Employment law for startups in Bulgaria: from the first contract to the last day
A non-compete in an employment contract is void, a six-month probation clock stops during sick leave, and letting someone start work before the tax authority registration lands costs up to EUR 7,669. The full Labour Code map for founders.
Startups rarely end up in a dispute with the labour inspectorate over something done in bad faith. They end up there over things that look administrative: someone who started work on Monday morning while the registration was filed that afternoon; a developer on a civil contract with a company laptop and a daily standup; a non-compete copied from a US template into the employment contract, where it is worth nothing.
The Bulgarian Labour Code is not a default-rules statute. Its provisions are largely mandatory and cannot be displaced by a contract or by internal rules. Art. 8(4) makes a waiver of employment rights invalid - an employee cannot validly give up leave, minimum pay or dismissal protection, even where they signed that they did. And under Art. 74(4) a clause that contradicts the law is replaced automatically by the statutory provision: the defective clause does not merely fail to work - the text of the law stands in its place.
The tax and social security treatment of the team - contributions, food vouchers, per diems, freelancers, EOR - is in our article on startup taxes and is not repeated here. Figures are in euro, current as of September 2026.
1. The contract, and the registration that makes it real
The employment contract is concluded in writing before work begins. Art. 66(1) lists ten particulars: the parties' details; place of work; job title and character of the work; date of signature and of commencement; duration; paid annual leave; the notice period, identical for both sides; base pay and permanent supplements; payment frequency; the length of the working day or week.
A signed contract is not, however, enough to let the person start.
The Employment Register
Since 1 June 2025 the paper record book has been replaced by a single electronic employment record. The sequence before the first working day is fixed: signing the contract; entry in the Employment Register - within three working days, but before the person is physically admitted to work; an electronic confirmation from the revenue authority; delivery against signature of the contract, the confirmation and the job description. Only then can the employee lawfully be admitted.
Missing the registration or the delivery carries a pecuniary sanction under Art. 414(3) of roughly EUR 767 to EUR 7,669 per individual. For five people hired on the same day, that is not one sanction.
For relationships already running on 1 June 2025, the employer had to complete the paper book and return it to the employee by 1 June 2026.
The contract types, and where they go wrong
| Contract type | Basis | Constraint | The typical mistake |
|---|---|---|---|
| Indefinite | Art. 67(1)(1) | None | None - this is the default relationship |
| Fixed-term | Art. 68(1)(1) | Up to 3 years; for permanent work only exceptionally, for at least 1 year and at the employee's written request | A fixed term on a permanent role "as a trial" - under Art. 68(5) it is indefinite from signing |
| Part-time | Art. 138 | - | Cutting leave pro rata |
| Additional work | Art. 110, Art. 111 | 48 hours a week in total across all contracts | Ignoring the 12-hour and 48-hour rest periods where consent is given under Art. 113(2) |
| Traineeship | Art. 233b | Person under 29 with no experience in the field; 6 to 12 months; assigned mentor | An unpaid "internship" against real work |
Three clarifications that cost money. A fixed-term contract becomes indefinite under Art. 69(1) cumulatively where the term expired, the employee kept working 5 or more days without written objection, and the position is vacant - silence is consent, literally.
Part-time work does not reduce paid annual leave pro rata: someone on four hours a day gets the full minimum of 20 working days. What counts pro rata is the social security record; full length of service requires at least half the normal hours.
An unpaid internship is lawful only as academic practice under a tripartite agreement between university, company and student. Real work without a contract or pay is undeclared work under Art. 414(3).
2. The probation period whose clock stops
Art. 70 allows probation of up to 6 months. Three details are missed routinely.
In whose favour. The contract must state expressly in whose favour probation is agreed; absent a stipulation it is presumed the employer's. That works for you only if you wrote nothing - "in favour of both parties" gives the employee the same right to walk without notice.
The clock stops. Under Art. 70(4) the period excludes time on statutory leave, or in which the employee otherwise did not perform the work. Six months' probation from 1 January expires on 30 June only if the person worked throughout; twenty working days of sick leave move the end date to 31 July. Calculate by the calendar rather than by days worked and a termination under Art. 71 can land after expiry and become an unlawful dismissal.
