In Bulgaria, the termination of employment often involves complex procedures and legal justification. However, Article 331 of the Bulgarian Labour Code (LC) offers an alternative: it allows employers to initiate a termination by offering compensation, subject to the employee's agreement. When used appropriately, this mechanism provides a mutually beneficial way to part ways—ensuring fairness for the employee and procedural ease for the employer.
The Legal Framework of Article 331 LC
Under Article 331 LC, an employer may propose termination of the employment contract by offering compensation. This is not a unilateral dismissal, but rather a voluntary agreement initiated by the employer. If the employee accepts the offer in writing, the employment relationship ends under the agreed conditions, with compensation of no less than four times the employee's last gross monthly salary.
Why Employers and Employees Use Article 331 LC
This termination route is commonly used due to several practical advantages:
- Simplified procedure: It avoids the formalities required for termination based on redundancy, misconduct, or lack of qualification.
- Mutual consent: Reduces the risk of legal disputes since the employee agrees voluntarily.
- Financial support: The severance payment provides a safety net while the employee searches for a new role.
- Operational flexibility: Employers can streamline workforce adjustments without lengthy dismissal procedures.
- Customisable terms: The compensation amount can exceed the legal minimum, and the termination date can be mutually agreed.
- No need for dismissal justification: Especially valuable when legal grounds for dismissal are difficult to prove or sensitive to disclose.
Key Legal Requirements for Validity
To ensure lawful termination under Article 331, the following must be strictly observed:
- Employer-initiated only: The process can be started solely by the employer.
- Written acceptance within 7 days: The employee must confirm their acceptance in writing; lack of response is treated as rejection.
- Minimum compensation of four gross monthly salaries: Higher amounts can be negotiated.
- Payment within one month: If the compensation is not paid within one month of termination, the agreement becomes invalid.
- Tax treatment: The compensation is subject to personal income tax, but no social security contributions are due.
Eurofast's Take
Termination under Article 331 LC is a practical and compliant way to end employment relationships in Bulgaria. It allows employers to manage exits respectfully and efficiently, while also offering financial security to the departing employee.
At Eurofast, our experts support companies with the legal structuring of terminations, severance planning, and compliance with Bulgarian labour law. We ensure a smooth and risk-free process tailored to your business needs.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.