Bulgaria: Changes in unemployment benefits upon termination of employment contracts

The Social Security Budget Act for 2018 made many changes to the Social Security Code, which came into force on 1 January 2018. One of the more surprising changes is that employees with terminated employment contracts based on Art. 331 of the Labour Code will be entitled to an unemployment benefit to a minimum amount and only for 4 months. Previously, they received full unemployment benefits.

Termination of an employment contract under Art. 331 of the Labour Code has been a particularly preferred way of terminating employment by both employers and employees; it allows an employer to dismiss an employee on his own initiative for an agreed allowance, which may not be less than four salaries. Employees usually accept the termination proposal for compensation: on the one hand, because they receive the payment all at once within one month after the termination, and on the other hand, they are also entitled to the full unemployment benefit from the labour authority. Employers prefer this way of termination because, since the employee has consented to the dismissal, he has no right to appeal the dismissal as being illegal in court.

Until now, a minimum unemployment benefit was granted only in cases where the employment relationship was terminated by mutual agreement, on an employee's initiative or as a result of guilty behaviour. Now, however, with the new provisions of the Social Security Code, dismissal on initiative of the employer against a stipulated compensation (Article 331 of the Labour Code) joins termination of the employment contract by mutual agreement (worker's initiative) and will accordingly determine the minimum compensation for unemployment. Therefore, the question arises as to whether from 2018 onwards termination of the employment contract under Art. 331 of the Labour Code will continue to be preferred by both parties as a legal ground for employment termination.

In addition, many other changes have been voted in the Social Security Code limiting the right to unemployment benefits. Compensation for a full 12-month period will now be available if the employee has more than 15 years (instead of 12 years) of unemployment insurance coverage acquired after 31 December 2001. Another regulatory change is that the right to unemployment benefits requires 15 months of insurance in the last 18 months instead of the current 9 months of the last 15.

For further information on the topic, please contact Maria Drenska.