Dobrev & Lyutskanov: Conditions and Procedure for Payment of Compensation to Employers for the Duration of the State of Emergency

On 30 Match 2020 the Bulgarian Council of Ministers adopted the Decree laying down the conditions and procedure for the payment of compensation to employers in order to maintain the employment of workers and employees during the state of emergency, declared on 13 March 2020. The Decree will be promulgated in the State Gazette after the state aid has been approved by the European Commission.

The Decree sets down the criteria that employers must meet in order to benefit from the 60:40 support scheme during the state of emergency.

With the amendments to the Measures and Actions during the State of Emergency Declared with a Decision of the National Assembly from 13 March 2020 Act it is additionally provided that the state shall also pay the social security contributions, which are due by the employer. The purpose of this scheme and the adopted measures to cover also the social security contributions is to protect employment and avoid collective redundancies.

Conditions for Receiving Compensation

Employers which, as a result of the state of emergency declared on 13 March 2020, have issued an order, on the basis of the Order of the Minister of Health or of another state authority, to suspend the work of the enterprise, of part of the enterprise, or of individual workers or employees, and the activity of which is on the list of economic activities attached to the Decree, are eligible to receive compensation.

The following sectors have been excluded from the scope of the Decree: Agriculture, forestry and fisheries, Financial and insurance activities, Government, 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.

Apart from the employers listed in the Decree, whose work has been suspended directly as a result of an order by a state authority, other employees who are not on the list of exceptions are also eligible for compensation, if they meet the following conditions:

  • Following the declaration of state of emergency, the employer has issued an order to suspend work of the enterprise, of one of its units, or of individual workers or employees, for the whole period or for a part of it, until the state of emergency is lifted,

OR

  • Following the declaration of state of emergency, the employer has issued an order to institute part-time work for the whole enterprise or for one of its units, for the whole period of state of emergency or for part of it,

AND

The employer declares decrease in sales revenue, as follows:

  • for companies incorporated before 1 March 2019 – decrease of no less than 20 per cent in the month preceding the month when application for payment of compensation is filed, as compared to the same month in the previous calendar year,
    – for companies incorporated after 1 March 2019 – decrease of no less than 20 per cent in the month preceding the month when application for payment of compensation is filed, as compared to January and February 2020 average earnings.
Requirements for Employers

The Decree places the following requirements for employers:

  • must be local natural or legal persons, as well as foreign legal persons conducting business in Bulgaria;
  • must have no tax obligations and obligations for mandatory social security contributions to the State or municipality, established by an act of a competent authority which has entered into force, and for which employers have not taken any action for rescheduling, deferring or securing;
  • must not be declared bankrupt or be in bankruptcy or liquidation proceedings;
  • must maintain the employment of workers and employees for whom they have been compensated for a period not less than the period for which the compensation is paid (maximum period of three months);
  • must not terminate the employment contracts of workers and employees on grounds of closure of part of the enterprise, redundancies, reduction of workload or downtime during the compensation period;
  • must not have committed a violation of the Labor Code or of the Labor Migration and Labor Mobility Act, established by way of a penal decree or court decision in force, for a period of 6 months prior to the issuance of the termination order.
Amount of the Compensation

The amount of the compensation is 60 per cent of the insurance income for the month of January 2020 for each person to whom the regime of termination of employment or part-time work is applied.
In the case of instituted part-time work, the compensation is paid in proportion to the time not worked, but for no more than four hours.

Application Procedure

As of today, 31 March 2020, the Employment Agency has published on its webpage a notification for starting the procedure, instructions, as well as samples of the documents that must be filed.

The term for applicaiton is 21 April 2020.

In accordance with the clarifications provided by the minister of labour and social policy the measure can be utilized by employers, who:

  • have not fired any employees due to the state of emergency;
  • have not delivered any notices for termination of labour contracts for the period, for which they claim the compensation;
  • have sent their employees in mandatory leave from work;
  • have introcuded part-time working hours; the compensations is only for the hours not worked – while the employer shall have to pay the salaries in full for the hours worked.
  • Employers can apply for compensation for a part of or for the whole period of the state of emergency, but not exceeding 3 months.
  • The compensations are paid as of the date of stopping work or introducing part-time working hours.
  • The 60/40 scheme is compensation mechanism, which is applied with some differences in most EU member states with the purpose of supporting both parties on the employment contract and to avoid collective redundancies.

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