Payroll Services in Bulgaria

Bulgaria joined the euro area on 1 January 2026, the twenty-first member to do so. The Council of the European Union adopted the final legal acts on 8 July 2025, and the national implementing law – the Law on the Introduction of the Euro in the Republic of Bulgaria, published in State Gazette No. 65 of 8 August 2025 – set the mechanics. The conversion rate is irrevocably fixed at 1 EUR = 1.95583 BGN and must be used at all five decimal places, never rounded or truncated. Dual circulation ran for one month, from 1 to 31 January 2026, and was not extended.

For payroll the practical consequences were mechanical rather than legal. Lev amounts in statutes and contracts redenominate arithmetically at the fixed rate, rounded to the cent, and the euro law contains no provision re-basing figures to round euro numbers – which is why Bulgarian payroll figures now look odd in euro. The minimum wage is €620.20, not a round number, because it was set as BGN 1,213. Labour Code fines are the same: the general employer penalty band is €766.94 to €7,669.38, because it was BGN 1,500 to BGN 15,000.

One useful indicator of how complete the transition is: the National Social Security Institute now publishes its parameters in euro only, with no lev equivalents. Any payroll system, contract template or budget model still expressing Bulgarian figures in leva is working from pre-2026 data.

For an employee born on or after 1 January 1960 – the normal case – total social security is 32.70% to 33.40% of insurable income, split roughly 19% employer and 13.78% employee. The employer’s share comprises 8.22% to the state pension fund, 2.80% to the mandatory second-pillar universal pension fund, 2.10% for general sickness and maternity, 0.60% for unemployment, 4.80% for health insurance, and 0.40% to 1.10% for occupational accident and disease, which is employer-only and differentiated by economic activity. The employee pays 6.58%, 2.20%, 1.40%, 0.40% and 3.20% respectively. For an employee born before 1960 there is no second pillar and the whole 19.80% pension element goes to the state fund – the employer and employee totals are identical, only the allocation differs. Teaching posts carry a further 4.30% teachers’ pension fund contribution, entirely at the employer’s expense.

The base is capped, and in 2026 the cap moved mid-year. From 1 January to 31 July the maximum monthly insurable income was €2,111.64; from 1 August it is €2,300. Because the ceiling applies to both sides, the effective employer rate falls above it: 18.92% at €1,500 a month, about 12.4% at €3,500, about 7.3% at €6,000.

Underneath the ceiling sits a floor system that catches foreign employers out. The minimum insurance thresholds – minimalni osiguritelni dohodi, or MOD – set a minimum insurable income for each combination of economic activity and occupational group, published as an annex to the annual social insurance budget act. They were not abolished, contrary to a common belief; they were restructured. From 1 August 2026 they are mapped onto the new KID-2025 economic activity classifier, replacing KID-2008, which is a real payroll configuration change rather than a paper one. Indicative floors from August 2026 run from about €716 a month for administrative support staff to about €936 for managers. If an employee’s actual pay is below the MOD for their activity and occupation, contributions are still calculated on the MOD.

From 1 August 2026 there is also a new obligation for a specific population: state civil servants, judges, prosecutors, investigators and judicial staff, previously insured wholly at the employer’s expense, now make employee-side contributions on transitional splits, moving to the standard distribution on 1 January 2027.

Bulgaria applies a flat personal income tax of 10% on employment income, with no bands and no allowance. The base is gross pay less the employee’s own mandatory social security and health contributions, so the effective rate on gross is lower than 10%. Tax is withheld monthly and reconciled annually.

The arithmetic is unusually clean, and worth stating on the page because it is a genuine selling point of the jurisdiction. An employee earning up to the insurance ceiling takes home 77.6% of gross, whatever the salary – because both the 13.78% contribution and the 10% tax are proportional within the cap. Above the ceiling, net rises: at €6,000 a month gross the employee keeps about 85% of it, because contributions have stopped and only the flat tax continues.

A small number of reliefs are administered through or around payroll, principally the child tax relief and disability relief, which are claimed annually rather than applied monthly by default. Food vouchers up to €102.26 a month are non-taxable and outside the contribution base, which is why they are close to universal in Bulgarian remuneration packages.

