EOR makes it difficult to build a strong company culture, protect intellectual property, or establish a genuine local presence. 

This comprehensive guide explains why transitioning from EOR to direct hires in Bulgaria is essential for sustainable growth, detailing how establishing your own legal entity provides full operational control, enhances brand reputation, and eliminates recurring fees. 

EOR services in Bulgaria seem convenient but there are many hidden legal risks. Bulgarian law doesn’t recognize EOR, forcing companies into risky workarounds like Temporary Staffing Agencies (TSA) or commercial contracts. These lead to fines, reclassification, and higher costs. Transitioning to direct hires ensures compliance and long-term savings. 

Legal Risks of EOR in Bulgaria 

Bulgarian law requires direct employment. EOR isn’t recognized, so providers use TSA or service contracts. TSA restricts roles to temporary tasks (max 30% workforce), and commercial contracts risk reclassification into employment, triggering fines. CeeLegalMatters confirms these risks even with compliant contracts. 

Hidden Costs of EOR – EOR fees (€450-€2,300/month) exceed direct hiring costs by 20% for €60k salaries. No economies of scale—costs rise with headcount.

Superior Control with Direct Hiring – Direct hiring offers full HR control, avoids EOR gray areas, and boosts employee retention. EOR often disrupts growth with compliance issues. 

Safe Transition Steps 

Audit EOR contracts, register a Bulgarian entity, and transfer employees with proper notice. Partner with legal experts for compliance with a 6-12 month transition window.

The Hidden Costs and Limitations of Using an EOR in Bulgaria 

Beyond the monthly fee: the escalating long-term costs of EOR 

EOR fees typically include a percentage of the salary plus employer taxes (18.92%-19.62% in Bulgaria). This layered cost structure makes scaling prohibitively expensive. 

EOR fees may seem manageable initially, but they escalate with each new hire and salary increase. These recurring costs become a heavy financial burden over time. Unlike a one-time legal entity setup, EOR fees persist indefinitely. 

For senior hires, fees multiply quickly, straining budgets. Many companies underestimate this long-term drain, which hinders sustainable growth. 

Loss of control and critical compliance risks 

Handing payroll and compliance to a third party creates distance and reduces your control. Crucially, your company still faces liability for the EOR’s mistakes. 

Bulgarian labor laws are strict, and any compliance errors can lead to severe legal consequences. In Bulgaria, the absence of explicit EOR regulations creates legal ambiguity. 

Companies using EOR services may unknowingly violate labor laws, leading to penalties. Legal experts highlight the risks in Bulgaria’s regulatory landscape legal experts highlight the risks. 

This uncertainty makes EOR a risky choice for long-term operations. 

Key EOR drawbacks to consider: 

• Perpetual monthly fees: A significant long-term drain on your budget that scales with your team’s size and salary. This continuous cost makes scaling expensive over time and reduces funds available for core business investments. 
• Lack of direct control: You cannot customize employment contracts or benefit packages beyond the legal minimums. This restricts your ability to build a unique company culture and tailor incentives to retain top talent. 
• Co-employment liability: Your company remains legally responsible for any compliance failures by the EOR, risking fines, lawsuits, and reputational damage even if the EOR made the error. 
• Employee disengagement: Workers employed by a stranger often feel less connected to your company, damaging loyalty, collaboration, and overall workplace morale. 

Why EOR Solutions in Bulgaria Pose Hidden Risks for Your Business 

EOR services in Bulgaria ensure compliance but pose hidden risks. EORs handle payroll but act as legal employers, causing a cultural disconnect. EOR employees feel disconnected, reducing loyalty and engagement. This prevents building a cohesive culture aligned with your mission. 

• Limited contract customization 
• Unclear IP ownership from generic contracts 
• Weak team culture affecting productivity 
• Rising costs per employee 

Direct Hiring Ensures Full Control Over Contracts and IP 

Direct hiring in Bulgaria gives full contract control for tailored needs. Custom IP and NDA clauses ensure protection. EORs use standard contracts, risking IP disputes for tech firms. Learn about EOR vs legal entity. 

Long-Term Cost: EOR vs. Direct Hire in Bulgaria 

EOR fees rise per employee. Direct hiring has one-time setup costs with stable expenses. Better scalability. EORs hide your brand; direct hiring builds local trust. 

