Bulgarian Government adopts wage subsidies to support business during crisis

On 30 March 2020, the Bulgarian government introduced wage subsidies to help avoid layoffs due to the coronavirus crisis across different sectors of the economy by adopting a Decree on the Conditions and Order for Payment of Employers’ Compensation with the aim to Preserve the Employment of Workers and Employees during the State of Emergency, declared by a Decision of the National Assembly of 13 March 2020 (the “Decree”). The Decree has retroactive effect and shall be deemed in force as of 13 March 2020.

According to the Decree, employers will be entitled to compensation in the amount of 60% of the January 2020 insurable earnings of their employees for the whole or part of the period of the applicability of the Bulgarian State of Emergency Measures Act, but for not more than three months. The compensation will be granted to employers who have suspended their business wholly or partially due to an order from a state authority or upon their own discretion suspended business or the work of individual employees or introduced part-time work in response to the state of emergency. In order to obtain compensation, employers must comply with certain requirements, such as retaining their employees for an additional period equal to the period for which compensation is paid. The requirements that employers have to meet are different, depending on whether the employer has suspended its business due to an order of a state authority (applicable for certain economic areas such as construction, manufacturing, retail, transport, food and beverage services, hotels, cultural activities, and sport sectors), or the employer suspended its business, the work of employees or introduced part-time work at its own discretion (applicable to businesses with sales revenue decreases of 20% or more).

Employers are obliged to pay full monthly salaries to employees and social security contributions.

Employers have to submit to the relevant Labour Office Directorate per the place of work of their employees an application for payment of compensation in accordance with an approved template. The application can be submitted in paper form, electronically or by registered letter with acknowledgement of receipt through a licensed postal operator. Information on the conditions and the order for applying for compensation will be published on the website of the Employment Agency and on information boards in the Labour Office Directorates.

Per the Decree, compensation will be paid after the receipt of an approval of the measure by the European Commission, or a decision confirming that the measure does not constitute state aid.

Possible next steps of the Bulgarian Government

The Decree is in line with the Communication from the European Commission of 13 March 2020, Coordinated economic response to the COVID-19 Outbreak, complemented by the Communication from the European Commission of 19 March 2020 on State Aid Temporary Framework measures to support the economy. Member States are permitted to use the full flexibility allowed under state aid rules to support their economies during the COVID-19 pandemic. To help Member States take fast and effective action to support their citizens and businesses, in particular SMEs, in the face of economic difficulties, the Temporary Framework sets out five types of possible aid, which include direct grants, selective tax advantages, state guarantees on bank loans, and public loans with subsidised interest rates. Further information can be found here.

Member States, including Bulgaria, have until 31 December 2020 to set up these schemes following notification to and authorisation by the European Commission.

For more information on state aid and general measures in support of Bulgarian business, contact your regular CMS source or local CMS experts: Nevena Radlova and Anna Tanova.

The article is co-authored by Kalina Krastanova.