated as the ratio of the individual gross salary to the average gross salary in that particular month, while a correction index would be applied to the yearly score of people who retire this year, calculated as 43.3 percent of last year’s gross average salary and a pension index in effect at the time. Both these raises were to take effect on January 1, 2012. The Government will also change the building, land and vehicle tax regime, introducing a new calculation method that will allow earnings from this source to increase by more than EUR 233 million over the next three years. The strategy, designed to save the Government tens of millions of EUR over the next couple of years, was approved by the Government in mid-August.