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:
- Calculation of all employees’ monthly working and sick days
- Summing up the gross salary with bonuses and other benefits added
- Generating printouts after doing the necessary deductions
- Sending the payroll file, social insurance payment orders and, if necessary, salary payment orders to the employer
- Filing two extra declarations with 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.
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).
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
The standard working time in Bulgaria is eight hours per day over a 40-hour (five-day) week.
Some alternatives include the following:
- An extended 48-hour work week, but only if limited to 60 work days annually, a maximum of 20 days of which can be consecutive
- A reduced 6-7 hour work day for minors or those working in conditions that pose a risk to life or health
- Unspecified working time for some positions, determined by the employer
- Work in shifts
- Overtime, although it is not permitted in principle
- Part-time work for a minimum of 4 hours a day, with a working time reduction never exceeding half of the regular working time and not for more than three months annually
- Flexible scheduled work, where the employee spends a specified period of time (e.g. from 9 AM until 1 PM) at the workplace, after which they are free to decide if, how, where and when they should work the remainder of their working time, with the manner of timekeeping specified in the employer’s internal labor rules
Employees can choose to refuse standard arrangements if an agreement is reached with the employer.
In case of minors, weekly working time must not exceed 40 hours.
Overtime cannot constitute more than:
- 150 hours per year
- 30 hours (or 20 night hours) per month
- 6 hours per day
- 4 hours per night.
Overtime pay rate is:
- 150% on working days
- 175% during holidays
- 200% during public holidays
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
Bulgarian Labor Code specifies that all employees should be granted a minimal paid annual leave of 20 working days. In case of an agreement between the parties involved, paid annual leave can be longer, but never shorter.
In case of employee termination, unused paid leave days are subject to compensation.
Before being entitled to annual paid leave, the employee must work for a minimum of eight months.
Annual paid leave days should be used within the calendar year they are earned in. In some cases, unused paid leave days can be transferred to the next calendar year, but they should be used by the middle of said year. Unused paid leave days are subject to compensation only if the employment is terminated.
In calculating the annual paid leave, public holidays are not accounted for.
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.
ILLNESS AND SICK LEAVES
For the first three days of sick leave, the employer covers 70% of the employee’s wages. The rest of the sick leave is covered by the National Social Security Institute after the employee submits the appropriate documents.
An obligatory six months of work (and social security payments) must be completed before the employee is eligible for sick leave compensation, unless the sick leave is due to a work accident or a professional illness, or if the employee is a minor.
Sick leave or injury compensation is either:
● 80% of the average daily gross salary, with a maximum social security base of 2600 BGN, or
● 90% of the average daily gross salary if a labor accident or professional illness occurs, with a maximum social security base of 2600 BGN
The maximum sick leave is 18 consecutive months, applicable in case of a serious illness.
Paid maternity leave at 90% of the mother’s salary is granted for up to 410 days, 45 of which should be taken during the last stage of pregnancy.
The father is entitled to 15 days of paid leave from the date of childbirth. Care of the child may be transferred to the father when the child reaches 6 months of age, in which case the father shall receive benefits for the remainder of the 410 days.
SOCIAL SECURITY AND HEALTH INSURANCE
Social security is mandatorily paid on employees’ gross income and starts from 32.7% in Bulgaria. Contributions are shared between employee and employer. The maximum threshold for social security payments is 3000 BGN while the minimum insurance income depends on the group of economic activities and professions.
|Social security contribution||paid by employer, %||paid by employee, %|
|Health insurance fee||4.80%||3.20%|
|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 recognized in their home country under applicable social security treaties.
Based on their annual income, self-employed persons are responsible for the entire social and health 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.
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 can be terminated with a one, three, or six month notice, depending on the contract. After termination, the employee receives all the necessary documents, including their labor book and their certificates for income tax and social security payments.
The National Revenue Agency must be notified of the termination within seven days of its coming into effect, by way of a standard form that specifies the details of the termination.
In case of failure by the employer to notify the NRA in due time, they will be subject to a fine of up to 15 000 BGN.