Regarding the complicated epidemic situation related to the spread of COVID-19 on the territory of the Republic of Bulgaria, a state of emergency was proclaimed by decision of the National Assembly dated 13.03.2020.
In this regards, Order № RD-01-124/13.03.2020 of the Minister of Health, with subsequent amendments and supplements, has been issued, by which several anti-epidemic measures have been introduced on the territory of the Republic of Bulgaria, for a period until 29.03.2020, as one of which is the suspension of all visits to entertainment and play halls, discotheques, bars, restaurants, fast food restaurants, pubs, cafes and large retail centers (malls), with the exception of bank and insurance offices, food stores and pharmacies, situated inside them. By Order No. RD-01-154/26.03.2020 of the Minister of Health the term of the anti-epidemic measures have been prolonged until 12.04.2020 including.
On 24 March 2020 an Act on Measures and Actions during State of Emergency, proclaimed by Decision of the National Assembly of 13 March 2020 (hereinafter referred to as “AMADSE”) was promulgated in the State Gazette, Copy 28/24.03.2020.
Pursuant to Paragraph 6 of the Transitional and Concluding Provisions of AMADSE, during the validity of AMADSE (from 13.03.2020 until the date of revocation of the state of emergency), but for a period not longer than three months, the National Social Security Institute shall transfer 60 percent of the amount of the insurance income for January 2020 for the persons insured under Art. 4, Par 1, item 1 of the Social Security Code by insurers meeting the criteria determined by an act of the Council of Ministers. The funds shall be transferred by bank transfer to the relevant insurer within 5 working days based on the written information provided by the Employment Agency. The funds shall be at the expense of “Unemployment Fund” of the state social security.
Based on Para 6 of the TCP of AMADSE, the Council of Ministers of the Republic of Bulgaria adopted Decree No. 55 of 30.03.2020 on determination of the conditions and procedure for payment of compensations to employers in order to keep the employment of workers and employees in the state of emergency, proclaimed by Decision of the National Assembly dated 13 March 2020, and which is effective as of 13 March 2020 (hereinafter referred to as “DCM”). On 31 March 2020 DCM has been published on the website of the Council of Ministers of the Republic of Bulgaria.
Subject of the present statement and analysis shall be namely the conditions, criteria and procedure for applying and payment of compensations to employers, as provided for in DCM.
Before analyzing in details the above issues, firstly it shall be clarified the meaning of two basic terms used in DCM, namely compensations and insurance income.
Paragraph 1 of the Supplementary Provision of DCM defines the term of compensations, namely: “amounts for labour remunerations, which shall be paid to employers for keeping the employment of workers and employees in the event of suspension of work or establishment of part-time work due to the state of emergency proclaimed”
Pursuant to Art. 6, Para 2 of the Social Security Code “the income on which contributions are due includes all salaries, including accrued and unpaid or unaccrued, and other incomes from employment. Law on the Budget of the State Social Security defines:
1. the maximum monthly amount of insurance income during the calendar year;
2. the minimum monthly amount of the insurance income during the calendar year for self-insured persons;
3. the main economic activities and qualification groups of occupations, for which a minimum monthly amount of the insurance income is introduced for the calendar year by activities and groups of occupations, as well as the minimum insurance income for them.”
The term for insurance income is further developed in Art. 3 of the Ordinance on the elements of the remuneration and the income on which social insurance contributions are made, where it is stipulated that “the insurance income includes all incomes and remunerations, including remunerations under Art. 40, para. 5 of the Social Security Code and other incomes from the employment of the insured during the calendar year and cannot be higher than the sum of the maximum monthly insurance income determined by the Law on the Budget of the State Social Security for the respective calendar year separately for each of the months of the year..”
Or generally, the insurance income is the income from any remunerations, on which social security contributions are due.
Art. 7, Para 1 of DCM regulates the manner by which the insurance income for January 2020 shall be defined.
II. Criteria for payment of compensations to employers
DCM provides for several groups of employers to whom the amounts under paragraph 6 of the TCP of the AMADSE can be paid as compensations in order to keep the employment of the workers and employees in the enterprise:
– The first employer group which may apply, respectively receive compensation, is regulated in Art. 1, Para 1 of DCM and these are the employers who, by their order, issued on the basis of an order of a state authority, have suspended the activity of the enterprise or a part thereof (referred to as “the Employers under Art. 1, Para 1″);
– The second group employers are those who, by their order, issued pursuant to Art. 120c, Para 1 of the Labor Code, have suspended the work of the enterprise, of part of the enterprise or of individual workers and employees (Art. 1, Para 2 of DCM);
– The third group employers are those who by their order, issued pursuant to Art. 138a, Para 2 of the Labour Code, have established part-time work in the enterprise or in its unit (Art. 1, Para 3 of DCM).
