Adecco: The labor market and the evolution of HR services in Romania in 2021

Changes in the labor market in 2021 in Romania

Background: In the last months of 2020, economic indicators were noticeably higher than the previous quarter. The economic recovery in 2021 will continue throughout the year and is expected to increase up to 4.2%, after a decrease of 5% last year.

Amid rising prices and consumer goods with 2.1% in 2020, consumption is expected to intensify in 2021. This trend, coupled with a potential success of the vaccine campaign, indicates a complete resumption of activity in almost all sectors of the economy (including HORECA and Culture).

“We are in a similar time to the beginning of 2012, when the first signs of economic recovery began to appear. Back then, the insecurity was higher and the way out of the crisis has lasted a longer time. Now, the context is totally different and we are optimistic, especially for the developments of the labor market. This year has started very energetically in terms of employment. We have noticed increases in demand in areas that normally had higher needs during this period (eg. retail, technical, automotive, pharmaceutical, logistics and transport), but also in less active areas (eg. medical and healthcare, educational). In these last areas, we expect a steady growth until the end of the year, both from companies in the country and in the EU.

The average gross wage will steadily rise in the private sector, but there is still much uncertainty about what will happen to the State. Initiatives to reduce bonuses or holiday vouchers for public employees will greatly affect the income of employees in the field. In this case, opinions are divided: on one hand, there are extremes that end up frustrating even the most optimistic employee from the private sector. On the other hand, most state employees work in health and social work, education, infrastructure or the judiciary, all of which are essential areas for the functioning of a state. Especially in a pandemic.

The unemployment rate will slightly rise and we estimate that it will be above the monthly value of last year. In fact, 2020 was the first year in a long time when we had an increase over the previous year. In the last five years, the unemployment rate has fallen from one year to the next. There will be a noticeable decrease in the second quarter of the year, but it is a seasonal decrease, caused by the beginning of agricultural works. The rise in unemployment as a whole should not scare us, because there are enough employers who can take over these people,” said Florin Godean, Country Manager of Adecco Romania

The regional role of the domestic labor market

Background: GDP in the euro zone fell by 0.7% in the last quarter of last year, compared to the previous one. The decrease was much smaller than the expectations of specialists (2.4% according to a Bloomberg survey). A similar optimistic trend was registered in the US economy, which grew in the forth quarter of 2020 by 1.% compared to the third quarter. In the medium and long term, the US economy seems to perform better than the euro zone or other developed countries this year as well. The trend is driven by broader financial incentives and a faster vaccination program.

The difference between the active population and the number of employees in Romania continues to be very large (approx. 3.5 million). This keeps Romania among the countries that export seasonal and permanent labor. The pandemic and partly Brexit have disrupted this trend, with many Romanians reorienting themselves regarding work or study destinations and even considering their final return to the country.

The pandemic and travel restrictions have slowed the migration to Asia of multinationals looking for cheap labor. This creates a favorable context for the countries in the region, including Romania, to keep investments and attract new ones.

“The Romanian labor market in 2021 has a great potential to catalyze all European and global trends. There are enough signals in the market that we can play a much more important regional role. Unemployment is no longer a relevant indicator for investors who need large volumes of employees. More attention should be paid to the difference between the active civilian population and the number of employees. That is the untapped potential of the labor market. Romania has one of the most active vaccination programs in the EU, rising average wages and optimistic macroeconomic indicators for the current year.

A reduction in labor taxation and a faster digitalization of contractual labor relations would send a much-needed signal to all employers (foreign or domestic) to make plans for development in Romania” – said Florin Godean, Country Manager of Adecco Romania

The evolution of HR services in 2021

Background: The turnover of human resources service providers has been growing steadily until 2019. Since then, the temporary employment services segment has started to decline, amid changes in the automotive industries. Another factor with effects we can sense is automation, a factor that has been accelerated on the background of the pandemic and health restrictions.

Employers have begun to consider changes in HR strategies and thus in labor market behavior. The directions indicated by them involve: internalizing/ retaining employees, acquiring relevant and new skills in the workplace, hiring specialized temporary employees, complete outsourcing of entire business processes, automation and digitization of work processes that allow it, hiring freelancers who have the necessary skills for the company.

The skills that employers have a focus in for development are: active learning, stress and flexibility, team management, analytical and innovative thinking, use of technology, monitoring and control, quality assurance and control, solving complex problems.

“The effects of the pandemic on the labor market have led employers to rethink how they treat risks and responsibilities in relation to employees or state control bodies. 2020 has exposed companies’ vulnerabilities in the context of a health crisis and has reminded managers of the economic uncertainty from the beginning of the last decade, when the economic crisis was wreaking havoc. Technical unemployment, financial aid schemes for the affected companies or complete suspension of activity have generated situations of high uncertainty. The questions it has raised have determined companies to look for more flexible business partners who can take on as much of the risks and responsibilities of personnel management as possible.

Looking for a balance between internal employee management and the outsourcing of these activities, employers are looking for more complex and flexible solutions.” – said Florin Godean, Country Manager of Adecco Romania