What Severance Pay Rules Must Employers Follow in Bulgaria?

Which Employees Qualify for Severance Pay?

• Employees dismissed by the employer due to staff reduction, closure of part or all of the enterprise, or reduction in workload, as defined in the Bulgarian Labour Code.
• Employees terminated because their position is eliminated or their job functions are reorganized, where the initiative clearly comes from the employer.
• Employees whose employment is ended because they can no longer perform their job for health reasons, supported by a medical expert decision, and no suitable alternative role is available.
• Employees dismissed due to lack of necessary qualifications or professional skills, where this is formally documented by your company.
• Employees with at least five years of service with the same employer who retire and whose employment is terminated in connection with acquiring the right to a pension.
• Employees whose fixed-term contracts are terminated early by the employer without cause, where compensation is due for the remaining contract period within statutory limits.

What Are the Legal Timelines for Paying Severance?

Under the Bulgarian Labour Code, severance must be paid at the time the employment relationship ends, together with the employee’s final salary and any unused paid leave compensation. In practice, your company should settle all amounts no later than the regular payday for the period in which termination occurs. Many employers pay on the employee’s last working day to avoid disputes and interest. Delays can trigger statutory interest and open the door to labour inspectorate scrutiny. Always document the payment date and method in the termination order and payroll records.

What Penalties Apply if Severance Is Not Paid Correctly?

If your company fails to pay severance correctly in Bulgaria, you risk financial sanctions, back payments, and potential court claims. The General Labour Inspectorate can audit your records, and employees can challenge non-payment or underpayment before the courts. Non-compliance also increases the risk of a finding that the dismissal was unlawful, which can lead to reinstatement or additional compensation.

• Administrative fines can be imposed on the company and responsible managers for breaches of the Labour Code.
• Your company may be ordered to pay the full severance due plus statutory interest for late payment.
• Courts can award additional compensation for unlawful dismissal, sometimes up to several months of the employee’s remuneration.
• Reputational damage and strained employee relations can follow public disputes or inspectorate findings.
• Repeat violations can trigger higher fines and closer monitoring by labour authorities.

Does Outsourcing Employment via an EOR Change Severance Liability?

Using an Employer of Record (EOR) such as the service described at https://www.playroll.com/employer-of-record does not remove the need to follow Bulgarian severance rules, but it can shift who is the formal employer of record. In a typical EOR model, the EOR entity registered in Bulgaria is the legal employer responsible for calculating and paying severance under the Labour Code. Your company, as the client, usually bears the economic cost through service fees or recharge of severance amounts. Courts and authorities will still look at the real employment relationship, so sham arrangements that try to bypass labour protections can be challenged. A compliant EOR structure should clearly allocate responsibilities for terminations, documentation, and funding of severance in the service agreement.

Be 100 Percent Compliant in Offering Severance with Playroll

Working with Playroll helps your company navigate Bulgaria’s strict Labour Code rules on severance, notice, and termination documentation. Our team tracks statutory triggers for severance, such as redundancies, health-related dismissals, and retirement-related terminations, and translates them into clear, step-by-step actions for your HR team. We also help you align internal policies and contracts with local practice so you do not accidentally promise more than you intend or fall below the legal minimum.

Playroll’s platform centralizes employment data, making it easier to calculate average monthly remuneration, length of service, and any enhanced severance you choose to offer. When you use Playroll as your global employment partner, we coordinate with local experts and, where applicable, the EOR entity to ensure severance is calculated, approved, and paid on time. That way, your managers can focus on restructuring decisions while we help you stay fully compliant and reduce the risk of disputes.