Ending an Employment Relationship in Bulgaria: Redundancy and Mutual Consent

Corporate Clients Insights, Corporate Disputes, Employment Litigation, Employment

When an employer in Bulgaria needs to end an employment relationship for business or organisational reasons, there is rarely a single correct path. In practice, employers most often choose between two routes: a negotiated exit by mutual consent, or a formal redundancy through elimination of the position. Each carries a distinct risk and cost profile, and the appropriate choice frequently depends on whether the employee in question falls within a legally protected category.

Termination by Mutual Consent

Under the Labor Code, either the employer or the employee may propose ending the employment relationship by mutual agreement. The proposal must be made in writing, and the receiving party has seven days to respond in writing, with silence treated as rejection. Once accepted, the relationship terminates on the agreed date, without a notice period and without the need to invoke any specific ground for dismissal.

The principal advantage of this route is its flexibility. Bulgarian law imposes no minimum compensation requirement, meaning any severance payment is left entirely to negotiation between the parties. This also allows the employer to avoid the special dismissal protections discussed further below. In practice, however, employers frequently need to offer a sufficiently attractive payment to secure the employee’s agreement.

A related but distinct mechanism allows the employer to propose termination against compensation on its own initiative. Where the employee accepts, the employer is required to pay compensation of no less than four times the employee’s last gross monthly salary, a statutory minimum that does not apply to an ordinary mutual consent agreement. This amount must be paid within one month of termination, failing which the termination itself is treated as having lapsed. This mechanism also has a bearing on the employee’s subsequent unemployment benefits, which are payable at the minimum statutory rate for four months, a factor that is sometimes taken into account during negotiations.

Redundancy

The alternative route is a formal redundancy, involving the elimination of the position itself. This is a more structured and document-intensive process, generally comprising the following steps:

Approval of a revised staffing structure by the employer, removing the relevant position. Both the prior and revised versions should be retained, as they serve as the principal evidence that the reduction is genuine.

Where several employees occupy comparable positions and not all are being made redundant, a selection process based on objective criteria such as qualifications, performance, and disciplinary record.

Verification of whether the affected employee falls within a legally protected category, addressed further below.

Service of notice, typically no less than 30 days, or payment in lieu of notice. Issuance of a written termination order citing the redundancy ground.

Settlement of final payments, including statutory redundancy compensation and payment for unused annual leave.

The employee retains the right to challenge the dismissal in court within two months of the termination order. Where the challenge succeeds, available remedies include reinstatement and compensation for the period of unemployment, up to six months’ gross salary.

Protected Employees

For more information, you may check our detailed article.

Redundancy is unavailable, or subject to conditions, for a number of protected categories of employees, and this is frequently the source of disputes. Before serving notice, an employer should verify whether the employee:

• Is the mother of a child under three years of age
• Occupies the position pursuant to a medical prescription due to reduced working capacity
• Suffers from one of a defined list of illnesses under a Ministry of Health ordinance, including ischemic heart disease, active tuberculosis, cancer, occupational disease, mental illness, or diabetes
• Has already begun using approved leave
• Serves as an elected employee representative, or as a representative on health and safety matters
• Sits on a special negotiating body, a European Works Council, or a representative body within a European company or cooperative
• Is pregnant or undergoing advanced-stage in-vitro fertilisation treatment, in which case dismissal with notice is permitted only on a narrow set of grounds such as closure of the enterprise
• Is on pregnancy, childbirth, or adoption leave, in which case dismissal is permitted only where the enterprise itself is being closed
• Currently holds, or has held within the preceding six months, a trade union office

For most of these categories, the employer must obtain prior written permission from the Labour Inspectorate before notice may be served, generally supported by a medical commission’s opinion where illness or reduced capacity is involved. Where a trade union official is concerned, the required permission comes instead from the relevant union body rather than the Labour Inspectorate, and in some cases a collective agreement may extend a similar union consent requirement to redundancies generally. Permission obtained after the fact does not remedy the defect, and failure to observe this requirement renders the dismissal unlawful on procedural grounds alone, irrespective of whether the underlying redundancy was genuine. Importantly, obtaining permission does not itself guarantee that a subsequent dismissal will withstand challenge in court on other grounds.

The Importance of Internal Documentation

A less obvious, but no less significant, risk factor lies in the state of an employer’s internal documentation. Many employers, particularly smaller ones, operate without internal labour regulations or documented remuneration policies, notwithstanding that the former is a mandatory document under Bulgarian law, non-compliance with which may attract administrative penalties.

Beyond this standalone regulatory exposure, such gaps materially weaken an employer’s position in the context of a redundancy dispute. Establishing that a reduction is genuine depends heavily on a documented staffing history; defending a selection decision is considerably more difficult without records of qualifications or performance; and calculating compensation correctly requires clearly defined remuneration policies. As the burden of proving the lawfulness of a dismissal rests with the employer, each documentary gap represents one less means of discharging that burden.

Final words

Termination by mutual consent generally represents the cleaner and lower-risk course. 

Redundancy remains a legitimate and, at times, necessary course of action, however it exposes the employer to risk on several fronts: the genuineness of the reduction, the fairness of any selection process, compliance with protections afforded to vulnerable employees, and the adequacy of the underlying documentation. 

Employers contemplating redundancy would be well advised to review their internal documentation and staffing records before initiating the process, rather than after a dispute has arisen.