Following much debate the changes proposed by the government in Bulgaria’s Labor Code finally came into effect on July 30, 2010. Under the new regime, employees must use their paid annual leave by the end of the calendar year to which it refers, and will not be entitled to carry it over into future years and respectively get compensated for carried-over leave upon termination of their employment. However, a part of the paid annual leave, amounting to not more than 10 working days (more in cases of sickness, pregnancy etc.), may be deferred by the employer to the next calendar year due to important production reasons. In that case, the entitlement will have to be used in the next calendar year to which it is deferred. Any unused paid annual leave accumulated until January 1, 2010 for previous calendar years can be used only until December 31, 2011.
The changes address a serious contingent liability issue for Bulgarian companies and other employers, which had to accrue provisions for unused paid leave carried over from previous years. In some companies that resulted in significant amounts being allocated, due to the fact that employees had accumulated significant unused paid leave entitlement, which had to be compensated upon termination (including retirement) based on the current salary level of the employee.