13.09.2024
WHAT THE LATEST CHANGES TO THE CASH PAYMENTS RESTRICTION ACT PROVIDE FOR THE PAYMENT OF LABOR REMUNERATION BY BANK TRANSFER
Comment from the specialist
Assoc. Dr. Andrey ALEXANDROV, Institute of State and Law at the Bulgarian Academy of Sciences, Southwest University "Neofit Rilski" - Blagoevgrad
New changes were recently adopted - § 41 of the Transitional and Final Provisions of the Law on Amendments and Supplements to the Accounting Law (promulgated SG No. 72 of 27.08.2024) amended the provision of Art. 3, para. 1, item 3 of the Law on Restriction of Cash Payments.
We summarize the most important developments to date, as well as what's new in the payment of remuneration by bank transfer.
The Bulgarian legislator adopted the idea that in the current economic and political conditions in our country, payment by bank transfer is necessary and is in the interest of employees. The changes to the Cash Payments Restriction Act of 2023 were motivated by the desire to limit work in the "grey" sector, i.e. curbing the vicious practice of irregularly paying salaries in cash in order to "save" taxes and insurance. The increase in the relative share of bank payments makes the movements of the amounts traceable and is a kind of guarantee for their accountability.
In the provision of Art. 3, para. 1, item 3 of the Law on the Limitation of Cash Payments (in the version effective from 01.09.2023) it was stipulated that payments on the territory of the country are made only by transfer or payment to a payment account, when they are labor remuneration under within the meaning of the Labor Code, paid by employers with 100 or more employees, with the exception of persons with whom an employment contract has been concluded for short-term seasonal agricultural work in accordance with Art. 114a of the Labor Code.
This exception is logical and implied: in the employment contract for short-term seasonal agricultural work, the remuneration is paid personally to the worker against a receipt at the end of the working day (Article 114a, Paragraph 5 of the Labor Code). Considering the not particularly high amount of these remunerations, it would be unjustified to introduce a requirement that they must be paid by bank transfer.
It is important to note that the criterion by which the obligation to pay by bank transfer was introduced is not the size of the amount (which is the main principle of the Law on Limitation of Cash Payments), but the number of personnel employed by a particular employer. If the enterprise has fewer than 100 workers, the general rule remains that remuneration can be paid in cash. I have already had reason to express reservations about this decision, so I will refrain from commenting on it here as well.
As mentioned, these changes were voted through the Transitional and Final Provisions of the Accounting Law Amendment Act. Why this legislative practice is extremely vicious and creates enormous legal uncertainty has been discussed more than once. In an increasingly disturbingly large number of cases, important changes in labor (and not only) legislation are "pushed through" with the Transitional and final provisions of other normative acts that have little (or nothing) to do with the amended matter. This makes them difficult for their recipients to track, and – perhaps even worse – often completely unmotivated. Such changes are often "born" between the first and second reading of a bill in the plenary hall, without being subject to public discussion and without a clear assessment of their impact.
The case under consideration is of this kind. The initial draft of the Law on Amendments and Supplements to the Accounting Law does not foresee any changes to the Law on Limitation of Cash Payments. It was only between the first and second reading of the draft law that the proposal (which was ultimately accepted) appeared, the provision of Art. 3, para. 1, item 3 of the Law on the Limitation of Cash Payments to be amended as follows:
[Payments on the territory of the country are made only by transfer or payment to a payment account when they are: …]
Labor remuneration within the meaning of the Labor Code, paid by employers with 100 or more employees, with the exception of:
The motives of the proponents of the proposal are so short that they can be quoted in their entirety[2]: "Employers who hire foreigners from third countries cannot meet the requirements of Art. 3, para. 1, item 3 of the Law on Limitation of Cash Payments, due to the fact that most foreigners who are employed do not have bank accounts either in Bulgaria or in their country of origin. Employers who have more than 100 employees may have both seasonal and year-round foreign employees. The procedure for obtaining a permit and issuing a bank account is identical in both cases. The procedure lasts about 3 months. During this period, foreigners have the right to work, but cannot receive their remuneration on the basis of Art. 3, para. 1, item 3, because they do not have bank accounts. Issuing a bank account for seasonal workers will create an administrative burden on banks. Since the procedure for issuing a bank account for them also takes about 3 months, and the seasonal work permit is from 3 to 9 months, i.e. the person will be able to use the account for a very short period or not at all. The proposal also adds "persons from third countries with whom an employment contract has been concluded on the basis of Art. 24 of the Law on Foreigners in the Republic of Bulgaria - for a period of up to three months after the issuance of a residence document" so that these persons, while they receive their bank accounts, can receive their remuneration in cash."
The reasons thus presented sufficiently clearly reveal the purpose of the proposed amendments, which are already part of our current legislation. The impotence to speed up the procedure for opening a bank account for the foreigner has led to the result of paying him a cash reward so that he does not have to open an account. It is apparently not so important that this "exception to the exception" runs counter to the general legal concept of "lightening" income by wire transfer.
The changes are effective from 07/06/2024 (when most of the Law on Amendments and Supplements to the Accounting Law also enters into force), which is another legislative absurdity. If, between 07/06/2024 and 08/27/2024, an employer with more than 100 employed workers paid wages to seasonal and other third-party workers in cash, he was in violation of the regulations in force at that time. Whether giving retroactive effect to the law remedies such violations is perhaps a question to be answered by future administrative and judicial practice.
In conclusion, I will take the liberty of quoting from memory the well-known joking statement of a remarkable Bulgarian jurist and public figure with a brilliant sense of humor: "I fear that one day they will bring back the death penalty through the Transitional and Final Provisions of the Beekeeping Law." Without a doubt , this aphorism from many years ago is still relevant today.
_____
[1] Aleksandrov, A., On the payment of labor remuneration by bank transfer and is it a guarantee for the interests of workers and employees. – Labor and Law, 2024, No. 4, pp. 22–28.
[2] The original text of the proposal is available on the Internet at: https://www.parliament.bg/bg/bills/ID/165592,
See Proposals between first and second ballot; No. 3. Entry number: 50-454-04-31 dated 08/06/2024.
