In a situation where an employer has been declared insolvent, the workers and employees who were in an employment relationship with the employer are entitled to guaranteed receivables connected with their employment relationships.

These guaranteed receivables include accrued but unpaid amounts such as:

  • gross labour remuneration, comprising the basic salary and the additional remuneration provided for in individual or collective employment contracts;
  • monetary compensation provided for in statutory instruments, such as compensation under the Labour Code or under Article 40(5) of the Social Insurance Code.

Funds provided periodically or as a one-off for work clothing, social expenses or the like do not fall within the scope of the guaranteed receivables.

Which Employees Are Entitled to Guaranteed Receivables?

All workers and employees who have been, or are, in an employment relationship with the employer are entitled to guaranteed receivables, regardless of the duration and the hours worked. This right also applies to workers employed under an employment contract in an enterprise — a Bulgarian employer operating within the territory of Bulgaria — where that enterprise constitutes a distinct part of another company operating in an EU country or the European Economic Area and declared insolvent.

It is also necessary that the employer has carried out activity for at least 12 months before the date on which the insolvency or over-indebtedness arose, as stated in the court decision.

The employer’s failure to pay the contributions due to the Guaranteed Receivables of Workers and Employees Fund does not deprive the employees of their right to guaranteed receivables.

The Moment When the Right to Guaranteed Receivables Arises

The right to guaranteed receivables is deemed to have arisen from the date of entry in the Commercial Register of the court decision for:

  • opening insolvency proceedings;
  • the simultaneous opening of insolvency proceedings and declaration of the employer’s insolvency;
  • the opening of insolvency proceedings accompanied by the cessation of the enterprise’s activity, the declaration of the debtor’s insolvency and the suspension of the proceedings owing to a lack of property to cover the costs.
Notification of Employees

After the court decision is entered in the Commercial Register, the employer is obliged, within 14 days, to inform its employees of the date of entry and of the manner in which they may obtain their guaranteed receivables.

Employees who are still employed are notified by a notice posted in a suitable place in the enterprise and by written notification to their representatives. For those whose employment contracts have been terminated, the employer sends notification by registered post with acknowledgement of receipt.

For each worker and employee entitled to guaranteed receivables, the employer draws up a statement setting out the amount of the unpaid gross wages and compensation, as well as any attachments upon them, if any. Within one month, the workers and employees may submit objections to the data set out in the statement.

Amount of the Guaranteed Receivables

Employees are entitled to guaranteed receivables for the last six accrued but unpaid monthly labour remunerations and compensation, accumulated during the last 36 calendar months before the entry of the court decision declaring the employer insolvent.

The maximum monthly amount of these guaranteed receivables is set annually in the State Social Insurance Budget Act. For 2020, this maximum amount is BGN 1,525 per month, notwithstanding that the actual sum the employee is entitled to receive may be greater.

If it concerns only unpaid monetary compensation due under a statutory instrument or a collective employment contract, the amount of the guaranteed receivable may not exceed four times the minimum wage at the time of termination of the employment relationship.

Procedure for Payment of the Guaranteed Receivables

In order to receive the funds due to them, the employee must file a declaration-application in the prescribed form with the territorial division of the National Social Security Institute (НОИ) at the employer’s location.

The declaration-application is filed within three months of the date on which the court decision is entered in the Commercial Register, or of the date on which the workers and employees are notified of the opening of insolvency proceedings in another State. The application must include the statement drawn up by the employer and, where applicable, any objection to the data in it.

The document may be filed in person, through an authorised person, or by a licensed postal operator with acknowledgement of receipt.

The Director of the Guaranteed Receivables of Workers and Employees Fund issues a payment order, which is sent within 3 days to the НОИ’s territorial division and to the entitled person.

Payment of the guaranteed sums is made within seven days of receipt of the order and is effected to the employee’s personal bank account.

These sums are subject to income tax, which is withheld by the НОИ before the funds are paid out.

Inheritance Rights over Unreceived Guaranteed Receivables

In the event of the death of the worker or employee, their heirs are entitled to receive the sums due. For this purpose, they must file an application accompanied by a certificate of heirs. The sums are paid to a single heir authorised by all the others, or are distributed in accordance with the order laid down in the Inheritance Act.

If the Director of the Fund refuses to approve the declaration-application, the refusal may be appealed within 14 days before the administrative court.

Should you require assistance or consultation regarding the guaranteed receivables of workers and employees upon the employer’s insolvency, please contact us on tel.: 0887550706 or by e-mail: [email protected]