Definitive Criteria for Payment of Compensations to Employers Who Have Suspended Work Due to the State of Emergency

After carrying out consultations with the National Tripartite Cooperation Council, on 30 March 2020 the Council of Ministers (CM) definitively enacted the Decree, which specifies the requirements and the procedure for payment of compensations to employers who have suspended work due to the announced state of emergency (hereinafter referred to as the Decree). The Decree is expected to be promulgated in State Gazette shortly.

As is known, the Act for the Measures and Actions during the State of Emergency Declared by Decision Dated 13 March 2020 of the National Assembly was promulgated in the State Gazette on 24 March 2020. This Act provides that while it is in effect, but for a period not exceeding three months, the National Social Security Institute (NSSI) will pay compensations to employers meeting the criteria specified by the Government. This will be done in order to preserve the employment in the undertaking after the end of the state of emergency.

 I. Amount of the Compensations and Requirements for Application

It is stipulated the compensation to be at the amount of 60 percent of the social security income for the month of January 2020 of the employees affected by the state of emergency. If part-time work is established, the compensation shall be paid at an amount, which is proportionate to the carried out work but for not more than 4 hours per day.

Compensations shall be paid for the whole period of the state of emergency or for a part thereof, but for no more than 3 months.

The Decree provides for that compensations shall be paid to three types of employers and namely

a. Employers who have suspended work in the undertaking, in part of it or as regards particular employees, by means of an order, issued on the grounds of an act of a public body;

b. Employers who have issued on their own initiative an order on the grounds of Art. 120c, Para. 1 of the Labour Code, for suspension of work in the undertaking, in part of it or as regards particular employees;

c. Employers who have issued an order on the grounds of Art. 138a, Para. 2 of the Labour Code for establishment of part-time work in the undertaking or in a particular department therein.

The Decree provides for that no compensations shall be paid for the following categories of employees:

• Employees who have not been in an employment relationship with the employer before the date of declaration of the state of emergency;
• Employees who are using temporary disability leave, pregnancy and childbirth leave, leave for adopting a child up to 5 years of age or raising a child up to 2 years of age;
• Employees for whose remuneration and social security contributions the employer receives financing from the state budget, European Structural Funds or other public funds.

II. Criteria for Applicatio

1. Criteria for employers who have suspended work by means of an order issued on the grounds of act of a public body (i.e. employers under it. I, letter “a” hereinabove):

• The employer must be a local natural person or legal entity or a foreign legal entity carrying out business in the Republic of Bulgaria;
• The employer must apply for compensation for employees ensured in the economic activities included in the list hereinbelow;
• The employer has no obligations for taxes and statutory social security contributions towards the state or the municipalities, which have been proven by means of an effective act of a competent authority and as regards to which the employer has not undertaken actions for rescheduling, postponement or security;
• The employer has not been declared insolvent and is not in insolvency or liquidation proceedings;
• The employer is obliged to keep the employment of the persons for whom he has received compensation for a period of not less than the period for which the compensation is paid;
• For the period for which compensation is paid, the employer is obliged not to terminate the employment contracts of employees by means of termination notice on the grounds of closure of part of the undertaking, staff cut, reduction of the work load or upon suspension of the work for more than 15 working days;
• There must be no effective penal decrees or court decisions for violations of the Labour Code or of the Labour Migration and Labour Mobility Act as regards the employer for a period of 6 months preceding the issuance of the employer’s order for suspension of work in the undertaking.

It is important to note that an employer who has received compensations under the Decree that fails to fulfil his obligations under bullets 5 and 6 above, as well as an employer who do not pay the full amount of the remuneration and social security contributions of the affected employees, shall return the received compensations.

