Civil contract vs employment in Bulgaria: where the line sits

In Bulgaria, a person who provides labour for someone else is meant to do so under an employment relationship, and the Labour Code (Кодекс на труда) says this in so many words. Art. 1(2) provides that relations for the provision of labour are governed only as employment relationships. A civil contract (граждански договор) used for work that is, in substance, employment does not escape that rule.

Civil contracts are not banned. They exist for work that is genuinely independent: a defined result delivered by someone who runs their own time, tools and business. The trouble starts when a company uses one because it is quicker or cheaper, while the person in fact works like a member of staff.

For foreign companies the temptation is understandable. Without a Bulgarian company, there is no obvious way to sign a labour contract, so a developer or sales lead in Sofia gets a services agreement instead. This article explains where that line sits, what the Labour Inspectorate can do about it, what it can cost, and how to move people onto proper employment.

What decides the matter is how the work is actually done, not the title on the document. When the Labour Inspectorate looks at a relationship it can rely on any evidence, so emails, timesheets, org charts and chat messages all count. The patterns below tend to point towards employment:

• The person works fixed hours set by you, or is expected to be online during your team’s working day.
• A manager on your side assigns tasks, sets priorities and approves leave or absences.
• The arrangement is open-ended, with no defined deliverable that ends it.
• Payment is a fixed amount every month, whatever was produced.
• The person uses your laptop, accounts, email address and job title, and appears in your internal directory.
• They work only for you and could not realistically take on other clients.

A genuine civil contract usually looks the other way round. The scope is a result, such as a module, an audit or a translation, with a price tied to it. The contractor decides how and when to do the work, uses their own equipment and is free to serve other clients. If you read the first list and recognise most of it, the relationship is unlikely to stand up as a civil one, however the contract is worded.

The gap between the two contracts is large, which is why reclassification matters. A person under a Bulgarian employment contract (трудов договор) is entitled to a set of protections that a civil contractor does not have:

• Paid annual leave of 20 working days or more each year, and payment for any days still unused when the job ends.
• Sick pay from the employer for days one and two of an illness, worked out as 70% of the average daily gross, then a benefit from the National Social Security Institute (NSSI).
• 410 days of maternity leave per child, paid by the NSSI, and paternity leave for fathers.
• Notice of at least 30 days, and dismissal only for a reason listed in Art. 328 or, for misconduct, Art. 330. There is no termination at will.
• A normal working week of up to 40 hours, overtime limits and statutory overtime premiums.
• Employer social security and health contributions of 18.92% for a typical office role, with nothing due on the part of monthly pay above €2,300 since August 2026.

None of these has to be offered to someone on a genuine civil contract, whose income is taxed and insured under separate rules. That is exactly what makes the civil route look attractive on a spreadsheet, and exactly what the inspector will look at if the relationship is questioned. For the full list of what a Bulgarian labour contract has to contain, see our guide to the labour contract in Bulgaria.

The Labour Inspectorate can issue an order declaring that an employment relationship exists, and it fixes the date on which that relationship began. The power comes from Art. 405a of the Labour Code, and the body that uses it is the General Labour Inspectorate Executive Agency (Изпълнителна агенция „Главна инспекция по труда“), usually called the Labour Inspectorate or GLI.

Two features of this power deserve attention. First, the inspector is not limited to the paperwork: any evidence can be used to show that the person worked as an employee. Second, the order sets a start date, which can lie well in the past. From that date the employer is treated as having had an employee all along, without a written contract and without the registration the Code requires.

In practice, a reclassification order rarely arrives alone. Once a relationship is declared to be employment, the employer has to put in place what should have existed from the start: a written contract, the entry in the employment register run by the National Revenue Agency (NRA), payroll, contributions and leave. The back-dated parts of that work tend to be the most expensive, and they are the reason to deal with doubtful arrangements before an inspector does.

Inspections can start in several ways: a routine check, a complaint, or a dispute with the person themselves. The last is common. A contractor whose arrangement ends badly, perhaps after a sudden termination with no notice, has every reason to argue that they were an employee all along, because that brings notice, leave pay and dismissal protection with it. The risk therefore tends to surface at the worst moment, when the relationship is already over and goodwill is gone.

Failing to sign a written contract, to register it with the NRA, or to keep someone from starting work before registration can be fined separately for each breach under Art. 414(3) of the Labour Code. Those duties come from three provisions: Art. 61(1) and Art. 62(1) require a written employment contract, Art. 62(3) requires the contract to be entered in the NRA employment register no later than 3 days after it is signed, and Art. 63 bars the person from starting work before they have been handed both the signed contract and the certified register entry, each as a copy.

The consolidated Labour Code still prints the fine bands in leva, the currency used when they were set:

• BGN 1,500 to 15,000 for the employer, for each breach.
• BGN 1,000 to 10,000 for the manager responsible.
• BGN 15,000 to 20,000 for a repeated breach.
• BGN 20,000 to 30,000 where the breaches are systematic.

Since Bulgaria moved to the euro on 1 January 2026, how these leva amounts are applied in euro is a point to confirm with counsel; the fixed conversion rate is 1 EUR = 1.95583 BGN. Either way, the fines count per breach, so several people working on civil contracts that should have been employment can produce several fines, before any contributions or leave pay are put right.

Note the role of Art. 63. Even a company that does sign a proper labour contract can be fined if the new hire is admitted to work before receiving the certified register entry. The rule is about the first working day, not the paperwork alone.

Foreign businesses face this issue most often when they find a strong candidate in Bulgaria before they have any structure there. The quick fix is a services agreement with the individual, often renewed month after month, with the person working full time for a single team. That set-up shows most of the signs listed earlier.

There are three realistic ways to put it on a clearer footing. The person can operate as a genuine independent business with several clients, which suits some consultants but rarely a full-time team member. You can set up your own EOOD or OOD and employ them directly, which means a company registration, accounting, NRA employer registration and an occupational health service contract before the first payroll. Route three is to hire through an employer of record (EOR).

In that model the person signs with the EOR, which becomes their legal employer, while the working relationship stays with you. Here is how it runs at Employer of Record Bulgaria: the person signs a Bulgarian labour contract with us; we make the NRA employment register entry before their first working day, and we pay them in euro each month, while you continue to direct their daily work. For a closer look at what that division of duties involves, read the EOR role in Bulgaria.

Converting a civil contractor to an employee is mostly a matter of order: decide the terms, sign, register, then start. A sensible sequence looks like this:

• List everyone in Bulgaria who works for you under a civil contract, and test each against the signs of employment above.
• For those who look like employees, agree a gross monthly salary in euro, recognised years of service for the klas supplement, and a start date for the labour contract.
• Decide on probation. It can last up to 6 months on an open-ended contract, though for someone who has already worked with you for a year, a short period or none at all may be fairer.
• Sign the written contract and complete the NRA register entry within 3 days, before the first working day under it.
• Close the civil contract with a clear end date that matches, so there is no overlap and no gap.

Conversion fixes the arrangement from the date of the labour contract; it does not by itself settle questions about the months that went before. If a relationship ran for a long time as a disguised employment, take legal advice on that earlier period before you move.

If you are comparing providers to employ people you are converting, our list of questions for picking an EOR in Bulgaria is a good place to start.