Severance Pay in Bulgaria: What a Foreign-Owned Employer Owes When a Job Ends
Bulgaria has no general severance scheme based on years of service. What you owe depends on why the contract ends: one month’s gross pay at most when a role is made redundant, two months’ pay (six after ten years with you) when an employee leaves with a pension right, and cash for untaken annual leave in every case. All of it is due by the last day of the following month.
Current as of September 2026. Based on the Labour Code (Art. 220–228 and 325–333, text as of State Gazette No. 69/2026) and Art. 24(2)(8) of the Personal Income Tax Act. Amounts are statutory minimums; a collective agreement or the employment contract can grant more. Bulgaria has used the euro since 1 January 2026. General information, not legal advice.
Why the termination ground drives the cost
If you run a Bulgarian EOOD from abroad, your local staff are on Bulgarian employment contracts, and Bulgarian law decides how those contracts can end. Every termination order must name a ground from the Labour Code, and each ground carries its own payout:
| How the contract ends | Legal basis | Statutory payout | Taxed? |
|---|---|---|---|
| Mutual agreement in writing | Art. 325(1)(1) | none (only untaken leave) | n/a |
| Employee resigns with notice | Art. 326 | none (only untaken leave) | n/a |
| Redundancy, closure, reduced workload | Art. 328(1)(1)–(4) + Art. 222(1) | gross pay while unemployed, max 1 month | yes, 10% |
| Termination with a pension right, any ground | Art. 222(3) | 2 months’ gross, or 6 after 10 years with you in the last 20 | no |
| Illness-related termination | Art. 222(2) | 2 months’ gross (5+ years’ service) | no |
| Your offer to end the contract for compensation | Art. 331 | at least 4 months’ gross | yes |
| Notice not respected by either side | Art. 220 | gross pay for the missing notice | yes |
All of these are on top of pay for untaken annual leave (Art. 224), which is owed whenever the relationship ends. Only the illness and retirement payments are exempt from personal income tax; the rest are taxed as employment income.
How long is the notice period?
For an open-ended contract it is 30 days, unless the contract sets a longer term, which can be no more than three months (Art. 326(2)). For a fixed-term contract it is three months, but no longer than what remains of the term. The same period applies when you dismiss on most business grounds (Art. 328(1)).
You may cut the notice short, but then you pay gross salary for the unserved part (Art. 220). In practice many employers do exactly that: they end the contract on the day the order is delivered and pay the month in lieu.
Worked example: making a role redundant
Your developer earns €2,000 gross. You decide to close the position and deliver a dismissal order under Art. 328(1)(2) on 1 October 2026 with 30 days’ notice, so the contract ends on 31 October. He has 6 untaken leave days and does not find a new job in November.
| Item | Calculation | Gross |
|---|---|---|
| Notice period | worked, paid as normal salary | not included |
| Redundancy pay (Art. 222(1)) | 1 month while unemployed | €2,000.00 |
| Untaken leave (Art. 224) | €2,000 ÷ 22 working days in October × 6 | €545.45 |
| Termination payments | €2,545.45 |
If you had released him on 1 October instead, you would add €2,000 for the unserved notice. The redundancy payment is conditional on unemployment: if he starts a new job after two weeks, you owe two weeks, or the pay difference if the new job pays less. Employers usually ask for proof, such as the employment record, before paying it.
The deadline for all of this is 30 November 2026: termination payments are due by the last day of the month after the month the contract ended (Art. 228(3)). After that you owe statutory interest on top.
Who you cannot dismiss without permission
Redundancy and several other grounds need prior written permission from the Labour Inspectorate for each case when the employee is (Art. 333):
- a mother of a child under three;
- an employee with reassigned duties for health reasons, or suffering from an illness listed in a Ministry of Health ordinance;
- someone who has already started authorised leave;
- an elected employee or health-and-safety representative.
Pregnant employees and those in advanced IVF treatment can be dismissed with notice only on a few grounds, such as closure of the whole enterprise (Art. 333). Protection is judged on the day the order is delivered, so check the facts before you serve it.
Mutual consent vs. a paid exit under Art. 331
Two routes avoid a contested dismissal:
- Mutual consent (Art. 325(1)(1)): the cheapest exit. Either side proposes it in writing; the other has 7 days to answer. No statutory severance applies, but employees often negotiate a payment in return.
- Termination for compensation (Art. 331): you propose ending the contract and pay at least four months’ gross salary. If the employee accepts in writing within 7 days, the contract ends. If you do not pay within one month, the termination ground falls away.
Art. 331 costs more, but it gives certainty where a redundancy could be challenged.
Admin you cannot skip
- A written order naming the exact legal ground (Art. 335). The ground decides severance, unemployment benefit and the employee’s tax.
- Registration within 7 days of the termination in the employment register kept by the National Revenue Agency (Art. 62(3)). If a late or missing entry stops the employee claiming benefits or starting a new job, you can be liable for their loss.
- Final payroll with untaken leave, severance and the right tax treatment, plus the certificates the employee needs for the National Social Security Institute.
An employee who thinks the dismissal was unlawful has two months to sue (Art. 358). If the court agrees, you owe up to six months’ gross pay for the time they stayed unemployed (Art. 225) and must reinstate them if they ask.
Frequently asked questions
Is there statutory severance based on years of service in Bulgaria? No. Apart from the retirement payment, statutory amounts do not grow with tenure. Longer protection has to come from a collective agreement or the employment contract.
Do I pay social security on severance? The treatment differs by type of payment. Your payroll provider applies the rules of the ordinance on insurable income for each item; do not assume severance is treated like salary.
Can I pay severance in a lump sum instead of giving notice? Yes. Ending the contract early and paying gross salary for the unserved notice is lawful under Art. 220.
What an employee costs while they work is covered in the real cost of employing someone in Bulgaria. If your Bulgarian company is run from abroad and you want terminations, final payroll and NRA filings handled correctly, see our accounting services in Bulgaria.