Employment Law in Bulgaria

Contracts

In Bulgaria, employment contracts can be fixed-term or open-ended, per the Labour Code. Open-ended contracts must include benefits such as 20 days minimum of paid leave, social security (18–32% employer contribution), and health insurance. Fixed-term employees receive equal benefits after one month.

Termination and notice periods

In Bulgaria, labor laws require employers to provide written notice of termination or pay in lieu of notice, with a minimum of 30 days for employees on indefinite-term contracts, unless otherwise agreed upon, up to a maximum of three months. In most cases, terminated employees are entitled to a fair process.

Employees dismissed due to redundancy or company downsizing are entitled to severance pay equivalent to one month’s gross salary, while those terminated due to illness or retirement may receive up to two months’ gross salary, depending on the circumstances.

There is no statutory gratuity payment in Bulgaria; however, additional compensation may be provided based on employment contracts or collective agreements. As your employer of record (EOR) in Bulgaria, we can assist you in managing employee terminations by providing legal guidance and a personalized process to ensure compliance with national labor standards and minimize legal risks.

Probation periods

In Bulgaria, probation periods can be established for up to six months and must be specified in the employment contract. For fixed-term contracts shorter than one year, the probation period cannot exceed one month. During the probation period, either party may terminate the employment without notice if the probation is agreed upon in their favor.

Working hours and overtime

In Bulgaria, the standard workweek is typically Monday through Friday, with eight hours per day, totaling 40 hours per week. Employees are prohibited from working for more than eight hours a day without appropriate compensation.

Any work beyond eight hours a day is considered overtime, and employees are entitled to an additional compensation of at least 50% over their regular hourly rate on weekdays, 75% on weekends, and 100% on public holidays. For work performed on rest days or public holidays, the overtime pay rate is higher, as specified by the Bulgarian Labour Code.

Taxes

In Bulgaria, withholding tax is referred to as personal income tax and is deducted by employers before paying salaries to employees. Employers must deduct personal income tax from employee salaries based on applicable income tax rates and submit it to the National Revenue Agency.

Employers in Bulgaria must adhere to various taxation and regulatory compliance requirements to operate legally and avoid penalties. Taxes that employers in Bulgaria must pay include:

• Corporate tax: Resident companies are taxed at a flat rate of 10% on their worldwide income.
• Value added tax (VAT): VAT applies to businesses with an annual turnover exceeding 100,000 BGN. Employers must register, file periodic returns, and pay VAT at a rate of 20% on applicable goods and services.
• Withholding tax (WHT): Employers must deduct WHT from payments such as dividends, interest, and royalties made to non-residents. The standard WHT rate is 10%, subject to applicable tax treaties.

Employer payroll contributions

Bulgaria’s social security system requires employer contributions that are dependent on the total number of employees, and these contributions cover pensions, medical care, disability insurance, and gratuity payments. In addition, workers’ compensation is financed by contributions from state governments, employers, and employees.

Bulgarian labor laws require certain contributions, which fund a range of benefits.

• Social security contributions: Employers contribute between 18.92% and 19.62% of an employee’s gross salary to social security, which covers pensions, unemployment, and maternity benefits.
• Health insurance: Employers contribute 4.8% of an employee’s gross salary to the National Health Insurance Fund, which provides access to public healthcare services.
• Gratuity: There is no statutory gratuity system in Bulgaria; however, end-of-service benefits may be outlined in individual employment contracts or collective agreements.