Only once. For the same work with the same employee at the same undertaking, probation may be agreed only once (Art. 70(5)). A repeat clause is invalid under Art. 74 and is replaced with nothing - the contract had no probation from the start.
Until the period expires, the party in whose favour it was agreed can terminate without notice and without reasons (Art. 71(1)) - the widest freedom the Labour Code gives an employer, and it is exhausted with the period.
3. Civil contract or employment: where the line runs
Art. 1(2) says relationships involving the supply of labour are governed only as employment relationships - not by the parties' choice, but by how the facts are characterised.
| Criterion | Employment relationship | Civil contract |
|---|---|---|
| Subject matter | Supply of labour, a process of work | A specific independent result under the Obligations and Contracts Act |
| Subordination | Instructions, internal rules, hierarchy | Independence of the contractor |
| Working time and place | Set by the employer | Set by the contractor |
| Means of production | Provided by the employer | Provided by the contractor |
A civil contract is lawful cumulatively where there is a clearly defined project deliverable, no integration into the org chart - no company-domain email, no working hours - and the contractor's own equipment.
The mechanics of Art. 405a
Where the inspectorate establishes a disguised employment relationship, it does not go to court. It issues an order under Art. 405a declaring the relationship to exist - an exclusive power of the agency - and directing the parties to sign a contract. The relationship arises from the date of the order, or from the actual start of work if the employee proves it.
Two consequences follow. The sanction under Art. 414 - for the amount see our tax article, which also covers freelancer taxation. And a revenue assessment: all contributions due plus statutory interest, including the employee's own share, because under the Social Security Code the employer must withhold it - retroactively, for the whole period.
A civil contract with your own employee is lawful only cumulatively: no overlap with the job description, entirely outside working hours, and with full autonomy. In practice this narrows the cases to nearly none.
4. Working time, overtime and night work
Normal working time is 8 hours a day and 40 hours a week (Art. 136).
Aggregated calculation (Art. 142(2)). A reference period of 1 to 4 months with advance schedules; up to 12 hours a day, 56 a week.
Overtime. In principle prohibited, except under Art. 144 - emergencies, defence, urgent public needs. "The sprint before release" is not among them. The three limits in Art. 146 apply simultaneously:
| Period | Limit |
|---|---|
| Calendar year | 150 hours |
| Calendar month | 30 hours day work / 20 hours night work |
| Calendar week | 6 hours day work / 4 hours night work |
Pay under Art. 262(1) carries an uplift of not less than 50% on working days, 75% on rest days, 100% on public holidays and 50% under aggregated calculation.
Night work. Night work runs from 22:00 to 06:00; a night shift is 7 hours. The supplement under the Regulation on the Structure and Organisation of Work Remuneration is not less than 0.15% of the minimum wage per night hour worked and not less than EUR 0.51. At the 2026 wage of EUR 620.20 the percentage floor gives roughly EUR 0.93 an hour - that is the one that applies.
Rest (Art. 152, 153). Daily rest is not less than 12 consecutive hours; weekly rest 48, under aggregated calculation not less than 36, and where shifts rotate in a continuous process not less than 24.
Art. 111a and the second job. Under Directive (EU) 2019/1152 an employer cannot prohibit an employee from working for another employer outside their working hours. An exception applies only for exhaustively listed objective reasons: trade secrets, conflicts of interest, health and safety. A blanket "may not work elsewhere" clause will not hold.
5. Leave and absence
Paid annual leave. The minimum is 20 working days (Art. 155); with irregular hours, 5 more (Art. 156(1)(2)). The right lapses 2 years after the end of the year it relates to (Art. 176a), except where lawfully deferred.
Maternity and parental leave. Pregnancy and childbirth leave is 410 days, at 90% of insurable income. The father has 15 days of paid leave on the birth (Art. 163(10)). Leave to raise a child up to age 2 (Art. 164) carries a monthly benefit - for 2026, EUR 460.17, an increase on the previous year rather than merely restated in euro.
