Bulgaria: Employment and industrial relations overview
Bulgaria joined the EU in January 2007. This feature looks at the economic transformations that have been taking place since the EU application process began in 1995, as well as labour market trends, the influence of EU social policy on national legislation, the social partners, collective bargaining and social dialogue.
On this page:
Economic background and
developments
Structure of the economy
Growth of private sector
Trends
Employment
Unemployment
Prospects
Labour market institutions and processes
2003
Employment Promotion Act
Vocational education and training
National employment agency
Employment contracts
Labour law
Equal treatment of women and
men
Health and safety
Social dialogue
The system of collective bargaining
Company level
Sector and branch level
Municipal level
Coverage
Extension
Hourly labour costs in
2005
Average annual
pay
Social partners and social dialogue
Employers'
organisations
Trade union
organisations
Economic and Social
Council (ESC)
National
Council for Tripartite Cooperation
Labour ministry social dialogue institutions
Table 1: Average annual number of
employees on employment contracts in 2005, according to economic activity
Table 2: Hourly labour costs in
2005
Table 3: Average annual wages and salaries of employees under employment contracts in 2005, by economic activity
Resources
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KEY POINTS
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Bulgaria joined the EU in January 2007, along with Romania. Following the decision taken by the European Council in 1993 to allow eastern European countries to apply for EU membership, Bulgaria submitted its official application in 1995. The council confirmed the conclusion of accession negotiations with the Bulgarian government on 17 December 2004 and the Accession Treaty was signed on 25 April 2005 in Luxembourg. In September 2006, the European Commission confirmed Bulgaria’s accession date as 1 January 2007 and announced that the country would meet no direct restrictions, but that progress in certain areas – reform of the judicial system, elimination of corruption and the struggle against organised crime – would be strictly monitored.
ECONOMIC BACKGROUND AND DEVELOPMENTS
Economic growth
Bulgaria's transition to a market economy began in the early 1990s but gathered pace after a severe economic crisis in 1996–97. Since then, the economy has undergone substantial reform to allow it to meet the economic requirements for EU accession. Following negative real gross domestic product growth in 1996 and 1997, the main achievement of Bulgarian governments since 1998 is seen as the creation of a functioning market economy with macroeconomic stability.
Average annual growth between 1992 and 2002 was 0%. In 2003, the economy grew by 4.5%. The upward trend continued, with 5.5% growth in 2005. At the same time, inflation fell significantly from more than 1,000% in 1997 to 2.3% in 2003 and 3.8% in 2005.
Structure of the economy
During the past decade, the structure of the economy has changed in terms of production, but much less so in terms of employment. In 1997, the agricultural sector’s share in gross value added was worth 26%, but this had fallen to 11% in 2003, reflecting negative developments in this sector and positive developments in the non-agricultural sectors. The share of industry (including construction) in gross value added remained at between 28% and 30% over this period, while services have expanded from 44% in 1997 to 59% in 2003. At the same time, the share of agriculture in total employment increased from 25% to 28%, and the share of services roses from 43% to 45%. Industrial employment fell from 32% to 28%.
A large number of state-owned enterprises have been sold or liquidated. The financial sector is entirely in private hands and, to a large extent, is foreign owned. The network industries (eg telecommunications) are in the process of full liberalisation and privatisation. It is noteworthy that the current account deficit has increased almost continuously since 1997, but was fully financed by net inflows of foreign direct investment in most years, except in 2001 (68%) and 2003 (79%). However, this situation may be difficult to sustain when privatisation is concluded and no longer contributes to long-term capital inflows.
Small and medium-sized enterprises (SMEs) have gained in economic importance. The proportion of total employment made up by non-financial sector enterprises with up to 250 employees rose from 56% in 1997 to 68% in 2001. Their share of added value also rose – from 35% in 1997 to 48% in 2001. At the same time, the large informal economy makes it harder for SMEs that play by the rules to compete.