Building Culture with Direct Employees 

Direct hires align with your mission, boosting loyalty and reducing turnover. Single leadership improves communication. This unity drives innovation and success in Bulgaria. 

The Practical Steps for Transitioning from EOR to Direct Hires in Bulgaria 

Employer of Record (EOR) services may seem convenient but often create compliance risks and hidden costs, as they may not fully understand local regulations. Direct hiring ensures full control and adherence to Bulgarian labor laws, avoiding potential legal issues and financial penalties. 

Step 1: Establishing Your Legal Entity in Bulgaria 

Registering an OOD (Limited Liability Company) with Bulgaria’s National Revenue Agency (NRA) is essential. The process includes verifying a unique company name through the Commercial Register, drafting articles of association, and appointing a manager. While the minimum capital is 2 BGN (about €1), banks typically require 150 BGN for account opening. Non-resident managers must visit Bulgaria in person to complete registration. This process typically takes 10-14 days, but proper documentation ensures timely completion. Consulting a local attorney helps avoid common pitfalls. 

Step 2: Managing the Employee Transfer Process Legally and Smoothly 

Terminating EOR contracts requires strict adherence to Bulgarian labor laws, which mandate a 30-day notice period for indefinite contracts. Draft new employment contracts that comply with the Labour Code, including salary details, 40-hour workweek, probation periods (max 6 months), and statutory benefits like 20 days annual leave. 

Notify the NRA within 10 days of the transfer and inform employees 60 days in advance to avoid fines up to BGN 15,000. Under EU Directive 2001/23/UE, employees’ terms must remain unchanged unless mutually agreed; otherwise, compensation of one month’s salary may apply. 

Employers must handle social security contributions (18.92% employer, 13.78% employee) and income tax (10% flat rate) directly through the NRA. This responsibility shifts from the EOR to the company upon transition, requiring robust HR infrastructure. 

Your 4-Step Transition Plan 

1. Register OOD with NRA: Complete name verification, submit articles of association, and deposit capital. Professional assistance ensures timely registration and avoids common pitfalls.

2. Review EOR Agreement: Check termination clauses, notice periods, and potential penalties to avoid legal complications during contract exit. 

3. Draft Compliant Contracts: Ensure all Labour Code requirements are met, including salary, working hours, leave, social contributions, and tax obligations. 

4. Coordinate Payroll Switch: Work with HR and EOR to transition payroll seamlessly, maintaining continuous employment and benefits with no gaps in payment. 

Unlocking Long-Term Growth in Bulgaria with Direct Hiring 

Building a Resilient and Scalable Local Operation 

Relying on an EOR for long-term growth in Bulgaria creates dependency. EOR fees per employee accumulate over time, often exceeding internal HR costs. Without a local entity, your business lacks control over critical HR processes. 

This limits adaptability to market changes and local challenges like bureaucracy and currency management. EOR service quality varies widely. Some providers subcontract operations, causing delays in payroll or onboarding. 

This inconsistency harms employee experience and exposes your company to compliance risks. As highlighted by SKUAD, “While the apparent pros of using an EOR are often discussed, the cons ultimately outweigh them for ambitious companies.”

A proper legal entity ensures stability. It allows direct management of operations and demonstrates true commitment to the Bulgarian market. This strategic move ensures compliance with local labor laws while fostering genuine integration. 

Positioning Your Business for Future Investment and Opportunity 

An EOR model acts as a ceiling for growth. Without a local legal presence, securing partnerships or acquiring assets becomes challenging. Investors view companies without registered entities as less credible. 

Direct hiring transforms HR decisions into strategic moves. Leading firms like Deloitte, EY, and Citi operate through direct hiring in Bulgaria. They leverage EU membership, competitive 10% corporate tax rates, and skilled workforce. 

This builds trust and positions them for sustainable success. A local entity grants access to EU funding and grants, which EOR-dependent companies cannot access. Operational costs are 30-50% lower than in Western Europe, enhancing long-term profitability. 

Strategic Advantages of Direct Hiring 

• Full Operational Control: Make hiring, benefits, and policy decisions directly. 
• Enhanced Brand Presence: Establish your company as a committed employer in the Bulgarian market. 
• Financial Predictability: Move from unpredictable EOR fees to stable, manageable payroll costs. 
• Foundation for Growth: Create the legal structure necessary for scaling and pursuing local opportunities. 

