Payroll in Bulgaria: An Essential Guide for Business Owners

Introduction

Payroll in Bulgaria requires strict compliance with labour legislation, social security regulations, and tax reporting obligations. Employers must calculate contributions accurately, observe statutory deadlines, and classify working relationships correctly.

This guide provides a structured overview of payroll in Bulgaria, covering employment contracts, social security contributions, director remuneration (DUK), freelancers, maternity leave, and employment termination. It is designed to help business owners understand the regulatory framework and avoid common compliance risks.

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Hiring Employees in Bulgaria

Hiring employees in Bulgaria involves understanding labor laws, drafting contracts, and setting up payroll systems. Key considerations include:

• Employment Contracts: Familiarize yourself with the different types of employment contracts in Bulgaria, including fixed-term and indefinite contracts. Understand the legal requirements for each type, including probation periods, notice periods, and termination clauses.
• Mandatory Payroll Deductions: Ensure you’re aware of all mandatory payroll deductions, including social security contributions and income tax. Understand how these deductions are calculated and the employer’s responsibilities for withholding and remitting them.
• Labor Laws: Stay updated on the latest labor laws in Bulgaria, including regulations related to working hours, leave entitlements, and employee rights.

For a detailed guide on hiring employees in Bulgaria, read: Hiring Employees in Bulgaria: Labor Laws, Contracts & Payroll Explained.

Employing Staff Without a Bulgarian Entity

Foreign companies that want to hire a remote worker based in Bulgaria without setting up a local company or branch can do so through foreign employer registration with the NRA. This allows the employer to run Bulgarian payroll and remit social security contributions directly, without incorporating in Bulgaria.

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Payroll Calculations

Accurate payroll calculations are essential for both employers and employees. The key components include:

• Gross Salary – the total remuneration agreed before any deductions.
• Net Salary – the take-home pay after all mandatory deductions.
• Social Security Contributions – mandatory contributions shared between employer and employee, covering health insurance, pensions, and other social benefits.

Social Security Contributions (Overview)

Social security and health insurance contributions in Bulgaria are calculated up to a statutory maximum insurable income, which is set annually by law.
As of the currently applicable social insurance budget, the maximum monthly insurable income is EUR 2,111.64 (BGN 4,130).

Income above this threshold is not subject to further social security or health insurance contributions, but it remains subject to personal income tax at a flat rate of 10%.

Indicative contribution rates (combined):

• Health Insurance: 8%
• Pension Insurance: 19.8%
• General Illness, Maternity, Unemployment: 4.8%
• Occupational Accident and Disease Insurance: approx. 0.4%–1.1%, depending on business activity

Total social contributions: approximately 32–33%

• Employer: ~19–20%
• Employee: ~13–14%

Income Tax

• Personal income tax: flat 10%, applied to the employee’s full gross income, including any amount above the maximum insurable income.

Note: Contribution rates and thresholds are subject to annual changes and should always be verified for the relevant payroll year.

If you need assistance calculating payroll costs or understanding how the maximum insurable income affects net salaries, you can contact us here for further guidance.

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Director Remuneration and DUK Contracts

In Bulgaria, managing directors of limited liability companies (OOD/EOOD) are commonly remunerated under a Management and Control Contract (DUK – Договор за управление и контрол).

A DUK contract is not an employment contract. It is a civil-law agreement governing the director’s management role.

Where remuneration is paid, it is generally subject to:

• Social security contributions
• 10% personal income tax (withholding basis)
• Monthly payroll reporting to the National Revenue Agency (NRA)

Although similar to salary in practice, a DUK relationship is governed by commercial law rather than labour law. Labour Code protections do not automatically apply.

For foreign founders, the distinction between employment contracts and DUK contracts is frequently misunderstood. Proper structuring ensures compliance with both corporate and tax requirements.

A detailed explanation of how managing director remuneration works, including the social security and tax implications of DUK contracts, is available in our guide on: Director Remuneration and DUK Contracts.

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Remote Work and Home Office Arrangements

Remote work is becoming increasingly popular in Bulgaria. If you have remote employees, consider these key points:

• Legal Framework: Understand the legal framework for remote work agreements in Bulgaria, including requirements for contracts, data protection, and health and safety.
• Tax and Social Security: Ensure compliance with tax and social security regulations for remote workers, including potential implications for foreign workers.
• Best Practices: Implement best practices for managing remote teams, including communication strategies, performance monitoring, and ensuring employee well-being.

For more information on remote work in Bulgaria, read: Remote Work in Bulgaria: Legal Framework and Best Practices.

In cross-border remote work scenarios, EU social security coordination rules may apply. In such cases, an A1 certificate may be required to determine which country’s system governs the employee. Read our detailed guide here: A1 Certificate Explained: Social Security Rules for Cross-Border Work in Europe.

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Freelancers and Civil Contracts

Working with freelancers and independent contractors involves specific considerations:

• Contract Types: Understand the differences between civil contracts and self-employment agreements, and choose the appropriate contract type for your needs.
• Tax and Social Security: Ensure compliance with tax and social security obligations for freelancers, including invoicing requirements and potential liabilities.
• Benefits and Challenges: Weigh the benefits and challenges of hiring freelancers, including flexibility, cost-effectiveness, and potential legal complexities.

Learn more about working with freelancers in Bulgaria: Freelancer in Bulgaria: Civil Contracts vs. Self-Employment.

