Medical leave absences: balancing public spending efficiencies with the burden on companies

The fiscal-budgetary measures affecting the calculation method of medical leave allowance, which came into force on 1 August, have led to a significant decrease in the number of medical leave certificates being issued, thus helping to streamline public spending. However, there were also some immediate negative effects felt by employees and employers: the income of those suffering bouts of temporary illness has decreased, while administrative costs and the amount of bureaucracy faced by companies has increased, according to TPA ROMANIA, a leading company in Central and Eastern Europe specialised in audit, accounting, tax advisory and legal consultancy services.

As part of the package of fiscal-budgetary reforms launched by the Romanian government during this summer, Law 141/2025 reduces the value of allowances paid for medical leave absences and introduces new calculation formulae, depending on the length of the leave taken. The authorities justify these measures based on the need to reduce the pressure on the health budget generated by the rise in the number of days of leave being granted without medical justification and the rising cost of treatments. Data released by the Ministry of Health at the start of November show a significant drop in the number of medical leave certificates issued in the period July-September 2025, generating considerable savings to the budget allocated to medical leave allowance payments.

“However, the legislative changes also mean lower allowances being paid to employees during short periods of sick leave and more complex administrative procedures for employers. Four months after coming into force, we can say that the immediate effects are negative both for employees – in terms of a decrease in the net income of those suffering temporary periods of illness – and for employers – on account of increased administrative complexity,” explains Ioana Zavastin, Payroll Director at TPA Romania.

These new measures come not long after significant changes were made last year to the calculation method of medical leave allowances: as of 1 January 2024, medical leave allowances were included in the calculation basis used to determine health insurance contributions (CASS, 10%), while, as of April 2024, the application of CASS contributions was restricted to medical indemnities for ordinary illnesses (code 01), quarantine (code 07) and shortened working hours (code 10), with the other types of medical leave (maternity leave, leave taken to care for a sick child, leave granted due to occupational risks to pregnancy, leave for emergencies, etc.) being exempted.

“Previously, these allowances were exempted from CASS payments, so the new calculation formula for medical leave allowance has significantly reduced the net amounts received by employees while on sick leave. The decrease in net income for employees and the extra administrative burden for employers has been accentuated by the legislative provisions introduced in August 2025,” says Ioana Zavastin.

How medical leave allowance is calculated as of 1 August

According to the TPA Romania specialist, prior to 1 August 2025, the allowance for ordinary illness (allowance code 01) represented 75% of the calculation basis, irrespective of the duration of the medical leave, whereas as of 1 August 2025, the percentage used to determine the value of the allowance paid for temporary occupational incapacity due to ordinary illnesses or accidents occurring outside of work varies depending on the total number of days of medical leave granted for each bout of illness: 55% for illnesses lasting up to and including 7 days; 65% for illnesses lasting between 8 and 14 days; and 75% for illnesses lasting 15 days or more. The calculation basis for medical leave allowance remains unchanged, as the medium level of gross income over the last six months, limited to 12 gross national minimum monthly salaries (Lei 4,050 x 12).

“This formula results in lower allowances for medical leave being granted for short periods of illness, which, while it may discourage abuse, is affecting the income of employees suffering temporary health issues. In practice, the processing of medical leave certificates is placing a greater bureaucratic and administrative burden on employers. Although the direct costs of medical allowance payments are no greater in the case of successive medical leave certificates, the recent legislative changes have generated a series of additional operational challenges and tax risks for businesses,” says Ioana Zavastin.

The situation on the ground and how it is affecting HR practice

TPA Romania has identified a number of situations faced by employers. If, during the course of a bout of illness, an initial medical leave certificate is issued followed by one or more additional certificates, then the number of days of medical leave will be cumulated, and the percentage applied to the calculation basis will be determined by the total number of days corresponding to the entire bout of illness.

Similarly, if the initial medical leave certificate is issued at the end of the month and is then followed by an additional medical leave certificate during the following month, then the total number of days of medical leave corresponding to the same bout of illness will increase.

Therefore, in the case of multiple medical leave certificates issued for the same bout of illness, the percentage is recalculated retroactively depending on the cumulative length of medical leave granted. This will result in an increase in the percentage applied to the calculation basis and, implicitly, a recalculation of the amount of allowance due for the initial medical leave certificate.

“HR and payroll departments need to implement clear internal procedures to manage medical leave certificates. To eliminate mistakes, these procedures will be necessarily complex, covering the analysis of medical leave certificates, the accurate recording of successive bouts of medical illness, the retroactive recalculation of salaries, and communication with employees and informing them in a transparent manner in order to prevent any dissatisfaction related to the reduction in the level of allowance awarded to them for short-term illness. In addition, the adjustment of payroll statements and of tax returns, in the case of retroactive adjustments, may result in fines and interest if the fiscal adjustments are performed after the reporting deadline has passed. Under these circumstances, employers will face an increase in the amount of bureaucracy and in the time required to manage absences and to process and calculate salaries, which may a have a direct impact on company’s productivity,” concludes Ioana Zavastin.