Growth of private sector
The share of employees working in the private sector increased from 46% in 1999 to 64% in 2004. The private sector's share in gross value added grew from 63.4% in 1997 to 73.3% in 2003. Since "land restitution" (of property seized under the Communist regime) was finalised in 2000, houses and land are largely in private hands. Between January 1993 and June 2004, 5,107 privatisation deals were concluded. At the end of June 2004, the percentage of state-owned assets (excluding infrastructure) that had been privatised was 86% (based on their value in 1995). A further 146 majority and 706 minority privatisation packages were outstanding. Privatisation has been a major factor shaping labour market conditions and employment relations.
LABOUR MARKET
Trends
The changes in the national labour market during the past 10 years reflect the major trends and processes in the development of the economy, with economic transformation, privatisation and industrial restructuring leading to high unemployment rates, in particular among lower-skilled workers. At the same time, the supply of highly skilled workers has been unable to keep up with demand, owing to high levels of emigration; it is estimated that prior to accession to the EU, 800,000 Bulgarians were living abroad.
Unemployed people have been seeking employment in newly created private sector, micro- and family businesses as well as working in the non-regulated economy.
Employment
The employment rate of the working-age population (15 to 64 years) fell from 54.5% in 1997 to 49.7% in 2001, but increased to 55.8% in 2005 (60% for men, 51.7% for women), compared with the pre-2004 average EU15 rate of 65.2%. Regional disparities in employment rates are considerable and mainly due to the inherited economic structure and the varying opportunities for starting up SMEs.
Part-time employment accounts for 2.1% and fixed-term employment accounts for 6.4% of all employment.
See table 1 for the sectoral distribution of employment by economic activity for 2005, across the public and private sectors.
Unemployment
Between 1992 and 2002, unemployment averaged 13.3% with two significant peaks: in 1993, Labour Force Survey data show there were 814,600 unemployed people, representing an unemployment rate of 21.4%; and between 2000 and 2001 unemployment rose by three percentage points, to 19.6%. Since then it has been falling steadily, to stand at 8.9% in 2006.
While female unemployment rates have historically been similar to, or slightly below, the male rate, since 2005 they have been higher.
Between 1993 and 2001, the unemployment rate for 15- to 24-year-olds was roughly twice as high as for 25- to 54-year-olds. Since then, it has been falling.
The levels of long-term unemployment have been fluctuating, rising between 2000 and 2002 and then falling by 6% before rising again. In 2005, the share of the long-term unemployed in total unemployment was 55.9%, compared with 52.6% the previous year.
The statistics show that long-term unemployment disproportionately affects people with low educational levels and blue-collar workers in all age groups. The proportion of the long-term unemployed accounted for by people with primary education or less rose slightly, from 57.6% for the first nine months of 2004 to 59.9% in 2005. Over the same period, the proportion for those with secondary education fell slightly, from 35.6% in 2004 to 33.7% in 2005. Those with no qualifications account for the largest group of the registered long-term unemployed.
Prospects
Although analysts predict that unemployment may fall to 7% in 2008, further reductions are hampered by the fairly low regional mobility of the workforce; this is caused by a combination of social ties, high owner-occupation of housing and skills mismatches between regional labour supply and demand. At the same time, as noted above, the emigration of highly qualified people has led to shortages in some segments of the labour market, which are expected to become more acute in some sectors, especially with regard to better-qualified workers.
Given a shrinking and ageing population, the potential for further employment growth is limited; sustained improvements in participation and employment rates are expected to allow for further annual employment growth of around 1% over the coming years.
LABOUR MARKET INSTITUTIONS AND PROCESSES
Overall responsibility for labour market legislation and policy belongs to the labour and social policy ministry. It implements policies that have been examined by the national council for the promotion of employment, a permanent consultative body that designs and develops employment policies within the labour ministry.
