Payroll in Bulgaria: Comprehensive Guide for Employers

Bulgaria is favorable for foreign investment due to its profitable taxation system for investors, skilled and affordable workforce, low cost of living, and powerful defense against external economic shocks.

Companies targeting to enlarge their business in Bulgaria should be familiar with local rules and regulations stated by the Bulgarian government. To entice, hire, and retain the best talent in Bulgaria, you should know how to efficiently manage the onboarding process, including the payroll process in Bulgaria. The payroll process requires understanding tax systems, social security contributions, salary structure, payroll cycle, entitlement and termination terms, payroll options, etc.

You need a thorough understanding of payroll tax in Bulgaria and labor requirements to ascertain accurate and accommodating payroll. The below guide discusses all aspects you must know about payroll in Bulgaria.

How Is Payroll Calculated in Bulgaria?

Payroll denotes the compensation the employees get from the employer for their services for a fixed period. The HR or accounting department governs it.

Bulgaria’s payroll policies and procedures cover pay, release payments, and track employees’ working hours. You should regularly maintain record-keeping to guarantee accurate payroll calculation. Besides, you should withdraw social security contributions and other relevant deductions by conforming to payroll rules and regulations in Bulgaria. You should calculate employer and employee contributions to understand how to do payroll in Bulgaria.

Important Elements of Salary Structure in Bulgaria

The elements discussed below contribute to the salary structure in Bulgaria:

Cost to Company (CTC)

The CTC denotes an annual amount that a company incurs when hiring an employee. It integrates aspects like employees’ net remuneration, gross remuneration, payroll deductions in Bulgaria, additional benefits, etc.

Gross salary

This element incorporates all aspects that help an employer create Bulgaria’s employee compensation package. It covers various aspects like the total income before calculating payroll deductions in Bulgaria, social security contributions, health insurance, etc.

Net salary

It refers to the amount transferred to an employee’s bank accounts after the employer has made all deductions from the gross salary. 

Basic salary

It is the amount employees get after the employer has calculated all additions and deductions from the annual package. The employees’ basic salary depends on the employer’s job title in the company and the sector’s activities.

Allowances

Allowances indicate all the job-related expenses that employers owe to their employees. The corresponding amount assures a decent work-life balance for employees. All employees in Bulgaria are entitled to multiple allowances, irrespective of the organization and the industry.

How to Set Up a Payroll in Bulgaria

The following steps help a foreign business plan to set up payroll in Bulgaria:

• Step 1: Register a business in Bulgaria with the Trade Register. This step also authenticates your business name’s validity.
• Step 2: Obtain an EIN (Employer Identification Number) from the IRS.
• Step 3: Register the company name, labor and tax registration, and national tax number.
• Step 4: Obtain a local or state business ID (if required).
• Step 5: List your team’s info, including each employee’s full name, employment start or termination date, tax filing number, address, date of birth, and compensation details.
• Step 6: Classify your employees among the independent, part-time, and full-time contractors.
• Step 7: Register for VAT. You must register for health insurance and pension through the Tax Authority.
• Step 8: Open a Bulgarian bank account with a local bank to disburse payroll-related payments. Before approving the business bank account, you will need the court and registration information (including proof of statistical number, health insurance registry, etc.).
• Step 9: Calculate the employee payroll amount and confirm your company’s payroll structure and payroll cycle.
• Step 10: Paying employees via a local entity (which allows you to hire and compensate employees compliantly) or partnering with an Employer of Record (EOR) platform in Bulgaria.

A Step-by-step Process of Payroll Processing in Bulgaria

Three stages are involved in the processing of payroll in Bulgaria. They are discussed below. 

1. Pre-payroll stage

This stage incorporates Bulgaria’s legal requirements to process salaries and payroll for any business. It covers the following mandatory components:

Business Profile

Companies should start by getting a unique business code that is derived from the unique profile setup process. It helps you identify your legal entity and streamlines tax compliance, reporting, and communication processes.

Attendance policy

The attendance policy defines a set of rules about the employees’ attendance. This policy helps with payroll calculation and compliance.

Statutory components

For payroll processing in Bulgaria, you must focus on current and new statutory compensation laws and regulations through which employees are entitled to a certain basic salary and leave entitlements.

Salary components

To attract and hire top talent in Bulgaria, you should consider different factors impacting salary calculation. These include allowances, deductions, and leave types.

Payment schedule

It focuses on selecting the day to release employee payments and stipulating a fixed payment schedule. This keeps employees updated on when they will get their salary each month.

Employee details

You should gather personal and professional information about all your employees. The details include employee names, roles, departments, nationalities, etc. These gathered details are entered into payroll software that supports features like ESS (Employee Self Service portal), leave and attendance management, and much more.

2. Payroll calculation stage

This stage calculates the employees’ net pay after counting the necessary taxes and deductions. The employer must recheck the process to ensure that there are no errors. You should calculate and maintain payroll records through paper-based or automated methods. It helps you to process payments timely and also helps in compliance and reporting processes.

3. Post-payroll stage

After setting up your business and payroll, you must finalize the payroll process. The relevant components are described below.

