Article

Who can take advantage of compensation payment to businesses during the declared state of emergency and how?

Breaking Legal Newsletter (3 April 2020)

In support of businesses, the government adopted Decree No. 55 of the Council of Ministers on 30 March 2020* for determining the conditions and procedure for payment of compensation during the state of emergency declared by a decision of the Parliament on 13 March 2020 (the “Decree”). The Decree contains a detailed description of the terms, conditions, and procedure for applying for and receiving compensation. 

“Compensation” within the meaning of the Decree is the amount of remuneration paid to employers for maintaining the employment of employees upon the full or partial suspension of work of the enterprise, of individual employees or upon the introduction of part-time work due to the declared state of emergency.

The financial resources for payment of the compensation will be provided by the Unemployment Fund of the National Social Security.


Who can take advantage of the financial support during the state of emergency?

There are two categories of employers who will be able to obtain financial support for covering part of the remuneration of the affected employees.

An employer, who is part of certain economic sectors determined by an annex to the Decree and who has suspended their enterprise’s work (the whole or a part of it) or the work of some of their individual employees by virtue of governmental order, can apply for payment of compensation.

Employers from other economic sectors will also be able to apply when they have fully or partially suspended work or introduced part-time work by virtue of an order issued by themselves in connection with the state of emergency. They will be eligible to receive funds when they can prove a decrease in sales revenue of at least 20%.

In order to receive compensation, the employers must meet the following criteria:

  • To be local natural or legal persons, or foreign legal entities that carry out an economic activity in the Republic of Bulgaria;
  • They have no obligations for taxes and mandatory social security contributions;
  • They are not declared insolvent or are not in insolvency or liquidation proceedings;
  • They will retain the employment of the employees, for whom compensation has been given, for a period that does not go under the period for which the compensation has been paid;
  • They will not terminate employment contracts of employees during the period for which they are compensated, etc.

For the employers who apply for compensation and meet the criteria above, a decrease in sales revenue is treated as follows:

  • for the persons established before 1 March 2019 – a decrease of at least 20% during the month preceding the month of the submission of the compensation application, compared to the same month of the previous calendar year;
  • for the persons established after 1 March 2019 – a decrease of at least 20% during the month preceding the month of the submission of the compensation application, compared to the average revenue for January and February 2020.

How can one apply for financial support during the state of emergency?

As of 31 March, the affected employers will be able to apply for compensation for the period of the state of emergency, but for no more than 3 months.

Тhe compensation amounts to 60% of the social security income for January 2020 for every person for whom the regime of suspended or part-time work is implemented. 

  • In the case of part-time work, compensation shall be paid in proportion to the time worked, but for no more than 4 hours per day.
  • The employers will receive funds provided that they preserve the jobs of the employees for a period of no less than the period for which they receive compensation.
  • During this period the employers will owe the full amount of the monthly remuneration and social security contributions to the employees for which compensation is granted.
  • The compensation will be paid for the whole or part of the period of the state of emergency, but for no more than 3 months. 

The applications for compensation will be submitted to the Directorate “Labour Bureau” in accordance with the workplace. 

Procedure for submitting an application for compensation

The employers submit to the Directorate “Labour Bureau”, servicing the territory at the place of the employees’ work, an application for payment of compensation according to a model approved by the Executive Director of the National Employment Agency. The application can be submitted both electronically and on paper, or by a registered letter with acknowledgment of receipt through a licensed postal operator.

The following dociments must be attached to the application:

  • a certified copy of the order of the employer for the suspension of work under Art. 120c of the Labour Code or of the order for implementation of part-time work under Art. 138 a, para. 2 of the Labour Code;
  • a statement that the employer will retain the employment of the persons, for whom compensation is received, and will not terminate employment contracts on the grounds of enterprise position closure or reduction of positions, reduced workload, or suspension of work for more than 15 workdays;
  • a statement from the employer and documents certifying a decrease in sales revenue;
  • a list, in accordance with a model, of the employees for whom the application for payment of compensation is being submitted;
  • a statement containing details of the employer’s payment account.

Activities from the following sectors are excluded from the scope of the Decree:

  • Agriculture, forestry and fisheries
  • Financial and insurance activities 
  • National government
  • Educationo Human health and social work 
  • Activities of the households acting as employers, undifferentiated activities of the households for production of goods and services for their own consumption,
  • Activities of extraterritorial organizations and services.

* Decree No. 55 from 30 March 2020 for determining the conditions and procedure for payment of compensation to employers in order to preserve the employment of the employees during the state of emergency, declared by a decision of the Parliament on 13 March 2020, is promulgated on 1 April 2020 in State Gazette, issue 31.The Decree enters into force with retroactive effect as of 13 March 2020.

Deloitte Legal Law Firm remains at your disposal for further information and questions. Deloitte Legal Law emergency contacts: 

  •  Attorney-at-law Reneta Petkova - Managing Partner, Banking and Finance, email: rpetkova@deloittece.com    
  • Attorney-at-law Georgi Simeonov – Director, Tax practice, email: gsimeonov@deloittece.com  
  • Attorney-at-law Zvezdelina Filova - Senior Manager, Labour and Commercial Disputes, email: zfilova@deloittece.com   
  • Attorney-at-law Miglena Micheva - Manager, Labour Law, email: mmicheva@deloittece.com  
  • Attorney-at-law Kaloyan Yordanov - Manager, Commercial and Corporate Law, email: kyordanov@deloittece.com   
  • Attorney-at-law Adelina Mitkova - Manager, Banking and Finance, email: amitkova@deloittece.com    
  • Attorney-at-law Pavlin Stoyanoff - Manager, Energy and Resources, email: pstoyanoff@deloittece.com  
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