2003 Employment Promotion Act
The 2003 Employment Promotion Act1 (on the National Employment Agency website) provides for active labour market policy measures and programmes, including vocational training for employed and unemployed adults. It includes financial incentives for employers that upgrade the qualifications of their employees, recruit unemployed people or offer internships. The Act provides the basis for Bulgaria’s vocational training policy and strategy.
Vocational education and training
The key law in this area is the Vocational Education and Training Act, (Microsoft Word format, 170K)2 (on the Ministry of Labour and Social Policy website) which incorporates the concept of lifelong learning in vocational education and training into related labour market reform. It provides for the establishment of a national consultative council, under the auspices of the labour ministry, which addresses the vocational qualifications of the labour force by coordinating national policies and strategies on training provision (for unemployed and employed people), focused on the acquisition of vocational qualifications within the context of lifelong learning.
National employment agency
The Bulgarian employment agency organises labour market training for unemployed people and those at risk of becoming unemployed, as well as for those with jobs. Although the funding for labour market training has risen, it remains relatively low (7% in 2005) as a proportion of the overall expenditure for all labour market programmes.
Unemployment data are monitored and analysed by the labour ministry and the national employment agency (by gender and number of those people served by labour office directorates). As well as strengthening the institutional capacity of the employment agency, the structures are being modernised, on the basis of a “one-stop-office” principle. Further, decentralisation is leading to more responsibility being accorded to the regional employment services.
Employment contracts
Measures have been introduced to monitor the existence of employment contracts, in order to reduce the avoidance of tax and social security payments and facilitate a lowering of income tax rates. However, the effectiveness of these measures depends on the sustainability of public administration reform in Bulgaria.
EMPLOYMENT AND SOCIAL POLICY
The influence of the EU appears to be the major factor shaping social and employment policy in Bulgaria, principally relating to the adoption of the existing body of EU legislation (acquis communautaire) on minimum standards in areas such as labour law, the equal treatment of women and men in employment and social security, and health and safety at work. At the same time, the government is improving implementation and enforcement bodies, particularly the labour inspectorates.
Labour law
National legislation transposing the EU Directive on the protection of employees in the event of the insolvency of their employer (2002/74/EC – on the EUR-Lex website)3 was adopted in April 2004. This regulates the establishment of a guarantee fund at the national social security institute, which guarantees claims arising after 1 January 2005.
Amendments to the Labour Code transposing a major part of the EU acquis were adopted in April 2004. These include sections covering:
The Directive on organisation of the working time of seafarers was transposed in October 2003.
Equal treatment of women and men
In this area, a number of key Directives were transposed in January 2004, including the equal pay Directive (75/117/EEC – on the EUR-Lex website)8, the equal treatment Directive (76/207/EEC – on the EUR-Lex website)9 and the Directive on equal treatment in social security (79/7/EEC – on the EUR-Lex website)10. Anti-discrimination legislation implemented the Directive (97/80/EC – on the EUR-Lex website)11 of 15 December 1997 on the burden of proof in cases of discrimination based on sex (EER 288 p.2).
In early 2004, an "Equal Opportunities for Women and Men" section (including focal points in each directorate) was established within the labour ministry, with a view to coordinating and implementing national policy in this area.
Other amendments to the Labour Code adopted in June 2004 introduced requirements regarding parental leave and relating to pregnant workers, and abolished the prohibition of night work and overtime for certain categories of women. At the same time, restrictions on women’s recruitment for military service were repealed.
Health and safety
In the area of health and safety at work, the EU acquis in the following areas have recently been transposed into national legislation:
Additionally, since April 2004, a plan for strengthening the administrative capacity of the General Labour Inspectorate between 2004–07 has been under way. In July 2004, a timetable for removing the additional payments designed to compensate for poor working conditions was established, with the intention of improving working conditions rather than paying workers a bonus for having to work in poor conditions. Despite all improvements in the health and safety area, however, the rate of occupational injuries remains a challenge.
