KPMG: Council of Ministers decree for compensation of employers for the purpose of employment preservation

On April 1st, 2020, a decree of the Council of Ministers on the conditions and procedure for payment of compensation to employers in order to preserve the employment of workers in the event of work stoppage due to the state of emergency, announced by a decision of the National Assembly of 13 March 2020 (the “Decree”) was promulgated the State Gazette, issue No 51.

The Decree indicates which employers shall be entitled to benefit from these economic measures, the conditions for payment of compensation and the application procedure thereof. The Decree has a retrospective effect, as from 13 March 2020.

It should be stressed that payment of compensation is subject to obtaining a decision by the European Commission, confirming that the compensation granted does not constitute State aid.

Below you may find an overview of some of the main provisions of the Decree.

Which employers are entitled to apply for compensation?

The scope of the Decree includes two main categories of employers:

  • Employers from the following sectors (an exhaustive list can be found in Annex 1 to the Decree), which are directly affected by the state of emergency measures, as a result of which they have introduced a full or partial suspension of the work:
  1. Retail, excluding trade in non-specialized and specialized stores, selling food, beverages and tobacco, trade with medical and orthopedic goods, trade performed in open stands and markets, etc.
  2. Transport — land and air passenger transport
  3. Tourism — hospitality, activity of tour agents and operators, other travel related activities and reservations
  4. Entertainment business — restaurants, fast-food outlets, pubs, cinemas, gyms, sport and leisure activities, etc.
  5. Culture — publishing, artistic and creative activity, other cultural activities
  6. Pre-school education in the private sector.
  • Employers from all sectors of the economy (with certain exceptions such as agriculture and forestry, financial and insurance activities, education, etc.) and which meet two cumulative criteria:
  1. They have ceased the work of their enterprise (or part of it) or of individual employees or have introduced a part-time working hours, and
  2. There is a drop in their sales revenue as follows: (i) if they were established before March 2019, a decrease of at least 20% of the turnover from the month preceding the month when the application for compensation was submitted, compared to the same month of 2019 and (ii) if they were established after March 2019, a decrease of at least 20% of the turnover from the month preceding the month when the application for compensation was submitted, compared to their average revenue of January and February 2020.

In addition to falling under some of the categories mentioned above, in order to apply for compensation, the employer must also meet a number of other additional conditions, such as: to be a local individual or legal entity or a foreign legal entity, operating in the Republic of Bulgaria; not to have obligations related to tax and social security contributions, to undertake an obligation to maintain the employment of their employees at least during the period for which they will receive compensation, etc.

Which employees are excluded from the scope of the Decree?

Compensation shall not be paid with regard to employees who were not employed by the respective employer prior to the date of the state of emergency, as well as those who are in leave for temporary incapacity, pregnancy and childbirth and taking care of a child up to 2 years of age.

What benefit are employers entitled to?

The compensation payable to employers shall be equal to 60% of the amount of the social security contribution of the respective employee for January 2020, whereby the employers shall be paying the remaining due amounts, as well as the due social security contributions.

The social security contribution for January 2020 will be calculated on the basis of the employee’s employment during that month — days worked, days of unpaid or other leave used, etc.

In the case part-time working hours have been established, the compensation will be paid proportionally to the time during which the employee was not working, but for no more than 4 hours per day.

The compensation shall apply for the whole or a part of the state of emergency, but in any case for no longer than 3 months.

How to apply?

The application procedure is already open and applications shall be submitted to the Labour Office Directorate in person, by electronic means or by registered mail. The application shall be prepared as per the official template and should be accompanied by certain documents.

Applications should be submitted by 21 April 2020 and will be reviewed within 7 days of their submission by a designated commission, formed by an order of the Director of the Labour Office.

The compensations will be paid by the National Social Security Institute. In the event the employer fails to comply with any of the commitments undertaken thereto, any compensation received must be returned.

How can we help?

KPMG team remains at your disposal for any questions or assistance concerning the interpretation and application of the Decree and the procedures provided therein.

Source: KPMG