In order to be eligible for compensation on the above grounds, an employer must carry out activity in sectors and economic activities explicitly included in the list attached to the Decree, and namely:

• Retail trade (except of motor vehicles and motorcycles), with the exception of retail trade in non-specialized stores, predominantly with food, beverages and tobacco; retail sale of food, beverages and tobacco in specialized stores; retail trade of medicines and other pharmaceutical goods; retailing of medical and orthopaedic goods; retail trade in open stands and markets; retail trade not in retail outlets;
• Other types of passenger land transport;
• Passenger air transport;
• Hospitality;
• Restaurants and fast food establishments;
• Drinking establishments;
• Movie projecting;
• Travel agency and operator activity; other travel and booking activities;
• Organization of congresses and trade fairs;
• Pre-school education (private sector);
• Artistic and creative activities;
• Other activities in the field of culture;
• Sports and other activities related to entertainment and recreation;
• Maintaining of good physical condition;
• Other economic activities (other than the listed above) – for employers who have suspended activity in particular settlements (cities, towns and villages) where anti-epidemic measures have been established by order of a public body.

 2. Criteria for employers who have suspended work/ established part-time work on their own initiative (i.e. employers under it. I, letters “b” and “c” hereinabove):

• The employer must not carry out activity in the following sectors (Classification of Economic Activities – 2008):
• Agriculture, forestry and fisheries;
• Financial and insurance activities;
• Governmental activities;
• Education;
• Human health and social work;
• Activities of households as employers; Undifferentiated activities of households for the production of goods and services for own consumption;
• Activities of extraterritorial organizations and services.
• The employer must be a local natural person or legal entity or a foreign legal entity carrying out business in the Republic of Bulgaria;
• The employer has no obligations for taxes and statutory social security contributions towards the state or the municipalities, which have been proven by means of an effective act of a competent authority and as regards to which the employer has not undertaken actions for rescheduling, postponement or security.
• The employer has not been declared insolvent and is not in insolvency or liquidation proceedings;
• The employer is obliged to keep the employment of the persons for whom he has received compensation for a period of not less than the period for which the compensation is paid;
• For the period for which compensation is paid, the employer is obliged not to terminate the employment contracts of employees by means of termination notice on the grounds of closure of part of the undertaking, staff cut, reduction of the work load or upon suspension of the work for more than 15 working days;
• There must be no effective penal decrees or court decisions for violations of the Labour Code or of the Labour Migration and Labour Mobility Act as regards the employer for a period of 6 months preceding the issuance of the employer’s order for suspension of work in the undertaking;
• The employer must provide documents proving a decrease in the income from sales throughout the month preceding the month of submission of the application for payment of compensations, with no less than 20% as compared to:
• The income for the same month of the preceding calendar year - in case that the employer is an entity established before 1 March 2019;
• The amount of the average income for January and February 2020 - in case that the employer is an entity established after 1 March 2019.

III. Application Procedure

Applications for compensation shall be received following a procedure before the Employment Agency. Information on the terms and conditions for applying, as well as template forms, are published on the website of the Employment Agency and on the information boards in the "Labor Office" Directorates.

The application for payment of compensations shall be in the form approved by the Executive Director of the Employment Agency and shall be submitted by the employer (online submission is possible) to the "Labor Office" Directorate operating on the territory of the place of work of the employees whose work has been suspended due to the state of emergency. The documents enumerated in the Decree  need to be attached to the application. The submitted applications and documents will be reviewed by a commission within 7 business days counted as of the date of submission and the employers shall be notified for the result within 2 business days from the drafting of the protocol of the commission’s meeting.

If the employers reinstate the employees to work or cancel the order for establishment of a part-time working hours during the period of payment of the compensations, the Decree provides for an obligation to notify the Employment Agency in writing within 3 days as of the date of issuance of the respective order.

The Decree provides for that compensations shall be paid after the European Commission has issued a decision in the sense that the granted aid is compatible with the internal market of the EU or that the aid does not constitute state aid within the meaning of Art. 107, Para. 1 of the Treaty on the Functioning of the European Union.

This material is not exhaustive, is only of general nature and does not represent a specific advice or consultation. Should any additional questions arise, please do not hesitate to contact us at tel.: 02/943 37 00, fax: 02/943 37 07, е-mail: office@afa.bg or at: 38, Oborishte Str., Sofia 1504.