Transitioning from EOR to direct hires in Bulgaria is a strategic leap, not just a change. Embrace full control, reduce long-term costs, and build a resilient local presence. This move unlocks sustainable growth, stronger employee loyalty, and positions your business for lasting success in the Bulgarian market. 

Frequently Asked Questions (FAQ) 

What does Rule 32 refer to in Bulgarian law? 

In Bulgaria, Rule 32 refers to Article 32 of the Labor Code, which governs probation periods for new employees. This regulation allows employers to set a trial period of up to six months for managerial roles and three months for other positions. During this time, both the employer and employee can terminate the contract with a shorter notice period—typically three days—making it easier to assess suitability before confirming permanent employment. 

Which jobs are currently in high demand in Bulgaria? 

Bulgaria’s job market is experiencing strong demand in several key sectors. The IT industry is particularly thriving, with roles such as software developers, data analysts, and cybersecurity experts being highly sought after. Additionally, engineering positions, healthcare professionals (including doctors and nurses), and roles in tourism and hospitality are in high demand. These sectors benefit from Bulgaria’s growing economy and strategic position within the European Union, making them attractive for both local and international talent. 

What does EOR stand for in the context of hiring? 

EOR stands for Employer of Record. It’s a third-party service that legally employs workers on behalf of a company, handling payroll, taxes, and compliance with local labor laws. This allows businesses to hire international talent without establishing a legal entity in the country. However, it’s important to note that in Bulgaria, the EOR model faces regulatory challenges, as the country’s labor laws do not explicitly recognize this arrangement, potentially leading to compliance risks. 

Why are British citizens relocating to Bulgaria? 

Many British citizens are moving to Bulgaria due to its affordable cost of living, favorable climate, and EU membership. The country offers significantly lower housing and daily expenses compared to the UK, making it an attractive option for retirees or remote workers. Additionally, Bulgaria’s rich cultural heritage, scenic landscapes, and relatively straightforward residency process for EU citizens contribute to its appeal. Post-Brexit, some Brits have also sought stable locations within the EU for long-term living. 

Why do Bulgarians nod their heads to say ‘no’? 

In Bulgaria, a nod up and down actually means ‘no,’ while shaking the head side to side signifies ‘yes.’ This cultural difference can be confusing for visitors. The tradition dates back centuries and is thought to have originated from historical practices. It’s important to be aware of this when interacting with Bulgarians to avoid misunderstandings—always confirm verbally if unsure about the gesture’s meaning. 

What should you be cautious about when in Bulgaria? 

When visiting or living in Bulgaria, be mindful of petty theft in crowded areas like markets or public transport. Always use reputable taxi services or ride-sharing apps to avoid overcharging. Additionally, ensure you understand local labor and tax regulations if working, as non-compliance can lead to legal issues. It’s also wise to stay updated on local customs—such as the nodding gesture—to navigate social interactions smoothly. 

Is a 1,500 euro salary considered good in Bulgaria? 

Yes, a 1,500 euro salary is considered above average in Bulgaria. The national average monthly salary is approximately 1,200 BGN (around 600 euros), so earning 1,500 euros places you well above this benchmark. This amount typically provides a comfortable lifestyle, especially in cities like Sofia, where costs are higher than in rural areas. However, the value of this salary can vary depending on your profession, experience, and specific location within the country. 

Can a US citizen legally work in Bulgaria? 

Yes, a US citizen can work in Bulgaria, but they must obtain the appropriate work permit and residence visa. This usually requires a job offer from a Bulgarian employer, who must demonstrate that no suitable EU/EEA candidate is available for the role. The process involves submitting documentation to Bulgarian authorities, including proof of qualifications and a contract. Using an Employer of Record (EOR) service can simplify compliance, though it’s important to note that Bulgaria’s legal framework for EORs has specific limitations and risks. 

What are the main challenges Bulgaria currently faces? 

Bulgaria is addressing several significant challenges, including persistent corruption, brain drain as skilled professionals emigrate for better opportunities, and economic disparities between urban and rural regions. The country also struggles with an aging population and underfunded healthcare and education systems. Additionally, navigating EU regulations and ensuring compliance with labor laws—such as the complexities around Employer of Record services—poses ongoing administrative hurdles for businesses operating there.