Understanding Payroll in Bulgaria: What Global Companies Need to Know About Bulgaria Payroll

For multinational organizations expanding in Bulgaria, it’s a time of progress amid patience. It’s been 10 years since the Republic of Bulgaria was accepted into the European Union. In that time, efforts to build up a new democratic economy have been hampered by old regime tactics, sectarian conflicts, and three separate government elections. However, the newly elected center-right GERB party is offering the country a new stability as it heads into 2018.

In 2017, Bulgaria grew its gross domestic product to an estimated BGN 87.8 billion (USD $52 billion). And its S&P Global Ratings outlook was recently raised to positive from stable. This stands as good news for companies with an international payroll interested in Bulgaria’s chief industries of services, manufacturing, and agriculture.  

With more financial investment so far in 2017 from companies like The Netherlands (USD $168.6 million) and Switzerland (USD $102 million), Bulgaria’s growth seems progressively moving forward.

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Getting Started

Multinationals seeking to expand in Bulgaria must register to Bulgarian tax and social security offices, usually work through a joint stock partnership. Companies can do this through Bulgaria’s Commercial Register, which is run by the Registry Agency. These companies should show a minimum operating capital of BGN 5000 ($3,000, £,2287, €2.555) and obtain and fill out all necessary applications and tax ID numbers for all employees.

During the time needed for necessary business registrations, company representatives can work on obtaining business bank accounts. In general, the documentation needed at most banks in Bulgaria include:

• Company certificate of incorporation

• Articles of Association  

• Tax ID Cards

• Company representative signatures

International companies operating in Bulgaria often work through an outsourced global payroll provider to help achieve compliance for these tasks, as well as employee hirings, terminations, payments, taxes and more.

Employment Laws/Employee Rights

Full-time employees in Bulgaria usually work 5 day/40 hr. work weeks. There are various rules around flexibility of work hours, overtime pay and working overnight. Thirty-minute breaks are included in an average work day, with other times designated for shorter work breaks. To freely stay for three months while working in Bulgaria, a valid ID or passport is the only documentation necessary for EU nationals, citizens of European Economic Area (EEA) member states and Swiss citizens with a valid ID or passport. Persons from non-EU countries can get a one-year work permit through the country’s Employment Agency, with support from the sponsoring company. These non-EU workers can also apply and receive a residence permit for the same one-year period with a Type D visa. Foreign workers are entitled to the same rights as Bulgarian citizens and are generally covered by the same tax and workplace laws.

Employees working in Bulgaria are subject to a written contract with the employer to establish a valid work agreement. This contract is then filed with the National Revenue Agency within three working days. The contract must include the name of the person being hired for the job, the job description, contract date and expected start date, length of employment, payment amount, schedule, details about vacation, sick leave, and more. 

Compensation, Bonuses and Severance

The Bulgarian minimum wage is currently BGN 460/month ($276, £210, €235). The minimum wage has been growing steadily the last few years. This is a result of a growing economy, higher GDP and a higher number of minimum wage workers. Another change in payroll regulations is a one percent increase growth of contributions into the social security system, to be split between the employee and employer. That rate will be increased another percentage point in 2018.  Bonuses can be paid to employees in Bulgaria, usually as a 13th-month payment. It's viewed as a gratuity and isn't required by local labor laws. 

Notice of job dismissal in the case of business reasons (lower work amounts, business closures, etc.) is usually 30 days and must be given to the employee before the termination. The amount of severance paid in the case of a termination by mutual consent is equal to the minimum of four monthly salaries.  

Tax Requirements/Collection/Withholding

Other key advantages for companies operating in Bulgaria are the low taxes. The profit tax on companies operating in Bulgaria is only 10%, among the lowest in all the European Union. This low flat tax helps Bulgaria to attract foreign companies looking to decrease ever-growing HR and personnel costs. And as a result of the numerous double-taxation treaties signed by Bulgaria over the past decade, this effective 10% tax rate can be lessened or even eliminated for many companies.

Leave - Sick, Maternity, Vacation, Absence, Holidays

Bulgaria employment law provides up to 410 days for maternity leave for a pregnant employee. Forty-five days can be used before the birth. After the baby turns six months old, the remaining time can be transferred to the father for the rest of the maternity leave.

Workers in Bulgaria average around 20 working days for their annual leave, which is calculated on the base of the employee’s salary during the last calendar month (provided they’ve worked for 10 days during that month). Extra pay for holiday time might be worked out with an employer for bonuses, overtime or night work payments. In the event of a sick leave for illness, the employee receives 70% of the salary for the first three days missed at work. If the illness is determined to be occupational in nature, the government provides compensation of up to 80%/90% of the employee salary.

Summary

Developing a business staff in Bulgaria takes time and patience to work within the changing government rules. The fluid nature of the government within the EU is complex, and will likely grow in complexity. It is recommended for expanding companies to outsource a global payroll solution to help simplify payroll management in Bulgaria.

This article is for informational purposes only and not intended to convey or constitute legal or any other advice. It is not a substitute for advice from a qualified professional.