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Payroll in Bulgaria

Payroll Calculation Procedure

All employment relations are handled by the Labor Code. Other Acts related to employment legal requirements are Healthy and Safe Working Conditions Act, Employment Promotion Act and some ordinances and regulations.

The monthly payroll calculation procedure consists of the following steps:
● Employees’ monthly working and sick days are calculated and compared in case there are additional leave applications and contracts
● Bonuses or any other benefits are added to the gross salary
● After the necessary calculations and deductions are made, the necessary printouts are generated
● The payroll file, social insurance payment orders, as well as salary payment orders (if necessary) are sent to the employer
● When the payroll calculations are completed, two extra declarations are prepared and submitted to the National Revenue Agency

In case of illness and after the declarations have been submitted, the sick leave list must be prepared and submitted no later than the 10th of the following month after receiving it.

Salary

Bulgaria has a government-mandated minimum wage which, in 2019, was 286 EUR per month. Annually the amount is 3 436 EUR per year.

The minimum rates apply to everyone, no matter of their age, industry and experience. Additionally, depending on the industry and the occupied position, the law provides minimum social security thresholds. Therefore, even if the agreed salary is the minimum wage, the social security instalments are calculated and based on the applicable minimum threshold.

National insurance contributions

National insurance contributions include social security and health insurance contributions. It is a system that guarantees financial protection against major life risks, work-related accidents and their consequences such as disease, unemployment, old-age and needs for nursing care to the employees.

The social insurance regulations are all gathered into a single legal act called the Social Insurance Code (SSC). (download)

The aim of the social security system is to guarantee a stable standard of living to everyone.

The Bulgarian social security system covers the following risks:
● General disease
● Work-related accidents
● Occupational disease
● Maternity
● Unemployment
● Old-age
● Death

Working hours

The standard working time in Bulgaria is eight hours per day over a 40-hour (five-day) week.

Some alternatives include the following:
● Extended working time up to 48 hours per week but not exceeding 60 working days annually, 20 of which should not be consecutive
● Reduced working time to six or seven hours per day for minors or employees working in specific conditions and under unavoidable life or health risks
● Open-ended working time for some job positions determined unilaterally by the employer
● Shift work
● Overtime (although in principle this is not allowed by law)
● Part-time work. There is no general requirement for minimum duration of the working day. However, a part-time employee must work at least four hours per day. The working day should not be reduced by no more than half of the working time. Further, the employer must limit the duration of the reduced working time to not more than three months per year
● Flexible working time. This means that the employee must be at work for only a specific period of time (for example, from 8am until 12pm). The employee can decide whether and how to work the remaining part of their working time. The method for time-reporting must be included in the internal labour rules by the employer

An employee can opt out of the standard working time arrangements under an agreement with the employer (for example, for part-time work or working time with variable limits, if the nature of the work allows for this).

The combined working time (standard working time and extended working time) for employees under 18 cannot exceed 40 hours per week.

Overtime cannot exceed:
● 150 hours annually
● 30 hours monthly (or 20 night hours)
● 6 hours daily (or 4 night hours)

Overtime pay is paid at:
● 150% on working days
● 175% on holidays
● 200% on public holidays

Rest

In Bulgaria the employee is not obligated to perform his work during periods of rest. The period of rest should serve recreational purposes.

● The lunch time is a break during the workday. It cannot be shorter than 30 minutes
● The rest period after the end of the working day cannot be less than 12 hours
● Weekly rest periods constitute 2 consecutive days (48 hours) in a 5-day working week
● Holidays

Vacation

According to the Bulgarian Labour Code, all employees are entitled to at least 20 working days of paid annual leave. If there is an additional agreement between the employer and the employee, this period can be longer but not shorter.

If the employment contract is terminated and the employee has unused days off, these days should be paid by the employer as compensation.

Before being entitled to annual paid leave, the employee must work for a minimum of eight months.

The employee must use their annual paid leave (at once or in parts) within the relevant calendar year. When not used, the right to either use the leave or be compensated for it is limited to two years. The law allows monetary compensation of unused paid leave only in the case of termination of the employment relationship.

