Independent Contractor Contract & Employment Guidelines in Bulgaria
Contractor length allowance
Civil contracts are always concluded for a certain period, this could be a specified time frame or until the completion of the task assigned.
Employment agreements, on the other hand, can be concluded for an indefinite period as well as for а fixed term.
What makes someone an employee
A definition of an employee is not explicitly given in Bulgarian legislation, and the main characteristics can be defined by analysis of the relevant legal provisions.
An employee is a natural person who concludes a contract with an employer (natural person or entity) by which the employee receives remuneration (usually monthly) for the provision of work.
The conditions for employment eligibility are specified in law.
The main requirement is reaching the minimum age for working capacity, 16 years. It is possible to increase the minimum age to 18 years of age for heavy, dangerous or harmful work (these are defined in a list approved by the Council of Ministers).
Employment eligibility for certain positions requires meeting additional criteria like educational status, work experience, Bulgarian citizenship (for government positions) and, in some cases, a clear criminal record when handling money or other valuables.
Employee vs contractor
There are many differences between employment and civil contracts and the legal provisions that govern both relationships.
Employees and contractors are treated differently by the law. Employees have a specific work time, and place of work and are hierarchically dependent on the employer. Employees use the materials and work environment of the employer. Employees bear disciplinary liability which can result in penalties, including their dismissal from the position.
In the employee–employer relationship, the risk is for the employer. In civil contract relations, not achieving the agreed result is at the contractor's expense. Employment agreements are always remunerative, civil contracts can be either way as long as this doesn’t result in tax evasion.
It is mandatory for employment agreements to be registered in the National Revenue Agency, while there is no such requirement for a civil contract.
In employment relations, the rights and obligations may not be transferred to third parties, while in civil contracts, this depends on the agreed conditions.
Employers are responsible for calculating, deducting, filing and paying personal income tax on the employee’s behalf and paying insurance contributions, along with the employee, that gives employees access to many benefits such as retirement pension, disability pension, sick benefits, health insurance, unemployment benefit etc. Calculating, deducting, filing and paying taxes and insurance contributions for contractors depend on their legal status (self-employed or not; is the payer a company or not etc.).
Infringements of labour laws are supervised by General Labour Inspectorate. Breaches of civil contracts, on the other hand, are to be solved through court litigation by the parties if an amicable solution between them is not possible.
Employees are due compensation in certain cases, for example, if an employment agreement is terminated, the employee is due compensation for unused annual paid leave. Such compensations are not due for civil contractors unless otherwise explicitly agreed.
Penalties for misclassification in Bulgaria
If an individual is providing their work under the meaning of the Labour Code, without formal employment relation, i.e. employment agreement, the employment relationship is declared as existing with an order of the General Labour Inspectorate (GLI).
GLI can fine employers with employees working without an employment agreement in the range of BGN 100 (around EUR 51) to BGN 20 000 (around EUR 10 226).
Employees working without an employment agreement can be fined triple the amount due for the mandatory social and health insurance contributions. This is calculated based on the minimum insurance income fixed for the relevant performed work and economic activity.