Main differences between the mandate contract and the individual employment contract in Romania

We have often encountered controversy regarding the differences between the mandate contract and the individual employment contract in Romania, which, although they may seem similar at first glance, conceal significant distinctions arising from the nature of the legal relationship and the applicable regime for each type of contract.

Based on the definition provided by the Civil Code and the Companies Law, it follows that a company will be able to conclude a mandate contract with individuals exercising representative functions, such as its administrators and directors, and not with individuals exercising executive functions, for whom the company has the option to conclude individual employment contracts.

Essentially, the mandate contract governs a specific legal relationship in which one person performs a remunerated activity for the benefit of another person, maintaining independence regarding how they fulfill their mandate, without being under the direct authority of the mandator.

In contrast, the individual employment contract entails a clear subordinate relationship between a natural person, referred to as the employee, and the employer. The employee is obliged to perform work for and under the authority of the employer in exchange for a remuneration known as salary.

Another difference lies in the fact that labor inspectorates do not have the authority to conduct inspections regarding compliance with the provisions of mandate contracts, these contracts do not need to be registered in the General Register of Employees and are not subject to the regulations established by the Labor Code.

An important aspect is that, in the case of directors/administrators with mandate contracts, there is no record of attendance at the workplace, as is the case for employees with individual employment contracts, where the employer is obligated to keep records of the daily hours worked, highlighting the start and end times of the working hours, and to present these records to the labor inspectors for control, whenever required.

The termination of the contract

Mandate contracts are typically concluded for a fixed term, and if the parties do not specify a duration, they terminate three years after their conclusion. In contrast, the standard rule for individual employment contracts is that they are concluded for an indefinite period and, by way of exception, individual contracts of employment may also be concluded for a fixed term, in the conditions expressly provided for by law.

Regarding termination, a mandate contract can be revoked without the need for justification and without undergoing any prior procedures. In contrast, the termination of an individual employment contract can only occur in the cases expressly provided by the Labor Code, requiring notice and a clear justification for the decision.

Fiscal implication of the mandate contract

From a fiscal perspective, the income obtained from individual employment contracts and mandate contracts are similar in terms of the tax obligations relating to social security contributions: CAS (social insurance contribution), CASS (social health insurance contribution), CAM (work insurance contribution), as well as income tax, which applies to both types of contracts. However, a significant difference arises concerning the benefits provided in kind, which are regulated distinctly for mandate contracts compared to individual employment contracts.

It is also worth mentioning that the director/administrator remunerated under a mandate contract, similar to an employee, is insured for leave and health insurance benefits in the social health insurance system, since the company pays the insurance contribution for work for their remuneration.

In the same way as an employment contract, the period during which the administrator/director is remunerated under a mandate contract constitutes a contribution period since the administrator/director receives remuneration on which social security contributions are calculated.

Although there are certain similarities regarding the contribution regime and the recognition of the contribution period, the individual employment contract and the mandate contract are fundamentally different in terms of the nature of the relationship between the parties, the responsibilities of the company, and the flexibility in their management.

Support offered by Accace Romania specialists

Understanding these differences will help you decide which type of contract is most suitable for your organization’s needs and objectives. For any further clarifications regarding the differences between the mandate contract and the individual employment contract in Romania, the specialists at Accace Romania are at your service.

Rodica Ștefan

Senior Manager Payroll and HR Outsourcing Services | Accace Romania

Get in touch with us

Denisa Toboșaru

Payroll Legal Counsel | Accace Romania

Get in touch with us