The text below is kindly provided by
AIMS Human Capital
At a Glance
As early as the beginning of the 2004, as part of its EU pre-accession efforts, Bulgaria has started the process of harmonising its labour-related legislation to the acting EU Directives. Today, two years after the country’s EU accession, Bulgaria’s labour market is governed by stricter legislative framework as regards formalisation of employment, furnishing employers’ National Insurance (NI) and personal income tax obligations, two pillars of social security, labour-safety provisions of growing sophistication, etc.
Employer’s cost as regards employment-type remuneration covers a number of mandatory contributions for National Insurance purposes and in the general case amounts to 17 per cent on gross pay (with the NI-base capped at BGN 2,000) for the year 2010. Employer’s costs related to NI have been gradually decreased within the last three years from 24 % at the beginning of 2007 to the current 17 per cent. The Bulgarian Government has announced its intentions to further decrease employers’ NI burden by a total of 5 percentage points until 2012.
Throughout 2009 the labour market in Bulgaria was faced with numerous challenges. The growing uncertainty of the economic environment created cautiousness in both employers and employees. Unemployment has been steadily increasing and according to the Bulgarian Employment Agency, it has soared up to 9.13% as of December 2009. Experts expect the annual unemployment for 2010 to reach 11.4%.
Bulgarian Labour Market Response to the Global Downturn
The pessimistic forecasts regarding unemployment in the country resulted in ‘anti-crisis’ measures taken by the local government. In March 2009 it initiated a programme supporting companies in the Production and Services sectors, which have been severely affected by the current economic conditions. Such employers are now allowed to decrease the official working hours of their employees for a total of six moths within a year. The employees, whose remuneration levels have decreased as a result of the above measure, are additionally compensated with an amount of 50% of the minimum wage in the country.
The hardships which a lot of sectors are currently experiencing have directly influenced the readiness of managers to take actual steps in order to soften the negative effect of the market environment on the performance of companies. The local market witnessed a change in strategies of whole organizations and accelerated processes of restructuring and optimisation.
According to a series of quick-scans conducted by AIMS Human Capital Bulgaria during 2009 (supplementing the data of the 18th edition of AIMS Compensation and Benefits Survey, 2009), the number of organizations which have undertaken changes in their practices related to people management exceeds 60%. “Stricter control over expenses” is the ultimate phrase reflecting the attitude among most companies on the local market .
Production organisations are among those most severely affected by the economic downturn. A clear indicator for the latter is the mass hiring freeze applied by a lot of the companies in the sector. Employers report that new recruits are taken only when successors of leaving employees on key positions are needed. Companies, where the personnel planning processes are much more long-term oriented, still continue to invest efforts in the attraction of highly qualified young specialists, who would ensure the retention of knowledge and skills necessary for the organisation to achieve its strategic business goals.
Similarly to the production sector, organizations in other sectors (Services and IT) have adopted temporary hiring freeze policies Despite the fact over the past years the IT sector in Bulgaria was among the most active on the local labour market in terms of employee attraction, development and motivation, a lot of the multinational companies report that their headquarters have already faced the economic difficulties at the end of the previous year, therefore the planning of measures has been implemented on a central level at an earlier stage. As a result, managers in the multinational IT companies in Bulgaria work on the introduction and actual implementation of global corporate measures.
It is important to mention that there are companies, such as the ones operating in the Pharmaceutical Sector which remain stable and are generally unaffected by the economic changes in Bulgaria. Such companies retain their policies and practices regarding people management, and are optimistic about the achievement of targets set for the current year.
Inward Migration and Talent Availability
The current economic conditions, which affected other countries even more severely, reflected on the migration of young Bulgarian professionals. Over the past years the brain-drain created by the outflow of Bulgarians in their pursuit of better economic opportunities in more developed countries, had created further pressure on the domestic labour market. However, since the beginning of the year experts observe a change in this trend as experienced Bulgarians, forced by the decreasing number of labour opportunities in Western Europe, decide to return to Bulgaria. As a result of the inward migration, employers in many sectors no longer experience the talent scarcity, which was till recently, a serious problem for the Bulgarian labour market.
The inward migration, together with the fact that almost all of the layoffs during 2009 had been from the private sector of the Bulgarian economy, also reflects positively on the availability of experienced professionals on the local labour market. HR experts believe that the increasing pool of job seeking candidates on the market has on the one hand raised the overall quality of the job applicants, and on the other hand, it has decreased the monetary cost of hiring experienced professionals.