Social dialogue
In the area of social dialogue, key sections of the Labour Code were amended by legislation in 2003. This included clarification of the criteria for representing workers, employees and employers. In November 2003, the Economic and Social Council was established. This is a legally independent consultative body on economic and social issues involving both social partners and civil society.
The government is completing the adoption of the relevant EU acquis, including: the Directive on the posting of workers (96/71/EC – on the EUR-Lex website)12; the European Works Councils Directive (94/45/EC – on the EUR-Lex website)13; the Directive supplementing the Statute for a European company with regard to the involvement of employees (2001/86/EC – on the EUR-Lex website)14 ; and the information and consultation Directive (2002/14/EC – on the EUR-Lex website)15.
THE SYSTEM OF COLLECTIVE BARGAINING
Collective
bargaining is regulated by arts. 50–60 in chapter IV of the Labour
Code (on the European Agency for Safety and Health at Work website), which were amended in 2001 and define the subject, levels, parties, bargaining obligations, conclusion and registration, enforcement and duration of collective agreements. According to the new rules:
Additionally, the Labour Code sets out new general provisions for concluding agreements between the national representative employees and employers’ organisations at sector and/or branch level.
Company level
Following the 2001 amendments, company agreements may be concluded between the employer and a trade union organisation; all trade unions are legally allowed to conclude collective agreements, regardless of whether they are affiliated to a representative trade union confederation or not. When more than one trade union is represented at an enterprise, they are expected to submit a single draft agreement. If they fail to do this, the employer will conclude an agreement with the trade union organisation whose draft agreement has been approved by a majority of more than half the members at a general employees’ meeting.
It has been estimated that between 1,400 and 1,500 company agreements are in force, significantly fewer than the 1998 peak of 4,500 agreements. This is mainly thought by commentators to be due to the effects of privatisation. Additionally, when the Labour Code amendments were introduced in 2001, all existing agreements (estimated at 2,100 to 2,200) became void and new accords, conforming to the new provisions, had to be concluded, leading to a further drop in the total number.
Sector and branch level
At sector and branch level, collective agreements may be concluded only between the representative employee and employer organisations. It is estimated that there are currently 70 sector and/or branch agreements in force.
Municipal level
At municipal level, collective agreements for activities financed from the municipal budget are concluded between the representative organisations of workers and employers. It is estimated that there are currently 105 municipal-level agreements in force.
Coverage
Collective bargaining coverage has been estimated at around 25%–30%. Collective agreements cover only the employees who are members of the trade union organisation/organisations that are signatory to the agreement. Workers who are not members of the signatory union organisation may accede to it in writing under terms and provisions determined by the parties to the agreement.
Extension
The Labour Code provides for the labour minister to extend to non-signatories sector or branch collective agreements, or individual clauses in such agreements, concluded between all employee and employer representative organisations if they submit a joint request. There are no reports on the application of the extension provision.
LABOUR COSTS AND PAY LEVELS
Hourly labour costs in 2005
Table 2 provides information on hourly labour costs in 2005, analysed according to economic activity. It underlines the generally low wage costs in the labour market and the wide variations between sectors, from BGN1.77 (€0.91) an hour for private sector workers in hotels and restaurants to BGN8.65 (€4.42) for employees in public sector financial institutions. Median hourly labour costs across all economic activities were BGN2.67 (€1.37) in private sector businesses and BGN4.15 (€2.12) in public sector businesses.
Average annual pay
Table 3 presents average annual wages and salaries in 2005 for employees who have concluded employment contracts, analysed by economic activity. Contracted employees in private businesses in the hospitality sector earned on average BGN2,352 (€1,203) a year in 2005, while employees in state-run financial institutions earned BGN12,433 (€6,357).
SOCIAL PARTNERS AND SOCIAL DIALOGUE
Employees and employers have a constitutional right to free association. The Labour Code sets out the conditions that have to be met by trade unions and employers’ associations, in order to be recognised as representative entities, with the right to participate in tripartite dialogue and to have access to funds aimed at supporting tripartite functions.