Salary payments

This stage involves releasing salaries to your employees. You can adopt any of these ways to do this:

1 – Communicate with your bank and request them to begin salary disbursement

2 – Use software that automatically releases salaries to your employees

Payroll accounting

You must track payments and payroll-related expenditures that help you to fulfill reporting and compliance requirements. You can conduct payroll accounting internally to reduce expenses or outsource it to an external auditing service.

Payroll reporting and compliance

This stage suggests that you must keep all reporting forms and mandatory compliance ready to submit to local regulatory authorities. It documents all contributions, compensation, withholdings, social security, and other details needed in your reporting and compliance forms.

Payroll Contributions

Depending on the salary, the employers and employees must contribute to social security in Bulgaria as part of the Bulgaria payroll requirements.

Employer contribution

Employee contribution

Employee payroll contributions include the following elements.

Payroll Cycle

In Bulgaria, employees are generally paid monthly on the last working day of the month. The employers disburse the amount to their salary account as per the specified schedule. 

Bulgaria Payroll Options for Companies

Employers can opt for various options to process the payroll in Bulgaria, depending on their budget and needs. The below section describes the HR payroll Bulgaria options.

• Internal payroll: Larger companies with long-term contracts with Bulgaria can operate internal payroll. This option is expensive as the company has to invest its time and hire proficient personnel capable of efficiently setting up payroll.
• Remote payroll: This HR payroll Bulgaria option of the Bulgaria payroll guide states using the remote payroll with your payroll company to streamline the payroll procedure in Bulgaria. The remote payroll will compensate the employees at your subsidiary. It is an affordable option, but the company must know different labor laws in Bulgaria.
• A Bulgaria payroll processing company: It is advisable to use this option after meticulously researching the market. It focuses on using a reliable payroll processing company that is experienced enough to set up payroll and payroll rules and regulations in Bulgaria.
• Bulgaria payroll outsourcing: With this option of the Bulgaria payroll guide, you benefit from an easy, cost-effective, and flexible method of governing payroll in Bulgaria. Companies can use services from a global PEO service provider like Multiplier, which administers all the elements of the Bulgaria payroll process and also guarantees that the payroll processes follow the Bulgaria payroll requirements. Besides, it excludes all the challenges associated with payroll processing in Bulgaria and lets you focus on the company’s development.

Entitlement and Termination Terms

Entitlement terms in Bulgaria

The employees in Bulgaria are entitled to the following benefits.

Paid time off

Employees who have completed at least four months of employment are entitled to 20 days of paid leave.

Sick leave

1 – All employees in Bulgaria get up to 18 months of sick leave.

2 – The employer compensates for the initial three days of sickness at 70% of the standard pay. Afterward, the National Social Security Fund pays until the employee has worked for at least six months under the same employer or made social security payments.

3 – It pays sick leave at 80% of the standard salary or 90% for a work-related injury or sick leave.

4 – The employees should provide a medical certificate within 48 hours of the beginning of the sickness.

Maternity leave

1 – The female employees in Bulgaria get 410 days of paid maternity leave.

2 – NHIF (Bulgarian National Health Insurance Fund) compensates this benefit to the employee at 90% of their regular pay. 

Paternity Leave

1 – Male employees in Bulgaria who have served at least one year of employment are entitled to mandatory paid paternity leave of 15 days.

2 – It is remunerated at 90% of the employee’s salary from the child’s birth.

Parental Leave

1 – Minimum of 6 months of parental leave is provided after the employer’s permission.

2 – It continues until the child is two years old. 

3 – It can be shared among the mother, the father, or grandparents.

Public holidays

1 – In Bulgaria, the employees belonging to any industry and sector are identical to 15 public holidays per year.  

2 – There can be a few additional holidays depending on the region. 

Other leaves

1 – The employees get two days of paid marriage leave.

2 – The employees get two days of paid leave to attend a family member’s funeral.

Termination terms in Bulgaria

• Employers in Bulgaria follow the standard termination process, depending on termination reasons specified in the Bulgarian Labor Law. However, the termination process is non-standard if an employer can provide adequate cause for dismissal without notice.
• The termination notice should be in writing and delivered to the appropriate governmental authorities.
• The statutory minimum notice period ranges from 30 days to 90 days in Bulgaria.

Bulgaria Payroll Processing Company

To administer timely, precise, and compliant payroll in Bulgaria, foreign investors need an in-depth knowledge of reporting, local tax, and employment and compensation requirements. Besides, they must know compliance with Bulgaria Labor and local employment laws before they set up payroll in Bulgaria. You can get services from an international PEO company like Multiplier to obtain the optimum benefits of payroll rules and regulations in Bulgaria.

How Multiplier Can Help with Global Payroll?

Bulgaria’s payroll management supervises different aspects like payroll processing, determining salary structure, payroll calculation, payroll cycle, employers’ & employees’ contributions, entitlement and termination terms, and more. The overall payroll process can be time-consuming for businesses to manage autonomously. You can utilize the service from a global PEO platform like Multiplier to eliminate these hassles and implement the Bulgaria payroll process.

Multiplier provides EOR solutions to international corporations in 150+ nations. Our experts competently deal with payroll processing, payroll management, payroll contributions, employee onboarding, and other related tasks. Moreover, our SaaS-based PEO services ensure that payroll processing works efficiently in the country.