EMCC European Monitoring Centre on Change

Law for guaranteeing workers' and employees' receivables in the event of employer's insolvency

Bulgaria
Phase: Management
Type:
  • Income support for workers
Last modified: 03 August, 2021
Native name:

Закон за гарантираните вземания на работниците и служителите при несъстоятелност на работодателя

English name:

Law for guaranteeing workers' and employees' receivables in the event of employer's insolvency

Coverage/Eligibility

Eligible are all employees who have not received due wages and other payments on the account of the employer, in instances of employer insolvency.

Main characteristics

The purpose of the law is to provide a maximum degree of protection for workers when insolvency proceedings have been opened against their employer. To achieve this, a special fund (fund guaranteeing the claims of workers and employees in the event of insolvency of the employer) was established to secure the payment of parts of the unsettled claims of the workers affected, including wages, social security contributions and other compensations.

The guaranteed receivables, according to the law, are the last six accrued but unpaid monthly wages and cash benefits in the last 36 calendar months preceding the month in which the decision of insolvency is entered. The amount can not be more than the maximum amount of guaranteed claims decided by the law in the annual State budget, and  the employee must have been in employment with the same employer for at least three months (paragraph 22, 1, law for guaranteeing workers' and employees' receivables in the event of employer's insolvency).

In general, companies are obliged to pay mandatory monthly contributions to the fund for guaranteeing workers' and employees' receivables in the event of employer's insolvency for workers on labour contracts. Contributions to the fund shall be submitted together with contributions for state social insurance. They are fully paid by the company and the amount is determined by the law for the budget of the state social security for each calendar year. According to the law for the budget of the state social security, in 2018, companies are not obliged to pay contributions to the fund. It is due to an accumulation of companies' contributions over the last years.

In 2020, the maximum single claim amount is BGN 1,525 (approximately €780). The total budget of the fund for guaranteeing receivables in case of insolvency for 2020 is BGN 3.5 million (approximately €1.78 million), according to the law for the budget of the state social security.

Funding

  • National funds
  • Companies

Involved actors

National government
Legal framework; funding.
Employer or employee organisations
The supervisory board of the fund comprises representatives of employer and trade union organisations recognised as representative at national level.
Other
Companies are responsible for financing the measure through contributions to the guarantee fund. The National Revenue Agency identifies, collects and administers the contributions.

Effectiveness

In 2012, 485 employees from 47 companies were beneficiaries of the fund on the total amount of BGN 825,842 (€444,001). The average compensation was BGN 1,702 (€870). Amounts recovered by the employer were BGN 12,531 (€6,737).

In 2014, the payments from the fund were BGN 351,066 (€188,745), and amounts recovered by the employer were BGN 83,229 (€44,746).

The budget of the fund based on cumulative revenue at the beginning of 2015 amounted of BGN 234,534,314 (€119,660,364). For 2015, the fund paid guaranteed receivables to 280 eligible persons, amounting of BGN 1,118,634 (€570,732).

In 2016, the payments from the fund were BGN 2,011,980 (€1,028,709), and amounts recovered by the employer were BGN 168,631 (€86,220). For 2016, the fund paid guaranteed receivables to 444 eligible persons. The average compensation was BGN 4,531 (€2,317).

In 2018, the payments from the fund were approximately BGN 7.4 million (€3.78 million), and amounts recovered by the employer were BGN 98 thousand (€50,000). For 2018, the fund paid guaranteed receivables to 3,720 eligible people and refused payment to 2,363 ineligible people from 274 companies. The average compensation was approximately BGN 1,985 (€1,015).

Strengths

The adoption and application of this law marks considerable progress in the development of the Bulgarian labour law. It strengthens the protection of the employees and widens the protective function of Bulgarian labour law as a whole.

Weaknesses

No information available.

Examples

No information available.
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