Employers' organisations
The representativeness criteria for central national employers’ organisations, which are assessed every three years, are:
There are six central employers’ associations that meet
these criteria. They are:
Trade union organisations
To be
representative, a central national trade union organisation must have:
There are currently
three central trade union organisations that meet these criteria:
Economic and Social Council (ESC)
The ESC was established in November 2003, as an independent consultative body on economic and social issues involving both social partners and civil society. A tripartite body, it consists of a president and 36 members representing: employers; trade unions; and non-governmental organisations and civil society members.
If requested by the president, the prime minister or parliament, the ESC is required to give its view on economic and social issues. It may also do so on its own initiative. The chair is elected by parliament and has a four-year term; council members also have a four-year term of office.
National Council for Tripartite Cooperation
This is a consultative body for labour and social insurance issues and living standards. It is consulted on draft decisions of the government in areas regulated by the Labour Code. It consists of an equal number of government representatives (at least one of them should be a deputy prime minister, who also chairs the council) and of representative organisations of employers and trade unions. The social partners appoint a deputy chair for each side.
Labour ministry social dialogue institutions
Finally, there are
social dialogue institutions and bodies, which are mainly consultative, under
the auspices of the labour and social policy ministry. They include:
Although social dialogue and tripartite cooperation in Bulgaria appears highly institutionalised, it is widely accepted by experts, social partners and European Commission services that social dialogue needs to be further improved, in line with EU practice. There are few collective agreements and social dialogue at enterprise and sector level is weak. It is also seen as crucial to obtain the involvement of the social partners for the success of the implementation of the EU acquis at all levels – national, sector and company – in order to improve employment policy and the restructuring process.
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Table 1: Average annual number of employees on employment contracts in 20051, according to economic activity | |||
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Economic activity groupings |
Total |
Public sector |
Private sector |
|
Agriculture, hunting, forestry and fishing |
69,983 |
10,363 |
59,620 |
|
Mining and quarrying |
29,349 |
11,236 |
18,113 |
|
Manufacturing |
606,660 |
17,241 |
589,419 |
|
Electricity, gas and water supply |
56,978 |
39,489 |
17,489 |
|
Construction |
141,829 |
8,218 |
133,611 |
|
Trade, repair of motor vehicles and personal and household goods |
312,272 |
1,469 |
310,803 |
|
Hotels and restaurants |
83,201 |
5,815 |
77,386 |
|
Transport, storage and communication |
160,153 |
71,788 |
88,365 |
|
Financial institutions |
33,599 |
1,741 |
31,858 |
|
Real estate, renting and business activities |
128,139 |
24,714 |
103,425 |
|
Public administration; compulsory social security |
131,065 |
131,065 |
– |
|
Education |
192,838 |
187,912 |
4,926 |
|
Health and social work |
125,464 |
107,750 |
17,714 |
|
Other community, social and personal service activities |
105,696 |
61,283 |
44,413 |
|
Total |
2,177,226 |
680,084 |
1,497,142 |
|
Source: “Enterprise survey on the number of employed persons, wages and salaries and other labour costs in 2005”, National Statistical Institute. 1. Average annual number of employees. | |||
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Table 2: Hourly labour costs in 2005 | |||
|
Economic activity groupings |
Total, whole |
Public |
Private |
|
Agriculture, hunting, forestry and fishing |
