Payroll in Bulgaria

Payroll Process in Bulgaria

Payroll is almost a universally standardized process. That is, while Bulgaria may have some different payroll process components, the payroll process overall remains ultimately a standard made up of three phases:

(i) Pre-payroll

(ii) Payroll calculation

(iii) Post-payroll

These are detailed as follows:  

Pre-payroll Phase

This phase involves country-mandated requirements for any business to process payroll and pay salaries or wages.

The pre-payroll phase generally includes such basic and mandatory components as:

Business Profile

You cannot operate in any jurisdiction without having a unique business number or code. This number or code, acquired as part of your business profile setup process, is not only important to identify your legal entity but also for many tax compliance, reporting, and communication purposes.

Work Location

Just as important, a business, or corporate, location needs to be officially and formally registered. In case you have several locations, each needs to be registered to specify that location's address, corporate activities, and so on.

Leave Policy

As part of the payroll process, leaves of all classifications (addressed shortly) need to be formalized into a company-wide policy to calculate payroll but also, of course, to monitor performance.  

Attendance Policy

Now commonly documented using biometric devices, attendance should be registered and formalized into a company-wide policy. As with leave policy, attendance policy is not solely developed to monitor employee performance but also for payroll calculation and compliance purposes.

Statutory Components

In the past, labor laws have usually been stable for years, if not decades. Recent years have seen a change in this stability,  due to a combination of pandemic-related, war-generated, and internal economic factors. The state of labor, including statutory compensations, in Bulgaria, is no different.

As an international employer planning payroll packages, you must keep an eye on existing and new statutory compensation laws and regulations by which employees are entitled to a certain basic salary or wage and leave rights in Bulgaria.

Salary Components

In addition to the basic statutory compensation to which employees are entitled in Bulgaria, talent needs additional benefits and perks. Your salary components should be tailored to the employment landscape in Bulgaria if you want to attract and retain top talent.

Pay Schedule

Employees and independent contractors expect to be paid on a pre-specified date or within a certain time range.

Labor laws, including those in Bulgaria, traditionally provide for monthly, weekly, or hourly payments. In recent years, more so under pandemic conditions, flexibility is in high demand not only with respect to work conditions but also in the payment schedules offered.

An international employer who considers scheduling payments flexibly, adjusts to new realities and also to attract and retain the talent for whom flexibility is a big perk.  

Employee Information

The payroll process involves extensive information collection efforts. Data needed includes employee information (such as name, department, role, subsidiary, nationality, etc.) not only for payroll processing purposes but also for later tax auditing and reporting activities.

Payroll Calculation Phase

Using either paper-based methods or automated systems, as an international employer you must calculate, and keep payroll records, both to process payments as scheduled but also for compliance and reporting purposes.  

Post-payroll Phase

Having properly set up business and payroll procedures, you should now proceed to finalize the payroll process as follows:

Salary Payments

Payments of salaries or wages are usually done using a corporate bank deposit or a built-in payment process, all-the-more so nedessaryfor distributed global teams, where payouts are processed and deposited automatically according to a pre-specified payment schedule.

Payroll Accounting

Having completed what is due for employees and independent contractors as payments, you  need to complete what is due from you as a legal entity operating in a given jurisdiction.

That is, after paying employees and independent contractors you must record payments and any payroll-related expenses to prepare for later reporting and compliance requirements.

In a budget-flexible world, payroll accounting can be outsourced to an external auditing service. In practice, though, most companies perform payroll accounting internally, not only to cut expenses but also to establish in-house reporting and compliance expertise.      

Payroll Reporting and Compliance

This is your final step in the standard payroll management process.

Having set your records straight, you should by now have all mandatory compliance and reporting forms ready to fill and submit as specified by local regulatory authorities.  

This critical step will document all compensation, contributions, social security, withholdings, and other data required in your reporting and compliance forms, reports, and communications.

The above 3-phase payroll process is standard under normal working and national circumstances.

However, the changing landscape of employment law in Bulgaria, coupled with pandemic-related risks and requirements, is making the payroll process less straightforward.

Here is where Skuad steps in to help you navigate your way to managing all your payroll needs in Bulgaria.

Payroll Processing in Bulgaria

Processing payroll in Bulgaria is addressed in labor laws and regulations covering basic payroll subjects such as:  

• Minimum salary or wage
• Increases in salaries or wages made unilaterally by employers
• Reductions in salaries and wages mutually agreed on between employers and employees
• Payroll calculation on a weekly or monthly basis but not longer than six months

Payroll Processing Company in Bulgaria

Skuad helps you not only process payroll in Bulgaria compliantly and smoothly but also helps  you focus on your core and strategic business issues.

Reach out to us to make your payroll process headaches history.

Payroll Management in Bulgaria

While the 3-phase payroll process is a minimum basic standard to manage payroll in Bulgaria, you also must manage a growing list of payroll components, more so under current pandemic-related and labor law adjustments.

For example, on top of keeping records of and reporting statutory payments and benefits you need to accommodate Bulgaria-specific payroll considerations including but not limited to:

• Prohibition of overtime work for mothers whose children are six years old or less
• Prohibition of overtime work for individuals less than 18 years old
• Full entitlement to paid annual leave after at least eight months of service
• Enhanced entitlement to at least five days a year of paid leave for employees working in unhealthy or special work environments
• Entitlement to a 25-day paid annual leave for individuals studying at secondary or higher education institutions

Payroll Compliance in Bulgaria

Generally, payroll compliance in Bulgaria covers basic statutory components, including but not limited to compensation, social security, pensions, withholdings, and deductibles.