Directive (EU) 2019/1158 added two instruments. Art. 167a gives each parent an individual, generally non-transferable leave entitlement of up to 2 months for a child under 8. Art. 167c gives parents of children under 8 the right to request flexible arrangements in writing; the employer must consider the request and, if refusing, give a written reasoned reply within 14 days. Silence is not a refusal; it is a breach.
Sick leave. The first 3 working days are at the employer's expense - 70% of daily gross pay. From the fourth day the social security institute pays - 80% of average daily insurable income over the previous 18 months, or 90% for a workplace accident.
Unpaid leave (Art. 160). Up to 30 working days a year counts towards both length of service and the social security record.
Dismissal protection (Art. 333). Pregnant employees and mothers of children under 3 are protected: dismissal on certain grounds under Art. 328(1), including redundancy and reduced volume of work, requires prior permission from the labour inspectorate, sought before the order. An order without it is unlawful however well-founded the redundancy.
6. Pay: what is mandatory beyond the agreed number
Minimum wage. For 2026 - EUR 620.20 a month at full time, with a minimum hourly rate of EUR 3.74 (Council of Ministers Decree No. 243 of 13 November 2025). The national formula, "50% of the average gross wage over 12 months", sits in Art. 244.
The length-of-service supplement. Not a bonus but a mandatory payment under the Regulation on the Structure and Organisation of Work Remuneration, at least 0.6% per year of service in the same, a similar or a same-character role, judged against the company's internal pay rules. Absent those rules, the criteria will be construed against you.
Bonuses. To stay discretionary, a bonus must be expressly made entirely the employer's discretion, not acquired automatically, and creating no entitlement for future periods. Tie it to objectively measurable targets and it becomes conditionally due remuneration the employee can claim.
Qualification agreements (Art. 234). The employee can undertake to stay up to 5 years after training and otherwise reimburse the costs pro rata. The only mechanism in the Labour Code resembling retention - and it works only against real, documented costs.
Equal pay. Art. 14 of the Protection Against Discrimination Act and Art. 243 of the Labour Code require equal pay for equal or equivalent work. Differences are lawful only on objective, pre-documented criteria: service, appraisal, qualification. "That is what we negotiated" is not a criterion.
One parameter from the tax article is needed here too: the maximum monthly insurable income - EUR 2,300 from 1 August 2026 (EUR 2,111.64 until 31 July). It is the ceiling up to which contributions are due on any benefit, including benefits in kind.
7. Equity as an employment-law question
Vesting mechanics and where options sit in the cap table are in our article on corporate structure and the capital-raising guide; the tax treatment of options, RSUs and phantom equity is in the tax article.
The employment-law point is simple: the instrument determines where the obligation lives. Phantom equity is a contractual arrangement under the Obligations and Contracts Act, not employment remuneration unless you draft it as such. The difference shows on termination - a clause in the employment contract falls under the Labour Code and Art. 8(4), while the same clause in a general-law agreement is read differently. Hence an equity-linked non-compete belongs in the equity documentation.
8. Who owns what the employee creates
Art. 14 of the Copyright Act - works made in employment. Copyright in works created in the performance of employment duties, including code and design, belongs to the author. But the exclusive right to use them for the purposes they were created for passes automatically to the employer, unless the contract says otherwise. The job description is decisive: the narrower it describes what the person does, the more of their output falls outside "performance of employment duties".
Art. 15 - moral rights. The right of attribution and the right to object to modifications prejudicial to the author's honour stay with the author; a blanket waiver of attribution is invalid. The answer is a contract containing consent to the modifications needed for commercial exploitation, and to use under the company's brand.
Art. 42 - commissioned works. Art. 14 does not apply to civil contracts - economic rights do not pass automatically. An express assignment clause is mandatory, covering exclusive rights worldwide, the full term of protection, all known modes of use, and the right to make adaptations. Its absence is a classic due diligence finding - and it is the buyer who finds it, not you.
Patents. An invention is an employee invention under Art. 14 of the Patents Act where made in the performance of employment duties or using the employer's resources. The right to the patent belongs to the employer, subject to a deadline: the inventor notifies in writing and the employer has 3 months to file - failing which the right passes to the inventor, who is also entitled to additional fair remuneration reflecting the economic effect.