As long as the criteria for applying of the second and third group employers under Para 2 and Para 3 of Art. 1 of DCM are the same, both group employers shall be referred together to as “the Employers under Art. 1, Para 2 and 3”.
2.1. Criteria for payment of compensations to Employers under Art. 1, Para 1
For payment of compensations to the Employers under Art. 1, Para 1, they shall meet the following cumulatively given criteria under Art. 2, Para 1 of DCM:
1. to be local natural persons or legal entities, as well as foreign companies having activity in the Republic of Bulgaria;
2. apply for payment of compensations for workers and employees who are insured in the economic activities specified in the Appendix to DCM, namely:
– Retail trade, with the exception of motor vehicles and motorcycles, with a place of work in commercial store on the territory of a shopping center, except for: Retail sale in non-specialized stores mainly with food, beverages and tobacco; Retail sale of food, beverages and tobacco in specialized stores; Retail sale of medicines and other pharmaceutical goods; Retail sale of medical and orthopedic goods; Retail sale via open stalls and markets; Retail sale outside stores
-Other passenger land transpor
-Passenger air transport
-Activity of restaurants and fast food establishments
-Activity of drinking establishments
-Travel agency and operator activity; other travel and booking activities
-Organizing congresses and trade fairs
-Pre-school education (private sector)
-Artistic and creative activity
3. do not have obligations to the state or the municipality for taxes and compulsory social security contributions within the meaning of Art. 162, Para 2, item 1 of the Tax and Social Insurance Procedure Code, established by entered into force act of a competent authority, and for which the employer has not taken any actions for rescheduling, deferral or security;
4. have not been declared insolvent or are not in insolvency or liquidation proceedings;
5. keep the employment of the workers and employees for whom compensations have been received, for a period not less than the period for which the compensations have been paid;
6. not to terminate the employment contracts of workers and employees on the ground of Art. 328, Para 1, item 2, 3 and 4 of the Labour Code during the period for which compensations are paid;
7. do not have a violation, established by entered into force penal decree or court ruling, of Art. 61, para 1, Art. 62, para 1 or 3, Art. 63, para 1 or 2, Art. 118, Art. 128, Art. 228, para 3, Art. 245 and Art. 301 – 305 of the Labor Code or Art. 13, para 1 of the Labor Migration and Labor Mobility Act during period of 6 months prior to the issuance the order for suspension of work.
2.2. Criteria for payment of compensations to Employers under Art. 1, Para 2 and 3
For payment of compensation to the Employers under Art. 1, Para 2 and 3, the same shall meet the following cumulatively given criteria under Art. 2, Para 2 of DCM:
1.Are employers from all sectors of the Classification of Economic Activities (CEA-2008), with the exception of Sectors A, K, O, P, Q, T and U, namely the activity of the workers and employees should not fall within the economic activities listed in the Appendix to DCM.
2. Meet the criteria under 2.1 above, with the exception of item 2.
3.Have declared a decrease in the sales incomes:
– For entities established before March 1, 2019 – by not less than 20% during the month preceding the month of submission of the application for payment of compensations, as compared to the same month of the previous calendar year;
– For entities incorporated after March 1, 2019 – by not less than 20% during the month preceding the month of submission of application for payment of compensations, as compared to the average incomes for January and February 2020.
III. Procedure for applying for payment of compensations
The procedure for applying of employers for payment of compensations shall be opened by an Order of the Executive Director of the Employment Agency. Information on the terms and conditions for applying shall be published on the website of the Employment Agency and on the information boards in the “Employment Office” Directorates.
On 31 March 2020 the Employment Agency published on its website information on the opened on 31.03.2020 procedure for applying of employers for payment of compensations under Art. 1, Para 1 of DCM, and the procedure refers only for applying of Employers under Art. 1, Para 1. Documents under the open procedure can be submitted during the period from 31 March to 21 April 2020.
The employer shall apply via submission of an application in an approved form to “Employment Office” Directorate servicing the territory of the place of work of the workers and employees. The application shall be submitted in paper form, electronically or by registered letter with return receipt through a licensed postal operator.
Pursuant to Art. 4, Para 2 of DCM the following documents shall be attached to the application:
1. certified copy of the order of the employer for suspension of work under Art. 120c of the Labor Code or the order for establishing part-time work under Art. 138 a, Para 2 of the Labor Code;
2. declaration for the circumstances under Art. 2, items 5 and 6;
3. declaration by the employer and documents certifying a decrease in the sales incomes under Art. 2, Para 2 – for the Employers under Art. 1, Para 2 and 3;
4. list of employees for whom an application for compensation is submitted pursuant to the decree, containing details of the persons – three names, personal identification number or personal number, personal number of a foreigner, official number from the National Revenue Agency, and for employees under Art. 1, Para 3 – the duration of the part-time work established;
5. declaration containing details of the payment account of the employer, designated by International Bank Account Number (IBAN), kept by a payment service provider licensed by the Bulgarian National Bank or by a branch of a payment service provider, operating on the territory of the country.
