Employment & HR in Bulgaria

Starting a venture is on your mind as you are here. Are you scrolling and sleuthing through stacks of internet search results on how to do it? Well, you are plumb at the right place then! Just undergird your spirits, fill yourself with dedication, and batten down your hatches to set yourself on the endeavor of establishing a startup. 

Have you lately been thinking of locating your business in Bulgaria? That’s remarkable! The highly developed, industrialized, modern, and free-market of the country renders it an ideal business destination. Furthermore, Bulgaria is a member of the World Trade Organization, the European Union, the Organization of the Black Sea Economic Corporation, and the Organization for Security and Co-operation in Europe. The national currency of Bulgaria is the Lev which stands as the most stable and strongest currency in the whole of Eastern Europe. The robust sectors in Bulgaria’s economy are machine building, tourism, agriculture, metallurgy, energy, mining, clothing, and refined fuels. On top of that, low corporate tax rate, free and direct access to the European market, young and talented labor pool, etc., render the country a favorable destination for starting a business. 

Starting a business in Bulgaria is fairly easy. You only need to be aware of what is to be done and who to contact. We have covered it all for you in the following sections starting from the process of establishing a business to hiring people and more. Let’s dive into this!

Quick Overview

Bulgaria is a preference among ex-pats to open a business thanks to its remarkable business climate, simple business registration procedure, and favorable tax benefits. Before heading to fulfill formalities and going through red tape, you must take the pain of evaluating the marketability and profitability of your business idea. Once done with this part, you should prepare a persuading and honest business plan that entails your market size, competitors, product/ service supply and demand, your budget, etc. Thereafter, choose a legal business structure. The common types of entities found in Bulgaria are limited liability companies, limited partnerships, general partnerships, joint-stock companies, and sole traders. This is followed by drafting and notarizing the constitutive documents of the company. Now open a business bank account and deposit the minimum share capital in it. The documents like Articles of Association and application form are submitted to the Commercial Register in Bulgaria. Register your business with tax authorities for VAT purposes. Companies with an annual turnover of over 50,000 BGN must register with VAT authorities. And finally, register the employees for the purpose of social insurance in Bulgaria. 

Process of setting up a business in Bulgaria

Establishing a business in any country can be a grueling process. You are expected to abide by legal obligations, meet certain criteria, undergo various formalities and procedures, and whatnot. When going through the red tape, in no time, you would sense a drop in your spirits. Nonetheless, enduring through it all, when it comes to starting a business in Bulgaria, is definitely worth it. Here we have collated the process of establishing a venture in the said country with all the things you need to know in detail. Read on!

• Scribe a solid business plan: When preparing a business plan, you will perform detailed market research, study your competitors, understand the demand and supply of the product or service you want to offer, market size, marketing budget, business goals, vision, and mission, and so on. That would facilitate you in knowing the opportunities and potholes when creating a business. Furthermore, it would clearly communicate the purpose and direction of your company to investors.

• Choose a business name: Select a proper and unique business name that will be used to identify your venture before government institutions as well as in the market. There are certain parameters you need to consider when choosing a business name. For instance, it must not be taken by anybody else. You may select a business name and own it officially even before the registration of the company.

• Register your business address: A company must have a Bulgarian business address that needs to be registered during the process of company registration.

• Register with the Government Official Register: All new ventures in Bulgaria need to be registered with the Official Commercial Register. This is a condition set by Bulgarian laws which one needs to fulfill. This is preceded by submitting an application for business registration.

• Get your official stamp: Getting an official stamp for your newly established venture is another requirement you need to meet for formalizing business activities. Although stamp registration is an extra step that comes after the registration process, it still stands as an obligatory act for setting up a business in Bulgaria. The business registration process ib Bulgaria remains almost the same irrespective of whether foreign or local individuals are owners or shareholders of the company.

• Choose a legal business structure: Bulgaria offers different legal business form options. It is important to select a business structure carefully as it would affect the way your business will operate, taxes you will pay, etc. In Bulgaria, you can choose from the following types of business entities:

1. Sole Owner
2. Public Limited Company
3. Freelance
4. Branch in Bulgaria
5. Single Person Limited Liability Company
6. Private Limited Liability Company

• Draft the Articles of Association: Now prepare and notarize the Articles of Association. These are basically constitutive documents of a company that are composed while adhering to the law and in the presence of a notary public. Other constitutive documents of business you will need are the identification details and signatures of the directors of the company and the minutes of meetings of company shareholders.