Just as anywhere else, payroll compliance is not optional in Bulgaria. Failure to comply, will not only subject your business to damaging, and perhaps lasting, regulatory measures, but also negatively affect your company’s reputation among existing employees and prospectives.

For example, recently proposed changes in the Bulgarian Tax and Social Security Procedures Code include a 5% penalty of taxes withheld, capped at 15,000 Bulgarian Lev (BGN) if a taxpayer, applying for a double tax treaty relief, fails to complete all relevant requirements for such relief. The penalty is raised to 10% but capped at BGN 30,00 in case of repeated violations.

In addition, cross-border taxpayers need to watch for new tax reporting deadlines increasingly changing in recent years based on new directives by the Council of the European Union and due to pandemic-related arrangements.

Payroll Components in Bulgaria

The Labor Code of 1986, modified repeatedly since adoption, is Bulgaria's flagship law on labor relations, rights, and arbitration.

For current purposes, here is what matters most for an international employer planning payroll services in Bulgaria:  

Compensation

• Set at a minimum monthly salary or wage of BGN 650 or BGN 3.92 per hour as of January 2021
• Calculated monthly, weekly, or hourly but in no longer than six month  periods
• Paid as night work if work is performed between 10 p.m. and 6 a.m.

Working Hours

• Set at a standard of 40 hours per week or eight hours per day in a 5-day work week
• Do not include rest or break hours
• Set at a maximum of 10 hours per day with a possible extension of 60 days, and no more than 20 consecutive days per year
• Set at a maximum of 35 hours per workweek for night work

Overtime Laws

Under Bulgaria's Labor Code, overtime work is calculated and compensated as follows:

• Set at a maximum of 150 hours per year
• Set at a maximum of six hours per work or a maximum of four hours for night work
• Set at a maximum of three hours a day or two hours for night work on any two given consecutive workdays
• Additionally compensated at 50% rate of regular pay for work done on regular workdays
• Additionally compensated for work done on holidays
• Additionally compensated at 100% rate of regular pay for work done on public holidays

Social Security

• Varies according to classifications of occupations
• Set at a maximum of BGN 3,000 as of 2021 for all occupations
• Set at an aggregate rate of 32.7% (2021 calculations) split between employers and employees in a ratio of 60:40
• Withheld by employers and remitted to the National Revenue Agency

Sick Leave

• Granted for any sickness-related matters to employees or family members
• Paid by an employer for the first three days of sickness and, if exceeding three days, by the National Security Institute
• Compensated at 80% of regular pay in case of a common disease
• Compensated at 90% of regular pay for work-related injury or disease

Parental Leave

The parental leave regulation in Bulgaria is extensive and, far from being summed up, can be overviewed as follows:

• Set at 410 days of leave for pregnancy and birth, 45 days of which may be before childbirth
• Entitles to a BGN 380 annual benefit under the State Social Insurance Budget Act of 2021 for childcare from childbirth up to two years old
• Set at 15 calendar days for adoptive fathers
• Calculated as cash benefits of a minimum equivalent to or greater than Bulgaria's minimum wage of BGN 650
• Covers paternity or maternity benefits paid in EU member states

Public Holidays

According to Bulgaria's parliament, official holidays are:

January 1st — New Year’s Day
March 3rd — Bulgaria’s Liberation from the Ottoman Empire
May 1st — Labor and International Worker’s Solidarity Day
May 6th — Gergyovden (St. George’s Day), and the Bulgarian Army’s Day
May 24th — Bulgarian Education and Culture, and Slavic Script Day
September 6th — Unification Day
September 22nd — Independence Day
November 1st — Day of the Bulgarian Enlighteners (holiday only for all educational institutions)
December 24th — Christmas Eve
December 25th & December 26th — Christmas Days
Easter Holidays — four days: Good Friday, Holy Saturday, Easter Sun,d ay and Monday)

Payroll Taxes

• Set at a flat 10% rate of base pay for residents and in-Bulgaria source of income

Other Laws

In addition to the Labor Code of 1986, a set of labor laws regulate different employer-employee relationships including, but not limited to:

• Social Security Code (SSC)
• Settlement of Collective Labor Disputes Act
• Protection Against Discrimination Act
• Employee’s Claims Guaranteed in the Event of Employer’s Bankruptcy Act

Employee Benefits in Bulgaria

In addition to all statutory benefits stated above, employee benefits include, for example:

• Education leave — for students in secondary schools or higher education institutions who are entitled to a 25-day paid leave annually
• COVID-19-related unpaid leave — up to 60 work days in 2020 and 90 workdays in 2021
• Flexible work arrangements — only granted to working mothers up until a child reaches six years old

Conclusion

By now, the picture of payroll reality in Bulgaria should be clear to you.

Eluding once-and-for-all control, payroll management in Bulgaria is an activity upon on which you need to keep a constant eye, or otherwise waste valuable resources and lose focus of what matters most to you.

Instead, Skuad is at your disposal to help you navigate Bulgaria's diverse and complex payroll terrain.

BGN exchange rate against USD is 0.54.