The declarations under item 2, 3 and 5 shall be in accordance with a form approved by the Executive director of the Employment Agency.
The application and the documents submitted shall be examined by a Committee appointed by Order of the Director of the “Employment Office” Directorate, which shall carry out examination of the compliance with the criteria for payment of compensations within 7 working days as of the submission of the application. The Committee shall record in a protocol the compliance or non-compliance of the employer with the criteria for payment of compensations. Within two days of the drawing up of the protocol, the “Employment Office” Directorate shall notify the employer of the results of the examination.
Within the term for examination of the application, the Director of the “Employment Office” Directorate shall send to the Employment Agency a list of employers who meet the criteria for payment of compensations, the protocols of the Committee and the documents under Art. 4, Para 2, items 4 and 5 of DCM. The received summarized information shall be sent electronically from the Employment Agency to the National Social Security Institute.
IV. Payment of compensations – amount, terms, limitations
Compensations shall be paid for the whole or part of the period of the validity of the AMADSE, but for not more than three months.
Compensations shall be at the amount of 60 percent of the insurance income for January 2020 for each worker and employee to whom the order under Art. 1, Para 1, Para 2 or Para 3 has been applied, and the employment of whom shall be kept for an additional period equal to the period for which compensations are paid. In the case of part-time work established, the compensation shall be paid in proportion to the not working period, but for not more than 4 hours a day.
The compensations shall be paid to the respective employer by bank transfer within 5 working days as of receipt by the NSSI of the written information submitted by the Employment Agency.
Compensations shall be paid after a positive decision by the European Commission or a decision that the aid is not state aid within the meaning of Art. 107, Para1 1 of the TFEU.
The employer shall be obliged to pay the full amount of the remuneration to the workers and employees for whom compensations have been received, for the respective month and to pay the due social security contributions.
Compensations shall not be paid for the following workers and employees:
-Workers and employees who have not been in employment relations with the employer before the date of proclamation of the state of emergency;
-Workers and employees who are using temporary disability leave, pregnancy and childbirth leave, when adopting a child up to 5 years of age or raising a child up to 2 years of age;
-Workers and employees for whom the employer receives financing for salaries and social security contributions from the state budget, with funds from the European Structural and Investment Funds or other public funds.
V. Follow-up obligations of the employers and sanctions upon non-performance
5.1. With regard to the employers who meet the criteria for payment of compensations, a follow-up obligation for notification upon changes in the circumstances is provided for. In the event that during the period of compensation payment, а resumption of work or cancellation of the part-time work occurs, then the employer shall notify the Employment Agency in writing, including electronically, within 3 working days of the date of issuance of order for resumption of the work. The Employment Agency shall notify the NSSI.
5.2. DCM stipulates several penalties for the employer upon non-performance of its obligations under DCM, as follows:
-In case the employer fails to fulfill his obligation to pay to the respective workers and employees, for whom compensations have been received, the full amount of their remuneration due, together with the due social insurance contributions, as well as if he fails to fulfill his obligations under Art. 2, Para 1, items 5 and 6 of DCM, or declares incorrect data under Art. 2, Para 2 of DCM, he shall be obligated to recover the compensations received to the state social security budget.
-Employer who has received compensations for which EA “General Labor Inspectorate” has found that the does not fulfill the stated circumstances in the documents in Art. 4, Para 2, items 1, 2, 4 of DCM, he shall be obliged to recover the compensations received to the state social security budget.
EA “General Labor Inspectorate” and the National Revenue Agency are the control authorities for the application of the DCM.
(1) In the event of a state of emergency proclaimed, the employer may, by order, suspend the work of the enterprise, of part of the enterprise or of individual workers and employees for the whole or part of it until revocation of the state of emergency.
(2) In the enterprise or its unit, the employer may establish for the whole period of the state of emergency or for a part of it, a part-time work for workers and employees who are occupied on a full-time work.
(3) Sector A “Agriculture, forestry and fish farm”, Sector K “Financial and insurance activities”, Sector O “Government management”, Sector P “Education”, Sector Q “Human health and social work”, Sector T “Household activities as employers, undifferentiated activities of households for production of goods and services for own consumption”, sector U “Activities of extraterritorial organizations and services”.
Thе present statement does not constitute legal advice or consultation, but rather our own interpretation and analysis of the issues outlined above.
The present statement contains up-to-date information as of 31 March 2020.
Author – Stanislava Ivanova, Attorney-at-law at Dyulgerova & Penkova Law Firm