• Set up a business bank account: The procedures and time for opening a corporate bank account in Bulgaria differ across institutions. You will need the main documents of the company, the Articles of Association, specimen signatures of company directors, and the company registration certificate when opening a business bank account. One also needs to consider the bank forms and application at this step and deposit the minimum share capital.

• Register the company with the Bulgarian Trade Registry: Now, the registration form, registration fees, and documents mentioned before are to submit to the Commercial Register, which comes under the Registry Agency.

• Register with tax and social security authorities: Finally, get your company registered with the VAT authorities. This is necessary for businesses whose income surpasses 50,000 BGN in a year. Contribu
  tions to Social Security are compulsory in Bulgaria, and as you hire employees, you will need to register your company for social insurance purposes. 

Hiring Employees in Bulgaria 

So, business registration finalized, got your licenses and permits and your tax number? Great! Now comes the time to recruit people in your company to handle the operations and activities. However, it is not as straightforward as you would think. There are several rules and obligations at this step as well, which one needs to be familiar with. These regulations are stated clearly in the labor and employment acts of a country which state limits, entitlements, and duties of the employer as well as the employees. With the help of an experienced HR consultant, all your requirements related to hiring employees are taken care of.

Here are the ones you need to know when hiring individuals to work for your business in Bulgaria. 

• Trial Period/Probation Period: The probation period in Bulgaria must not exceed the duration of six months and must be mentioned in the employment contract. The contract includes a trial period to assess the ability of the employee to handle the responsibility assigned to him/ her. During this period, for any of the parties involved in the contract, the employer or employee can terminate the contract with no advance notice. The probation period in Bulgaria does not entail the vacation time or the employee’s failure to discharge the assigned duties on cogent grounds such as illness.
• Leave and Holidays: The basic paid annual leave in Bulgaria must not be less than 20 working days. Depending upon the sector in which a person is employed, the paid annual leave period can be extended. If an employee has not used his/ her annual paid leave within two years, it becomes time-barred. An employer can grant unpaid leave to the employee upon request. If the unpaid leave is for up to a 30-day period per calendar year, it would be identified in a service period.
• Maternity Leave: In Bulgaria, female employees are entitled to 410 days of maternity leave, of which 45 days of leave is used before the anticipated date of childbirth. Furthermore, upon the mother’s consent, a father can use the remaining maternity leave as the child turns 6 months old.
• Termination of Services: In Bulgaria, termination of services is done only in writing. An employee has the liberty and right to terminate the contract without any cause, however, by presenting an applicable notice. An employer, on the other hand, cannot terminate the employee without mentioning the cause of dismissal, even by giving the applicable notice. Some grounds of termination as established by the BgLL are:

1. An employee doesn’t have the skills and competency to handle the job effectively. 
2. Reduction in work volume. 
3. No business activity for over 15 days consecutively. 
4. Partial or complete disclosure of employer’s company. 
5. Downsizing due to changes in the grid of employment.

• Pension: Pension contributions made by employers for the employees are compulsory state social security contributions. Workers also chip in their contributions as well. These contributions are established as a percentage of the total monthly payment of employees with a maximum and minim threshold decided every year by law. 

1. Pension base and minimum social security vary, corresponding to the nature of the job. 
2. The pension base and maximum social security are uniforms.

              Pension contributions of the employees are not counted in the taxable income of the employee. 

• Work Hour Norms: Standard workweek in Bulgaria includes 40 hours, while per day working hours limit s set to eight hours. Upon extension, the duration of workweek hours can go up to 48 hours. However, this extended workweek regime can not be continued for more than 60 working days in a year. Work hours cannot exceed four per day for part-time employees. Employees who are younger than 18 years of age must not be employed for more than 40 hours per week. 

How easy is it to conduct business in Bulgaria?

The World Bank released the Doing Business report in 2020, wherein it assigned 61st rank to Bulgaria in the Ease of Doing business and gave it a score of 72 out of 100. This report is prepared by comparing 190 economies against various factors that play a part in rendering the business environment either enabling or challenging. Some indicators of EODB rank include the ease of getting connected to the electricity grid, procuring credit, paying taxes, enforcing contracts, ease of trading across borders, and more. Here are rankings of Bulgaria in diverse sub-indices to help you gauge further how easy it is to establish and run a business in the country. Read on!