Open source adds a separate risk: static linking or modification of GPL or AGPL code can bring the product under a source disclosure obligation. The general framework is in our IP article.
9. NDAs, non-competes and non-solicitation
During the contract, confidentiality follows from the duty of loyalty in Art. 126(9); after termination, from an agreement under the Obligations and Contracts Act and the Trade Secrets Protection Act.
Non-compete. The most expensive misunderstanding in Bulgarian startup employment contracts. Under Supreme Court of Cassation practice, a clause restricting competition for the period after termination, agreed inside the employment contract itself, is void - as contrary to Art. 48 of the Constitution and to Art. 8(4) of the Labour Code. It is unenforceable and no liquidated damages are due under it.
The lawful mechanism is a separate agreement under the Obligations and Contracts Act, or a clause in the equity documentation, on three cumulative conditions: a reasonable term, typically 1 to 2 years; a defined subject-matter and geographic scope; and mandatory monthly compensation for the whole period. The third is the one most often missing - a restriction without payment fails again.
Non-solicitation. Clauses against soliciting clients and staff remain valid under general contract law - they do not restrict the right to work in general but protect a specific commercial resource.
10. Remote work and hiring outside Bulgaria
The March 2024 amendments regulate remote work in Art. 107z - 107p:
- A fixed place of work. The contract or annex must name the specific workplace; changing it requires the employer's written consent. "Works from wherever they like" is not a valid stipulation.
- Equipment. The employer provides the equipment and consumables. Amounts reimbursed for internet and electricity are non-taxable where the costs are documented and an internal methodology exists.
- Access. The employer and the inspectorate may access the remote workplace only with the employee's consent and after prior notice. Your health and safety obligations exist, but your inspection tools are limited.
Hiring in another member state. Under Regulation (EC) No 883/2004 contributions are due in the state where the work is performed. The exception runs through an A1 certificate from the revenue authority, confirming the employee remains insured in Bulgaria. For it you must demonstrate substantial activity in the country - no less than 25% of turnover, plus headcount and contracts performed. A company with all its turnover abroad and a team across the EU generally does not pass. The tax side, including EOR, is in the tax article.
11. GDPR and HR: your team's data
In an HR context, consent under Art. 6(1)(a) GDPR is rarely a valid basis, because of the imbalance between the parties. The bases that work are legal obligation (contracts, filings with the revenue authority and the social security institute), performance of a contract (pay) and legitimate interest (security).
| HR data category | Period | Basis |
|---|---|---|
| Payroll ledgers | 50 years | Art. 42(1) of the Accountancy Act |
| Personnel files, contracts, annexes | 50 years | Art. 128b of the Labour Code and Art. 42 of the Accountancy Act |
| CVs of unsuccessful candidates | Up to 6 months | Art. 25z of the Personal Data Protection Act, absent written consent |
| Sick notes and medical documents | 3 years | Social Security Code and the Health Act |
| CCTV recordings | Up to 30 days | Art. 107i of the Labour Code and the supervisory authority's guidance |
The six-month CV limit is the one startups breach most often - the "talent pool" sitting in Notion since 2023 is processing without a basis.
Monitoring. Under a November 2023 opinion of the data protection commission, CCTV cannot be used to assess performance, police discipline or determine bonuses - it is lawful for security purposes only. Monitoring email and Slack or Teams is lawful only where a policy has been adopted and served in advance against signature, and where necessity and proportionality are respected. A breach of HR data must be notified to the commission within 72 hours of becoming aware of it.
12. Discrimination and pay transparency
The protected characteristics in Art. 4(1) of the Protection Against Discrimination Act include sex, race, nationality, ethnicity, human genome, citizenship, origin, religion, education, convictions, political affiliation, personal or social status, disability, age, sexual orientation, family status and property status.
In recruitment. Art. 13 prohibits requiring information about protected characteristics from candidates, except where the nature of the role or the law requires it.
The burden of proof. Art. 9 is two-stage: first the complainant presents facts supporting a presumption of discrimination; only then does the burden fall on the employer to prove equal treatment was not breached. Documented selection and pay criteria are your defence; their absence is an evidentiary problem.
