New year, new changes in the law. Just as one manages to catch up after all the holiday spending, our government surprises us with an increase of the maximum amount of income subject to Social Security tax. What exactly is different, and what does this mean for employees? We asked a payroll specialist so you don't have to.
Changes apply to all Bulgarian citizens, as well as foreigners working in Bulgaria (excluding the ones with an A1 document).
Increased maximum amount of income subject to Social Security tax
The sum increased by 350 BGN - from 3400.00 BGN to 3750.00 BGN. The change affects everyone whose gross remuneration is equal to or higher than this amount. According to data from the National Statistical Institute, the change will affect around 163 thousand people.
Here's an example: An employee receiving a gross salary of 3800.00 BGN in 2023 will receive 43.41 BGN less as a net salary for January this year compared to the amount for December 2023.
💡 Taxable wage base is the amount used to calculate and from which insurance contributions to the state are withheld. The Maximum Insurance Income is the threshold above which the money is not subject to insurance.
Mandatory insurance is deposited to various state funds - a pension fund, a maternity fund, an unemployment fund and a health fund.
Employers also contribute to the state budget. They deposit an amount in the funds above, but the percentage on the insurance income is higher compared to the contributions on behalf of employees.
As for who will bear the difference, we can only guess. Some companies may compensate their employees by covering the new insurance contributions on their own (IT sector, we're looking at you 👀 ), but everything is in the realm of speculation and wishes.
Higher Minimum Wage
With the arrival of the new year, the minimum wage in our country is also increasing. The increase is 153.00 BGN (or 19.62%) compared to 2023. In other words, 118.17 BGN higher net salary.
What the law changes can lead to
Rise in the grey economy
There is a possibility that employees and employers may agree to maintain their current salaries without complying with the new requirements of the state. Unfortunately, the terms 'grey economy' and 'under-the-table money' are still relevant.
Higher labour costs
It is not excluded that a new wave of layoffs may occur due to worsening economic conditions for businesses. This applies not only to companies but also to self-employed individuals.
If you need more information on the topic, you can check a longer version of this article in Bulgarian.
As cliché as it may sound, only time will tell. If you're looking for a job where you know for sure if the salary fits, you'll find it at nPloy.
