How will the so-called “60/40” measure be applied in Bulgaria?

On 30 March 2020 the Government adopted a Decree on the requirements for granting compensation to employers with the aim of preserving employment in the state of emergency due to the coronavirus

This article overviews the requirements and procedure to be observed by companies applying for compensation under the 60/40 scheme.

Who is eligible to apply for financial support from the state?

Two groups of employers could benefit from the compensation:

1. Companies that cease business activity, either wholly or partly, on the grounds of an internal order or an order issued by a state authority due to the state of emergency. Employers who introduce part-time work are also included in this group. In addition, undertakings eligible for subsidies from the state must operate in economic sectors detailed in a list which is an integral part of a Governmental Decree (such as the retail industry with certain exceptions; road and air passenger transport; the hotel industry and tourism; and others);

2. Companies that suffer a decline in sales revenue during the month prior to filing an application for compensation of no less than 20% of their revenue compared to the same month of the preceding year. For entities incorporated after 1 March 2019 the relevant figure is the average revenue for January and February 2020. Employers from all sectors are eligible for financial support within this group with the exception of the following spheres: agriculture; financial and insurance services; general government sector; education; and others.

Additionally, other prerequisites have to be observed by all companies filing an application, namely:

  • no outstanding obligations for taxes and obligatory social contributions duly proven by the competent authorities (except in the case of debt rescheduling);
  • no declaration of insolvency has been made against the company; no liquidation or insolvency proceedings have been opened against it;
  • no proven violations of certain provisions of the Labour Code and the Labour Migration and Mobility Act.

Amount and maximum period of compensation granted

The state will support companies that keep their employees by paying 60% of the employee’s insurable earnings for January 2020. The Minister of labour and social policy has clarified that 60% of the social contributions due for each employee will also be paid by the state. In cases of part-time work introduced by companies, compensation will be commensurate to idle time but not exceeding 4 hours.
Financial support is to be provided for all or part of the period of the state of emergency but for no more than 3 months.

Compensation cannot be awarded for the following categories of employees:

  • employees who had not entered into an employment relationship with the employer prior to declaration of the state of emergency;
  • employees on temporary disability leave or on maternity or adoption leave;
  • employees whose wages are financed from public funds.

Obligations of the employer

Companies intending to apply for compensation must maintain their personnel in employment for at least the period of receiving financial support. Further, they are required to pay the residual amount of the employee’s insurable earnings and social contributions, both being calculated at 40%.
However, companies should be aware that if they fail to pay employees’ wages in full they will be obliged to reimburse to the state all the money paid under the 60/40 measure. The same sanction will be applied in cases where applicants declare false data in order to obtain compensation.

Procedure and documents for applying; deadline

Applications must be submitted preferably online or by post to the respective Employment Directorates. Documents to be enclosed with applications include: the order issued by the employer on cessation of activity or on introducing part-time work; statements on declaring preserved employment or decline of sales revenue; list of employees for whom compensation is to be paid; employer’s bank account data.
The deadline for applying previously set for 21 April 2020 is now repealed. To date, companies are not limited by a final deadline for filing their applications.
Needless to say, the award of subsidies under the 60/40 scheme is subject to clearance by the European Commission. On 15 April 2020 the Commission approved the measure allowing the National Insurance Institute to start paying compensation to eligible employers.
Sample documents that must be filled in for applying can be found here.

Source: Decree No 55 of 30 March, 2020 on the requirements and procedure for granting compensation to employers with the aim of preserving employment in the state of emergency declared by decision of the National Assembly of 13 March 2020 (Promulgated in the State Gazette extraordinary issue No. 31 of 1 April 2020).

 

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