IT Outsourcing Markets Review: Romania vs. Ukraine

We have started publishing a series of articles on the main CEE IT outsourcing destinations. The current article of the cycle is devoted to the analysis of Romanian IT market and compares it with Ukraine.

Romanian IT Market Overview

Romania has been amidst the fastest growing IT pools in the Central-Eastern Europe. The country is currently enumerating over 125K IT specialists – this number includes all the staff involved in the business process outsourcing: custom software development and product development, client and product support, as well as miscellaneous supporting functions. One of the main peculiarities of Romania is that 78% of its IT specialists are concentrated in the capital city, Bucharest. However, despite the vast number of specialists, Romanian IT services do not bring about that huge competition to the global IT outsourcing market leaders. The Romanian IT sector has also become a strong support the local economy - $3.4bn of income to the state budget within 2015. The past years has also shown an increase by 31% of the IT services and software products export. The TOP IT destinations of Romania are Bucharest, Cluj-Napoca, Iasi, Timisoara.

Ukraine vs. Romania

Destinations analysis: Ukraine vs. Romania

Education

Romania is the 6th best in Europe in terms of the certified IT specialists. By and large, there are up to 240 educational institutions of state and private ownership - 5 Polytechnic universities, 59 Technical universities, 174 colleges and schools providing technical education. The country possesses a good ground for gaining sufficient knowledge and skills for further :

  • Politehnica University of Bucharest
  • Polytechnic University of Timisoara
  • Technical University of Napoca
  • Babes Bolyai University
  • “Alexandru Ioan Cuza” University
  • “Gheorghe Asachi” Technical University

The Romanian IT industry is fueled by up to 17,000 tech graduates annually. Vast number of them starts their careers when they are still students, therefore, after the graduation practically all of them continue their career. The last opens great vistas owing to the EU membership which allows being officially employed in all the EU member countries.

Salary

The salary of Romanian IT specialists amount to as follows:

  • QA:
    • Junior - $770-990
    • Middle - $1100-1540
    • Senior - $2200-2750
  • Developer:
    • Junior - $1100-1980
    • Middle - $1980-2420
    • Senior - $2750-3300
  • Manager:
    • Junior - $880-1100
    • Middle - $1100-1540
    • Senior - $1980-2420

Average salary starting from 2012 in Romania is growing by 4-4.5% annually.

Benefits and Taxes

Despite the most popular benefits employees get around the globe are tea/coffee/cookies, Romanian IT staff also gets the 13th salary (the 13th paid a month in the end of the calendar year), short Fridays. As to various researchers, some companies also offer their employees, private health insurance, private pension, life insurance, gym cards, casualty insurance, transportation, meal tickets, lunch, cars, etc.

Romanian taxation system has been very friendly to IT industry – from this perspective, it is one of the main competitors of Ukraine and Bulgaria. The taxes with all the social contributions amount to 32,5% for employees, and 22.75-23.45% for an employer. However, there is one peculiarity encouraging local IT specialists to join the industry: if a company’s annual turnover (and starting from 2015 startups’ as well) exceeds $100K, the employees can get their tax exemption, therefore, get more cash.

Attrition/Hiring Period/Dismissal

Attrition ratio in Romania is 18%.

Trial period takes up to 90 days, however, this doesn’t mean, an individual should wait 3 months. Many companies make up their minds on whether they’ll hire specialist after 2-3 weeks in the office. This is an individual approach, therefore, the outcome is very difficult to predict.

Going through a dismissal in Romania is very tough and controversial subject. Local legislation requires thorough investigation. The overall procedure may take up to 6 months before an employee is dismissed. The reasons for an employer to dismiss an employee might be as follows:

  • disciplinary reasons (require disciplinary investigation)
  • poor performance (require verified proof of the employee’s failure)
  • economic reasons (require economic justification of company’s economic state)
  • bad health (require proofs of medical examination on an illness)

If the reasons are supported with the proof of an employee’s failure, s/he might be fined with non-payment of the last salary before being dismissed.

Cost of Living

Romania, if compared to other EU countries, is considered rather cheap. However, there are also lots of luxurious offers for
  • Food –$75-100
  • Transportation – $4-15
  • Rent – $320-750 (depends on the number of bedrooms and location)
  • Others (activities and entertainment) – $70-180

Trends

The recent surveys foresee the significant growth by 2020 it is expected to reach 300K professionals. Therefore, the total sum of the exported goods is envisaged to overcome $2.7bn. Such growth is explained by the EU membership of Romania and the opportunities for official employment of its specialists within any EU-zone country. For the Romanian IT sector, this tendency is both positive and negative as the country might face the outflow of specialists abroad.

Today, many Romanian IT specialists prefer switching to startups and develop such smaller cities and towns, which are becoming attractive to investors, like Pitesti, Craiova, Sibiu and Targu Mures. And in order to involve more specialists, IT companies establish educational and internship programs, recruitment campuses for juniors, therefore, by the time they graduate from the university, they’d already had a job, experience and huge opportunity for personal growth.

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