• Starting a Business: To start a business in Bulgaria or anywhere, for that matter, you need to go through particular formalities and procedures. Moreover, new ventures also need to set up a business bank account in the country where they need to deposit the minimum share capital. How many loops and hoops of bureaucracy you need to overcome when starting a business and how much time and cost it entails is what the Doing Business measures. Bulgaria came at 113th position in this sub-index among 190 countries and scored 85.4 out of 100. In 2019, the country created a centralized digital database for the purpose of commercial registration, thereby rendering the process of starting a business easier. Moreover, it also consolidated the business registration procedure and eliminated certain registration facilities to streamline your business establishment journey.
• Managing Permits: To construct warehouses and undertake the activities and operations your business looks forward to considering, you will need permits and licenses. To gauge the rank of an economy in this sub-index, the Doing Business measures the time, formalities, and costs that this process demands. Moreover, it also evaluates the quality and safety control systems of the construction permitting system of a nation. Bulgaria cam at 43rd position among 190 countries and scored 75.9 out of 100.
• Getting Electricity: To initiate the construction, establishment, and operate your business, electricity is an indispensable requirement. However, to procure a connection with the electricity grid, you need to endure more bureaucracy, satisfy criteria, etc. The Doing Business, thus, considers an EODB indicator where
  it measures the transparency of tariffs, reliability of electricity supply, and cost, time, and procedures the process of getting electricity in a country involves. Bulgaria came at 151st position among 190 countries in this sub-index and scored 55.1 out of 100, according to the Doing Business report 2020. In 2017, the country implemented an automatic system for energy management and established Supervisory Control and Data Acquisition for monitoring power outages and service restoration.
• Getting Credit: Credit can be procured easily or with difficulty, depending upon the power of credit reporting systems in lending funds to new ventures. The Doing Business measures the strength and efficiency of bankruptcy and movable collateral laws. According to the Doing Business report 2020, Bulgaria came at 67th position among 190 countries and scored 65 out of 100.
• Managing Payroll: Payroll management involves paying the staff and employees on time. However, it goes beyond that. One also needs to take care of payment of corporate taxes, VAT, and social security contributions, all while adhering to the laws that govern this domain. Therefore, it is sensible to integrate an efficient and able payroll management system to help you do the job. You may choose Zimyo’s payroll management services and ensure a hassle-free payroll management system.
• Paying Taxes: Paying taxes is another responsibility that businesses need to observe. You may have to grapple with more bureaucratic procedures and need to qualify more requirements at this step. Doing Business measures the formalities, cost, and time the process of paying taxes demands. Bulgaria came at 97th position among 190 countries and scored 72.3 out of 100. In 2008, the country introduced and encouraged to file and pay taxes through online mode. Moreover, it also reduced the social security contribution rate of employer and corporate income tax, thereby rendering the process faster and smoother.
• Enforcing Contracts: To measure this indicator, the Doing Business evaluates the outcome, cost, time, and procedure entailed in Enforcing Contracts process. It also assesses the power and efficiency of court systems, laws and regulations, and judicial processes. According to the Doing Business report 2020, Bulgaria received the 42nd rank among 190 countries and scored 67 out of 100. In 2008, the country adopted specific changes in its judicial system, enhanced transparency therein, and appointed private bailiffs, thereby rendering the process easier.
• Resolving Insolvency: Insolvency resolution depends on the legal framework and regulations that govern this domain. The Doing Business, thus, evaluates the strength of these systems and also measures the recovery rate, cost, and time involved in resolving insolvency. According to the Doing Business report 2020, Bulgaria bagged 61st rank among 190 countries and scored 57.8 out of 100. In 2012, the country made certain amendments in its commerce act to extend further entitlements to secured creditors and augment the transparency of proceedings. 

Bulgaria extends remarkable opportunities to new ventures thanks to its strategic location, which renders access to world markets. All in all, it emerges as a great location for establishing a business. When running your business, you can even take a break to relish the natural beauty of Bulgaria’s landscapes, cultural heritage, mountains, and more. 

Zimyo is a leading HR and Payroll management services provider in Bulgaria with multiple years of experience. The company helps businesses hire the best talent and takes care of the financial requirements of employees, such as advances or credit for a hassle-free work experience.