In light of the constantly and rapidly changing world climate, there was a need for changes to provisions in labor law that have not been updated for years, namely on minimum wages and payment of salary.
Until recent amendments to the Labor Code, the minimum wage in Bulgaria was determined by the Ministry Council of Bulgaria as a fixed amount – a norm that has been applied in Bulgaria for about 30 years. However, the European Parliament has adopted Directive on adequate minimum wages in the European Union that envisages that the member states who have determined statutory minimum wages shall also establish the necessary procedures for setting and updating those statutory minimum wages, and those member states shall adopt the measures necessary to comply with the directive by November 15, 2024. Amendments have been adopted in the Bulgarian legislation establishing the mechanism for determining the minimum wage. As of February this year, the minimum wage for the next calendar year shall be set by September 1 of the current year as follows: the minimum wage shall be 50% of the average gross wage for 12 months, which shall include the last two quarters of the previous year and the first two quarters of the current year. It is important to note that the new legislative decision envisages that the minimum wage could not be lower than the one determined for the previous year.
However, a couple of months after the amendments to the minimum wage were adopted, a bill was submitted to the National Assembly regarding the amendment of the mechanism for determining the minimum wage. The bill envisaged the mechanism for determining the minimum wage would apply from July this year, with the 12 months including the last three quarters of 2022 and the first quarter of 2023. However, at this point, the bill has been adopted only at first reading. Given the many public discussions and the sharp criticism of the adopted mechanism by employers and some trade unionists, it is not unlikely a new mechanism will be proposed for determining the minimum wage.
Another important change relates to payment of salary. Labor law provides that the employer could pay wages to its employees in cash or to a bank account. Under one of the latest amendments, restrictions are introduced regarding the payment of wages in cash in certain cases. As of September 1, 2023, payments within the territory of Bulgaria shall be made only by transfer or deposit to a payment account, where the payments are wages within the meaning of the Labor Code, paid by employers who have 100 or more employees. However, the calculation of the number of employees does not include short-term seasonal agricultural employment, where the wage is normally paid daily (as opposed to the usual way of being paid once or twice a month). In the case of an employer with 100 or more employees, the wages shall be paid only by transfer or by a deposit into a payment account at a bank in the country designated by the employee. It is noteworthy that the regulation with the new restrictions on the payment of remuneration in cash does not affect small enterprises, where the average number of employees for the accounting period is 50, and micro-enterprises, where the average number of employees for the accounting period is 10.
The reason for restricting payments in cash is to improve control and limit tax and social security evasion, as well as to allow employees to monitor that their remunerations are paid in the accurate amount and within the respective time limits agreed in their employment contracts. However, it remains to be assessed whether the introduction of these restrictions does not adversely affect the employees who are most in need of labor law protection, namely those who are paid at or close to the minimum wage. Such employees will now have to pay additional bank fees to receive their wages instead of receiving their full wage, which is already at, or close to, the minimum.
Although the amendments have received considerable criticism, given that they affect the interests of the state, businesses, and employees and that it is difficult to reach a balance between the interests of all concerned, the necessity of the amendments could not be denied.
By Antoniya Markova, Partner, and Teodora Shopova, Associate, Gugushev & Partners
This article was originally published in Issue 10.9 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.