The minimum wage from 1 January 2026 is €620.20 a month, or €3.74 an hour, set by Council of Ministers Decree No. 243 of 13 November 2025 and published in State Gazette No. 98 of 18 November 2025 – a 12.6% increase. Since 2024 the mechanism has been statutory rather than discretionary: Article 244 of the Labour Code requires the minimum wage to be set by 1 September each year at 50% of the average gross wage over a defined four-quarter reference period, implementing the EU adequate minimum wages directive. There are twelve monthly payments; a thirteenth salary is neither mandatory nor a general custom in Bulgaria.

The working week is 40 hours over five days, with an eight-hour day. Overtime is capped at 150 hours a year – a figure only a collective agreement can raise, to 300 hours, and which employee consent cannot raise at all – with monthly, weekly and two-day sub-limits. Premiums are at least 50% on an ordinary working day, 75% on a weekly rest day and 100% on an official public holiday. The night period is 22:00 to 06:00 and night hours are reduced, with seven hours counting as a full day. Employers must keep a register of overtime and report it to the Labour Inspectorate. Where a post is designated as open-ended working time, overtime premiums do not apply and the compensation is instead at least five additional days of paid annual leave.

Paid annual leave is a minimum of 20 working days, with five more for hazardous conditions or open-ended working time, and 26 days for employees with at least 50% reduced capacity. Sick pay is the item foreign employers most often get wrong: the employer pays the first two working days at 70% of average daily gross remuneration – reduced from three days with effect from 1 January 2024 – and the National Social Security Institute takes over from the third day at 80% of average daily insurable income. For a work accident or occupational disease there are no employer-paid days and the rate is 90% from day one. Sick notes are now issued fully electronically and transmitted automatically to both the institute and the employer.

Maternity leave is 410 calendar days, of which 45 fall before the expected date, paid at 90% of average gross daily income over the preceding 24 months and requiring 12 months of insurance for sickness and maternity. After it, a flat childcare benefit runs to the child’s second birthday. Fathers receive 15 calendar days at the birth, and – since the 2022 transposition of the EU work-life balance directive – a further two months of non-transferable leave usable until the child turns eight. Since 1 July 2025, cash benefits are not payable to anyone who actually performs work during the leave period.

Two monthly returns carry Bulgarian payroll. Declaration 1 reports per-person data – insurable income, contribution bases, days insured, contributions by fund and income tax withheld. Declaration 6 reports the aggregate amounts the employer owes. Both are filed electronically to the National Revenue Agency by the 25th of the following month, and the contributions and withheld tax are paid on the same date. The annual Declaration 6 for income tax is due by 25 February. The governing instrument is Ordinance No. H-13 of 17 December 2019.

Employment records changed in 2025. The paper labour book, the trudova knizhka, was replaced by the unified electronic employment record held in the Employment Register maintained by the revenue agency, from 1 June 2025 for the private sector and 1 June 2026 for civil servants. Employers had until 1 June 2026 to close out existing paper books, record each employee’s history to 31 May 2025 and return the completed book to the employee – that deadline has now passed, and closed books remain the official record for pre-transition service. Going forward, conclusion and amendment of a contract must be filed within three days, termination within seven, and a change of employer within ten. The data set is wider than the old book: it captures the start of performance, working time duration, leave used, recognised length of service and the date of any severance payment.

A Bulgarian entity is not always required. A foreign employer with no physical presence in Bulgaria – for example where employees work remotely from home – can register directly with the revenue agency for a service number under the Tax and Social Insurance Procedure Code, and with the social security institute as an insurer. That route needs apostilled and translated corporate and tax documents. Where the employer keeps an office or production facility, holds client meetings or otherwise conducts business in Bulgaria, a branch or subsidiary is required, and a fixed place of business may also create a permanent establishment for corporate tax. A local bank account is advisable either way, because payment processing failures are the common practical problem.

On termination, notice is set by contract subject to statutory minimums, and the Labour Code provides defined grounds together with compensation entitlements – on redundancy, on retirement, and for accrued unused leave. Certain categories require the prior consent of the Labour Inspectorate before dismissal. Labour Code penalties are substantial relative to Bulgarian salaries: the general employer breach band is €766.94 to €7,669.38, with €511.29 to €5,112.92 for the responsible official, and failure to close out a paper labour book within the transition period carries the same range as a general breach.