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Personal Income Tax Returns

Employees and freelancers in Bulgaria may need to file annual personal income tax returns. Key points include:

• Deadlines and Requirements: Be aware of the deadlines and requirements for filing personal income tax returns, including necessary documentation and potential deductions.
• Common Mistakes: Avoid common mistakes that can lead to penalties, such as late filing or incorrect information.

For a step-by-step guide on filing personal income tax returns, read: How to File Your Personal Tax Return in Bulgaria.

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Terminating Employment in Bulgaria

Employment termination in Bulgaria is highly regulated and requires strict compliance with the Bulgarian Labour Code. The legal ground and the procedure are equally important.

Key aspects include:

Legal Grounds

Termination must rely on a recognised legal basis, such as redundancy, disciplinary dismissal, probation, or mutual agreement.

Notice Periods and Compensation

Notice requirements, compensation in lieu of notice, unused paid leave settlement, and statutory severance (where applicable) must be calculated correctly.

Protected Employees

Certain categories of employees benefit from enhanced protection and may require prior approval from the Labour Inspectorate.

Because procedural mistakes can invalidate an otherwise lawful termination, employers should approach termination as a structured compliance process.

For a detailed breakdown of termination routes, risks, and best practices, see our full guide on
Employment Termination in Bulgaria: Employer Guide.

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Upcoming EU Pay Transparency Requirements

From 2026 onwards, payroll systems in Bulgaria will be affected by the implementation of the EU Pay Transparency Directive (Directive (EU) 2023/970).

The Directive introduces structured gender pay gap reporting obligations for employers with 100+ employees and transparency requirements that will apply to all employers once transposed into Bulgarian law.

Payroll systems must be capable of generating:

• Mean and median gender pay gap data
• Gender distribution across pay quartiles
• Analysis of variable and bonus components

For a detailed overview of the legal status, reporting timelines, and employer obligations, see our guide:

→ EU Pay Transparency Directive in Bulgaria

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Conclusion and Next Steps

Managing payroll in Bulgaria requires structured processes, accurate calculations, and ongoing compliance with labour, tax, and social security regulations. Even small errors in reporting or classification can lead to unnecessary administrative complications.

If your company operates in Bulgaria — whether with employees, directors under DUK contracts, or civil contractors — a properly organised payroll framework is essential.

If you would like a structured assessment of your payroll setup or are planning to hire in Bulgaria, contact Aidos to discuss your situation and receive a clear proposal outlining scope, responsibilities, and fees.

→ Contact Aidos
→ Book a Meeting

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Frequently Asked Questions (FAQ) – Payroll in Bulgaria

1. What are the mandatory payroll deductions in Bulgaria?

In Bulgaria, both employers and employees are required to contribute to social security and health insurance. The main payroll deductions include:

• Social security contributions – approximately 32–33% in total, split between employer and employee
• Health insurance – 8% (included in the total above)
• Personal income tax – flat 10%, applied to the employee’s gross salary

The exact split between employer and employee depends on the type of employment and insurance category.

2. What is the minimum wage in Bulgaria?

The current minimum monthly wage is EUR 620.20 (BGN 1,213).

The minimum wage is set by the government and may be updated annually, so it should always be checked for the relevant payroll year.

3. How do I calculate net salary from gross salary in Bulgaria?

To calculate net salary, the following are deducted from the gross salary:

• the employee’s share of social security contributions (approximately 13–14%, up to the maximum insurable income), and
• 10% personal income tax.

Example:
If an employee earns a gross salary of EUR 1,023 (BGN 2,000), the approximate net salary would be around EUR 828 (BGN 1,620) after mandatory deductions.
(Actual results may vary depending on insurance category and applicable caps.)

4. Do foreign employees need to pay Bulgarian payroll taxes?

Yes. If a foreign employee is legally employed in Bulgaria, Bulgarian social security contributions and income tax generally apply.

In some cases, exemptions or coordination rules may apply under EU social security regulations or double tax treaties, depending on the employee’s status and duration of work.

Where EU coordination rules apply, employers may need to obtain an A1 certificate before cross-border work begins. For a detailed explanation, see our guide on A1 certificates in Europe.

5. Can I hire freelancers instead of employees to reduce payroll costs?

Freelancers may be engaged under civil contracts or as self-employed persons, meaning they:

• handle their own taxes and social security contributions, and
• are not entitled to employment benefits such as paid leave or sick pay.

However, using freelancers for long-term or employee-like roles may create misclassification risks under Bulgarian labour law.

6. How do I terminate an employee in Bulgaria legally?

Employment termination in Bulgaria is strictly regulated. Employers must comply with requirements such as:

• observing the correct notice period,
• paying severance, where applicable, and
• having valid legal grounds (e.g. misconduct, redundancy, or mutual agreement).

Failure to follow proper procedures may result in labour disputes or penalties.

7. What maternity leave benefits apply in Bulgaria?

Mothers in Bulgaria are entitled to 410 days of maternity leave, including 45 days before childbirth.

During this period, maternity benefits are paid by the social security system and generally amount to 90% of the employee’s average gross salary, subject to statutory limits.

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Disclaimer

This article is for informational purposes only and does not constitute tax, legal, or accounting advice. Payroll obligations depend on the specific facts of each case and must be assessed under Bulgarian labour, tax, and social security legislation. Professional advice should be obtained before taking action.

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Last reviewed and updated: February 2026

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