Additionally, every employee is entitled to approximately 15 official holidays.

Public holidays in 2019

Public holidays are not included in the calculation of annual paid leave. The Labour Code lists public holidays, to which the Council of Ministers can declare other days as non-working days on a one-off basis.

The remuneration for work performed during public holidays must amount to not less than twice the amount of remuneration that would ordinarily be paid, calculated on a daily basis.
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Illness and sick leaves

For the first three days of sick leave, the employer must cover 70% of the employee’s wages. The National Social Security Institute must cover the rest of the sick leave, after the employee provides necessary documentations.

An employee must have at least six months' work experience recognised for social security purposes (six months' social security insurance history) to be eligible for these payments.

This period of experience is not required if the pay is related to:
● A labour accident or a professional illness
● Employees under the age of 18

Sick leave or injury indemnity payments amount to either:
● 80% of an employee's average daily gross wage, where the maximum social security base is capped at 2600 BGN
● 90% of an employee's average daily gross wage in the case of a labour accident or professional illness, where the maximum social security base is currently capped at 2600 BGN

The maximum allowed sick leave on an uninterrupted basis is 18 months (this applies when an employee has a serious disease).

Maternity leave

New mothers are entitled to up to 410 days of paid maternity leave at 90 percent of the mothers salary, 45 days of which must be taken prior to the birth of the child.

The father is entitled to 15 days of paid leave from the date of childbirth. When the child reaches the age of 6 months, the father may assume care of the child and hence the cash benefits from the mother for the remainder of the 410 days.

Healthy and safety working conditions

Each company that employs personnel must provide healthy and safe working conditions and must conclude a contract with Occupational Medicine company.

Social security and health insurance

Social security is mandatory paid on employee’s gross income and starts from 32.7% in Bulgaria. Contributions are shared between employee and employer. Maximum threshold for social security payments is 3000 BGN whilst minimum insurance income depends on the group of economic activities and professions.

Contributions rates

Social security contribution                

paid by employer, %

paid by employee, %

Health insurance fee

4.80%

3.20%

Pension fee

8.22%

6.58%

Unemployment fee

0.60%

0.40%

Common disease and maternity

2.10%

1.40%

Supplementary compulsory pension

2.80%

2.20%

Professional disease , labour accident insurance

              from 0,4 to 1,1 %

Total

From 18.92% to 19.62%

13.78%


Most common skim for III labor category. For I and II labor categories (under heavy and dirty work conditions) contribution percentages are higher for both employee and employer.

According to Bulgarian legislation additional 0.6% on gross salary is charged for each year of employee's professional experience. Cost to Company (CTC) includes not only employee gross salary (wage), social security contributions paid by employer but also supplement for professional experience.

Director’s fees are treated with the same taxation and social contributions as under employment contract.

Foreigners could be exempt from social security contributions in Bulgaria or the contributions paid in Bulgaria could be recognised in their home country under applicable social security treaties.

Self-employed persons/Freelancers

Based on their annual income, self-employed persons are responsible for the entire social and healthy security charge. Maximum threshold is the same as under employment contract – 3000 BGN. Minimum insurance income is mandatory 510 BGN even if less income is generated. The social contribution rate is minimum 17.80%.

Concealment of mandatory social contributions in large size (over 3 000 BGN) is criminalized.

Posted workers

EU Regulation 883/2004 on social security applies also for Bulgarian workers who are posted in another EU Member State and foreign workers seconded to Bulgaria from another EU Member State.

In both cases, workers may remain under their home social security legislation if the working period is less than 2 years.

Termination of Employment

Employment termination may occur with a notice of one, three, or six months based on the employment contract. After termination, the employer must provide all the relevant documents, including the certificate for paid social insurances and income tax and a filled-in labor book.

Regardless of the cause for termination, the employer must notify the territorial direction of the National Revenue Agency within seven days of the effective termination date. The notification is made by filing a standard form, which requires specific information about the end of the employment.

If the employer fails to submit the required notification within seven days, it will be subject to a fine of between 1500 BGN and 15 000 BGN.

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