Background information

The purpose of the law is to provide a maximum degree of protection for workers when insolvency proceedings have been opened against their employer. To achieve this, a special fund (fund guaranteeing the claims of workers and employees in the event of insolvency of the employer) was established to secure the payment of parts of the unsettled claims of the workers affected, including wages, social security contributions and other compensations.

Eligible are all employees who have not received due wages and other payments on the account of the employer, in instances of employer insolvency.

Content of measure

The guaranteed receivables, according to the law, are the last six accrued but unpaid monthly wages and cash benefits in the last 36 calendar months preceding the month in which the decision of insolvency is entered. The amount can not be more than the maximum amount of guaranteed claims decided by the law in the annual State budget, and the employee must have been in employment with the same employer for at least three months.

The maximum amount of the guaranteed claims under Article 22, paragraph 2 of the Law on the Guaranteed Claims of Employees in the Event of Employer's Insolvency is determined for 2022 as follows: * from 1 January to 31 March - BGN 1625; * from 1 April to 31 December - BGN 1775.

In general, companies are obliged to pay mandatory monthly contributions to the fund for guaranteeing workers' and employees' receivables in the event of employer's insolvency for workers on labour contracts. Contributions to the fund shall be submitted together with contributions for state social insurance. They are fully paid by the company and the amount is determined by the law for the budget of the state social security for each calendar year. According to the law for the budget of the state social security, in 2022, companies are not obliged to pay contributions to the fund. It is due to an accumulation of companies' contributions over the last years.

Use of measure

In 2012, 485 employees from 47 companies were beneficiaries of the fund on the total amount of BGN 825,842 (€444,001). The average compensation was BGN 1,702 (€870). Amounts recovered by the employer were BGN 12,531 (€6,737).

In 2014, the payments from the fund were BGN 351,066 (€188,745), and amounts recovered by the employer were BGN 83,229 (€44,746).

The budget of the fund based on cumulative revenue at the beginning of 2015 amounted of BGN 234,534,314 (€119,660,364). For 2015, the fund paid guaranteed receivables to 280 eligible persons, amounting of BGN 1,118,634 (€570,732).

In 2016, the payments from the fund were BGN 2,011,980 (€1,028,709), and amounts recovered by the employer were BGN 168,631 (€86,220). For 2016, the fund paid guaranteed receivables to 444 eligible persons. The average compensation was BGN 4,531 (€2,317).

In 2018, the payments from the fund were approximately BGN 7.4 million (€3.78 million), and amounts recovered by the employer were BGN 98 thousand (€50,000). For 2018, the fund paid guaranteed receivables to 3,720 eligible people and refused payment to 2,363 ineligible people from 274 companies. The average compensation was approximately BGN 1,985 (€1,015).

In 2021 (31 March), the payments from the fund are approximately BGN 4 million (€2,045), and amounts recovered by the employers were BGN 304 thousands (€155.000). The fund supported 1,621 eligible employees in 2021 for 115 companies.

The adoption and application of this law marks considerable progress in the development of the Bulgarian labour law. It strengthens the protection of the employees and widens the protective function of Bulgarian labour law as a whole.

Target groups

Workers	Businesses	Citizens
Employees in standard employment	Applies to all businesses	Does not apply to citizens

Actors and funding

Actors	Funding
National government Trade unions Employers' organisations	Companies National funds

Social partners

Social partners' role in designing the measure and form of involvement:

	Trade unions	Employers' organisations
Role	Consulted	Consulted
Form	Consultation through tripartite or bipartite social dialogue bodies	Consultation through tripartite or bipartite social dialogue bodies

Social partners' role in the implementation, monitoring and assessment phase:

• Social partners jointly
• Main level of involvement: Peak or cross-sectoral level

Involvement

The view shared by the Bulgarian Chamber of Commerce in

Views and reactions

Bulgarian Industrial Association (BIA) stated in June 2022 that the Law protects employees enough, so further changes at the Commercial Code are not necessary. Giving workers first priority in the list of creditors in insolvency over secured claims renders the legal institutions of pledge, mortgage, attachment and foreclosure as instruments ensuring the security of trade and credit meaningless. The lack of legal certainty and predictability in commercial relations, as well as the blocking of banks' lending activity, will have extremely negative consequences for the economy, including employment.

In § 4 of the draft of the Law on the Commercial Code it is proposed to change the order of the claims in the distribution of the realised property after the opening of the insolvency proceedings. It is envisaged that the claims of employees arising from employment relationships will be paid from the 4th place in the order of satisfaction of creditors.

Sources

• 04 December 2020: Law for guaranteeing workers and employees' receivables in the event of employer's insolvency (lex.bg)
• 01 January 2022: Law for the budget of the state social security (www.nssi.bg)
• 01 January 2022: Guaranteed receivables of workers and employees (nra.bg)
• 10 June 2022: BSK: THE GUARANTEED RECEIVABLES LAW PROTECTS WORKERS ADEQUATELY. BSK: THE GUARANTEED RECEIVABLES LAW PROTECTS WORKERS ADEQUATELY. CHANGES IN TOS ARE NOT NECESSARY! (www.bia-bg.com)
• 01 September 2022: Demography and statistics 2021 (www.nssi.bg)
• 13 October 2022: ERM database on restructuring related legislation (www.eurofound.europa.eu)
• 13 October 2022: National Social Security Institute, Statistics on Demography, Economy and Social Security 2014 (www.nssi.bg)
• 13 October 2022: National Social Security Institute, Statistics on Demography, Economy and Social Security 2016 (www.nssi.bg)
• 13 October 2022: Law for the budget of the state social security 2020 (www.nssi.bg)
• 13 October 2022: National Social Security Institute, Statistics on Demography, Economy and Social Security 2018 (www.nssi.bg)