Harassment. On a complaint the employer must immediately investigate internally, hear the parties and, if substantiated, take measures. Inaction is a breach in its own right.
Two routes, not one. Referring a case to the discrimination commission is not a mandatory pre-litigation stage - the affected person may sue directly in the district court under Art. 71. The difference matters: the commission imposes fines and binding instructions but does not award damages; the court does. Its final decision binds the civil court on the fact of discrimination - a lost case before it predetermines the damages claim.
Pay transparency. Directive (EU) 2023/970 requires pay transparency before interview, prohibits questions about previous pay, and mandates gender pay gap reporting above 100 employees. The transposition deadline was 7 June 2026; at the time of writing national transposition is in progress and its scope is not settled - it is sensible to build your practices around the text of the directive.
13. Discipline and termination
Art. 188 provides three penalties: a reprimand, a warning of dismissal, and disciplinary dismissal.
The Art. 193 procedure is mandatory and formal: before the penalty the employer must request written explanations by written invitation. Their absence makes the penalty unlawful in itself, however serious the breach - unless the explanations were not given through the employee's own fault. The deadlines in Art. 194(1) run in parallel: within 2 months of discovery and within 1 year of commission.
| Ground | Article | What it requires |
|---|---|---|
| Mutual consent | Art. 325(1) | Written proposal; the other side responds within 5 days, and silence counts as refusal |
| Employer notice | Art. 328 | Closure, redundancy, reduced volume of work. Before the order - check Art. 333 protection |
| Selection | Art. 329 | Mandatory when cutting part of the establishment with comparable roles. A skipped selection overturns the dismissal on its own |
| Against agreed compensation | Art. 331 | On the employer's initiative, at least 4 last gross monthly salaries |
| Disciplinary dismissal | Art. 188(3) | Only after the Art. 193 procedure and within the Art. 194 deadlines |
| Compensation | For what | Amount (base under Art. 228) | Contributions |
|---|---|---|---|
| Art. 220(1) | Notice not served | Gross pay for the unserved notice period | None due |
| Art. 221(1) | Employee resigns over late pay | Indefinite contract - 1 gross monthly salary; fixed-term - pay for the remaining term | None due |
| Art. 222(1) | Remaining unemployed after redundancy | For the proven period without work, capped at 1 gross monthly salary | Pension fund contributions due |
| Art. 222(3) | Retirement | 2 gross monthly salaries, or 6 after 10 years with the same employer | None due; non-taxable |
| Art. 224(1) | Accrued unused annual leave | By days of unused leave | None due |
| Art. 331(2) | Termination against compensation | At least 4 gross monthly salaries | None due |
All of these are subject to income tax except the payment under Art. 222(3). A claim challenging a dismissal must be brought before the district court within 2 months of service of the order (Art. 358(1)(2)); the general limitation period for other monetary claims is 3 years (Art. 358(1)(3)).
14. Headcount thresholds
Some obligations switch on at a headcount rather than at a revenue figure.
| Threshold | Obligation | Basis |
|---|---|---|
| More than 20 employees | Representatives for information and consultation | Art. 7(3) of the Labour Code |
| More than 50 employees | Representatives for the protection of employment interests | Art. 7(2) of the Labour Code |
| 50 or more employees | Mandatory internal whistleblowing channel | Art. 12 of the Whistleblower Protection Act |
| More than 100 employees | Gender pay gap reporting | Directive (EU) 2023/970, transposition in progress |
The internal whistleblowing channel. The 50-person threshold falls away entirely for financial services, anti-money laundering, transport safety and environmental protection. The sanction for not having one is roughly EUR 2,556 to EUR 10,226 for the legal entity and roughly EUR 511 to EUR 2,556 for the responsible officer. For fintech the threshold is effectively zero - see also our article on DORA.
Collective redundancies. Under Art. 130a two deadlines run in parallel: consultations with employee representatives at least 30 days before the dismissals, and written notification to the employment agency also at least 30 days before. The sanction under Art. 414(5) is roughly EUR 767 to EUR 2,556.
