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Apr 3, 2020

Compensation for the employers concerned at a state of emergency (the scheme 60/40)

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INTRODUCTION:

The COVID-19 epidemic and the anti-epidemic measures have already reflected on the country’s economic life. It is evident that there is shrinking consumption, the normal functioning of businesses is impeded and the normal rhythm of life is disrupted.

In order to mitigate the adverse effects of the forthcoming economic crisis, the Government of the Republic of Bulgaria outlined a series of commitments, one of which is to compensate the employers concerned.

DECREEE No. 55 OF MARCH 30, 2020 OF THE COUNCIL OF MINISTERS:

In this regard Decree No. 55 of March 30, 2020 was adopted by the Council of Ministers for the Conditions and Procedure for Payment of Compensation to Employers in order to Preserve the Employment of Employees in the State of Emergency, Announced by a Decision of the National Assembly of March 13, 2020, prom. SG 61 of April 01, 2020 (hereinafter referred to as “Decree No. 55”)
The decree was adopted on the basis of para. 6 of the transitional and concluding provisions of the Measures and Actions During the State of Emergency Act, where 60% of the insurable earnings of the employees in the affected enterprises from the State Social Security Unemployment Fund is assumed.

FREQUENTLY ASKED QUESTIONS:

1. Which employers can apply for compensation under Decree No. 55?

Employers which may be compensated under Decree № 55 are as follows:

 Employers who, by their order issued on the basis of an order of a state body, have suspended the work of the enterprise or part of it;
 Employers who by their order and on their own initiative have suspended the work of the whole enterprise, part of it or of individual employees on the grounds of Art. 120c of Labour Code;
 Employers who by their orders have established part-time work in the whole enterprise or in its unit on the grounds of Art. 138a of Labour Code.

In order to be in the first category, employers should apply for compensation for employees insured in the economic activities listed in Annex No 1 to Decree No 55, among which are the hotel industry, certain types of retail trade, passenger air and land transport, film projection, artistic and creative activities, etc.

Pursuant to Decree No. 55, employers from the sectors A, K, O, P, Q, T and U under the Economic Activity Classifier 2008 may not apply.

2. What is the difference in the conditions for payment of compensation between different categories of employers?

The first category of employers may be compensated without proving a fall in revenues from sales because it is undoubtedly that they are affected by government orders issued during the state of emergency.

The second and third category of employers should demonstrate a decrease in their sales revenue as follows:

 for legal entities incorporated before March 1, 2019 – not less than 20 per cent in the month preceding the month of the application submission for compensation, compared to the same month of the previous calendar year;
 for legal entities incorporated after March 1, 2019, not less than 20 per cent in the month preceding the month of the application submission for the compensation, compared to the weighted average revenues for January and February 2020.

3. Other conditions for application

A general requirement for receiving compensation is the suspension of the work of the enterprise, part of it or individual employees, or the establishment of part-time work for the entire enterprise or its unit. Other conditions that employers must meet are the following:

• to be local individuals or legal entities as well as foreign legal entities carrying on business in the Republic of Bulgaria;
• not have tax obligations and obligations for mandatory social security contributions to the state or municipalities;
• have not been declared bankrupt or are not in bankruptcy or liquidation proceedings;
• maintain the employment of employees for whom they have been compensated for a period not less than the period for which the compensations have been paid;
• not to terminate labour contracts on the grounds of Art. 328, para. 1, items 2, 3 and 4 of the Labour Code (reduction of the volume of work; redundancy; partial closing down of the enterprise; cat stuff; work stoppage for more than 15 working days) during the period for which they are compensated;
• there is no penal provision or a court decision against them for violations 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 Labour Code or Art. 13, para. 1 of the Labor Migration and Labor Mobility Act during the period of 6 months prior to the issuance of the suspension order.

4. What is the amount of the compensation and for what period it is granted?

The compensation is 60 to 100 of the amount of the employee’s insurable earnings for January 2020.

In the case of part-time work, the compensation shall be paid in proportion to the time worked, yet for no more than 4 hours a day. The internal logic of the requirement is that while the employee is working, the employer generates income, therefore should not be compensated by the state under Decree No. 55.

It should be noted that the insurable earnings are not equal to gross remuneration. Thus, if there are employees in the enterprise who are insured on the maximum insurable earnings, the employer should pay the difference between the compensation and the full amount of the remuneration. Employees whose gross remuneration is below the minimum insurable earnings for the economic activity concerned shall be compensated on the minimum insurable earnings.

5. Can employers apply for compensation for all their employees?

Employers will not receive compensation for the following categories of employees:

• employees who were not employed before the state of emergency;
• employees on leave in case of temporary disability, pregnancy, and childbirth leave when adopting a child up to 5 years of age or raising a child up to 2 years of age;
• employees for whom the employer receives funding for remuneration and social security contributions from the state budget, with funds from the European Structural and Investment Funds or other public funds.

The objectives of the foregoing are to prevent payment of compensation in respect of employees who already receive benefits from the State Social Security or other public funds, incl. ESIF funds.

6. What are the consequences for employers who do not comply with Decree No. 55 or state false circumstances?

In case the employer fails to comply with Decree № 55, he/she is obliged to reimburse the compensations received to the state social security budget.

According to Decree No. 55, an employer has several obligations:

 to pay the full amount of the wages and the insurable earnings due to the employees for whom he receives compensation;
 to maintain their employment for a period not less than the period for which state aid is received;
 not to terminate any labour contracts (even just one) because of reduction of the volume of work, redundancy, partial closing down of the enterprise, cutting staff, work stoppage for more than 15 working days.

The employer is obliged to notify the Employment Agency within 3 days of resumption of work or the cancellation of the part-time employment order.

Compensation granted may also be reimbursed when employers have misrepresented sales revenue reductions.

7. What is the procedure for receiving compensation?

Employers who want to receive compensation under Decree No. 55 may apply by submitting a model of the application to the Labor Office Directorate at the place of work of the employees for whom state aid is sought. The application may also be submitted by electronic means.

Verification that the employer meets the set requirements is carried out ex officio. When submitting the application, employers who are required to demonstrate a fall in their sales revenues should provide evidence of this.

A commission within the Labor Office Directorate decides on the application within 7 days. More information on the required application documents can be found on the website of the Employment Agency.

Measures for compensation of the employer at a state of emergency