2.08 |
2.80 |
1.96 |
|
Mining and quarrying |
6.02 |
8.28 |
4.69 |
|
Manufacturing |
2.75 |
5.63 |
2.67 |
|
Electricity, gas and water supply |
6.87 |
7.09 |
6.37 |
|
Construction |
2.43 |
3.84 |
2.35 |
|
Trade, repair of motor vehicles and personal and household goods |
2.20 |
5.79 |
2.18 |
|
Hotels and restaurants |
1.84 |
2.78 |
1.77 |
|
Transport, storage and communication |
4.25 |
5.13 |
3.54 |
|
Financial institutions |
6.99 |
8.65 |
6.89 |
|
Real estate, renting and business activities |
2.92 |
3.57 |
2.76 |
|
Public administration; compulsory social security |
4.52 |
4.52 |
– |
|
Education |
3.49 |
3.48 |
4.08 |
|
Health and social work |
3.50 |
3.73 |
2.12 |
|
Other community, social and personal service activities |
2.30 |
2.22 |
2.40 |
|
Total |
3.12 |
4.152 |
2.672 |
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Source: “Enterprise survey on the number of employed persons, wages and salaries and other labour costs in 2005”, National Statistical Institute. 1. All amounts in national currency, the Bulgarian lev (BGN), which is pegged to the euro at a rate of €1=BGN1.96. 2. Median value. | |||
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Table 3: Average annual wages and salaries of employees under employment contracts in 2005, by economic activity | |||
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Economic activity groupings |
Total, whole |
Public |
Private |
|
Agriculture, hunting, forestry and fishing |
2,803 |
3,437 |
2,692 |
|
Mining and quarrying |
6,274 |
7,693 |
5,391 |
|
Manufacturing |
3,466 |
5,845 |
3,396 |
|
Electricity, gas and water supply |
6,895 |
7,014 |
6,626 |
|
Construction |
3,210 |
4,505 |
3,130 |
|
Trade, repair of motor vehicles and personal and household goods |
3,008 |
6,611 |
2,991 |
|
Hotels and restaurants |
2,429 |
3,442 |
2,352 |
|
Transport, storage and communication |
4,772 |
5,230 |
4,396 |
|
Financial institutions |
9,051 |
12,433 |
8,866 |
|
Real estate, renting and business activities |
3,891 |
4,458 |
3,755 |
|
Public administration; compulsory social security |
5,737 |
5,737 |
– |
|
Education |
4,068 |
4,037 |
5,268 |
|
Health and social work |
4,543 |
4,837 |
2,767 |
|
Other community, social and personal service activities |
2,912 |
2,716 |
3,185 |
|
Total |
3,885 |
4,811 |
3,461 |
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Source: “Enterprise survey on the number of employed persons, wages and salaries and other labour costs in 2005”, National Statistical Institute. 1. All amounts in national currency, the Bulgarian lev (BGN), which is pegged to the euro at a rate of €1=BGN1.96. | |||
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Resources 1. Employment Promotion Act (on the National Employment Agency website). 2. Vocational Education and Training Act, (Microsoft Word format, 170K)2 (on the Ministry of Labour and Social Policy website). 3. 2002/74/EC(on the EUR-Lex website). 4. 1991/533/EEC (on the EUR-Lex website). 5. 2001/23/EC (on the EUR-Lex website). 6. 1998/59/EC (on the EUR-Lex website). 7. 2003/88/EC (on the EUR-Lex website). 8. 75/117/EEC (on the EUR-Lex website). 9. 76/207/EEC (on the EUR-Lex website). 10. 79/7/EEC (on the EUR-Lex website). 11. 97/80/EC (on the EUR-Lex website). 12. 96/71/EC (on the EUR-Lex website). 13. 94/45/EC (on the EUR-Lex website). 14. 2001/86/EC (on the EUR-Lex website). 15. 2002/14/EC (on the EUR-Lex website). 16. Bulgarian Industrial Association (link to its website). 17. Bulgarian Chamber of Commerce and Industry (link to its website). 18. Bulgarian Industrial Capital Association (link to its website). 19. Confederation of Employers and Industrialists in Bulgaria (link to its website). 20. Confederation of Independent Trade Unions in Bulgaria (link to its website). 21. Confederation of Labor Podkrepa (link to its website). |
This article was written by Beatrice Harper,
researcher and writer, European Employment Review.
European
Employment Review 399 (EER 399) contents