Collective agreements. A collective agreement normally binds only union members. But under Art. 51b(4)-(7) the labour minister can extend a sectoral or branch agreement to all undertakings in that sector. Check the register of collective agreements against your code under the classification of economic activities: if such an order exists, the higher pay, additional leave and compensation it sets bind you without your ever having been a party.
15. Enforcement and actual risk
Inspectors may visit at any time, require documents and explanations, and have employees complete written declarations of fact - start date, agreed pay, working hours. A declaration that the employee started a week before the date on the contract is sufficient evidence. Art. 404(1) also provides coercive measures, including suspending operations where breaches endanger life and health.
The folder they will ask for: employment contracts and the registration confirmations; job descriptions; the internal work rules and the internal pay rules; work schedules, payroll ledgers and the orders recording working time; leave orders; and the health and safety documents - the occupational medicine contract, the risk assessment, the orders and the induction logs.
| Basis | Breach | Sanction on the employer |
|---|---|---|
| Art. 414(1) | General breach of employment legislation | approx. EUR 767 - 7,669 |
| Art. 414(2) | Repeat breach | approx. EUR 10,226 - 15,339 |
| Art. 414(3) | Work without a contract or without registration | approx. EUR 767 - 7,669 per individual |
| Art. 414(5) | Breaches in a collective redundancy | approx. EUR 767 - 2,556 |
| Art. 415(1) | Failure to comply with an inspectorate instruction | approx. EUR 767 - 5,113 |
| Art. 80(2), Anti-Discrimination Act | Breach by a legal entity | approx. EUR 128 - 1,278; doubled on repetition |
| Art. 82(1), Anti-Discrimination Act | Failure to comply with a commission or court decision | approx. EUR 1,023 - 5,113; beyond 3 months, approx. EUR 2,556 - 10,226 |
| Whistleblower Protection Act | No internal reporting channel | approx. EUR 2,556 - 10,226 |
The courts. Employment disputes are heard under the fast-track procedure: 6 to 12 months at the district court, 6 to 9 at the regional court and 12 to 18 at the Supreme Court of Cassation - eighteen months to three years in total. Employees are exempt from court fees; if the employer loses it pays the fee, the employee's costs and statutory interest, on top of the award.
Health and safety. A contract with an occupational medicine service, a written risk assessment and the four inductions - initial, workplace, periodic and extraordinary - are mandatory. Workplace accidents must be declared to the social security institute within 3 days.
16. The deadline calendar
| Deadline | Obligation | Basis |
|---|---|---|
| Before admission to work | Signed contract and entry in the Employment Register | Art. 61(1) and Art. 62 |
| On the first day | Initial health and safety induction | Ordinance No. RD-07/2 |
| Within 3 working days | Registration of a concluded or amended contract | Art. 62(3) |
| Within 3 days of occurrence | Declaring a workplace accident | Art. 57 of the Social Security Code |
| Within 7 working days | Registration of a terminated contract | Art. 62(3) |
| Within 14 days | Reasoned reply refusing flexible arrangements | Art. 167c |
| 2 months from discovery / 1 year from commission | Imposing a disciplinary penalty | Art. 194(1) |
| 2 months from service | Challenging a dismissal before the district court | Art. 358(1)(2) |
| At least 30 days before dismissals | Consultations and notification of the employment agency | Art. 130a |
| 3 years | Limitation for monetary claims under the employment relationship | Art. 358(1)(3) |
This article is general information current as of September 2026, not individual legal advice. Some monetary thresholds are converted from leva at the fixed rate of EUR 1 = BGN 1.95583 and rounded - this applies to the administrative sanctions under the Labour Code, the Protection Against Discrimination Act and the Whistleblower Protection Act, which remain expressed in leva in the statutory texts and apply under the denomination rules. The minimum wage, the maximum insurable income, the minimum supplements under the Regulation on the Structure and Organisation of Work Remuneration, and the child-raising benefit are at the amounts officially published in euro for 2026. The scope of national transposition of Directive (EU) 2023/970 is not settled at the time of writing and is flagged as such in the text. For a specific hire, restructuring or dismissal, take advice.