STANISLAV POPDONCHEV: INVESTING IN PEOPLE AND HIGH-TECH IS KEY TO THE FUTURE OF THE LABOR MARKET
Vice President of the Bulgarian Industrial Association, Stanislav Popdonchev, Participates in BNT Business.BG Podcast on 17 February 2026
Highlights from Stanislav Popdonchev’s remarks:
The provisions of the Pay Transparency Directive are not new to Bulgarian legislation. What is new is that companies are now required to actively demonstrate that they have adopted methodologies and criteria to ensure equal pay for work of equal value across genders. Many companies, particularly smaller ones, lack dedicated human resources departments and well-developed internal compensation systems, meaning these new requirements will represent a significant administrative and financial burden. Differences in pay are rooted in multiple factors, raising concerns that this could lead to more legal disputes between employers and employees.
On 11 February 2026, European leaders met with industry in Antwerp, where the discussions focused on reducing administrative burdens, including reporting obligations. Europe has recognized several key issues: firstly, that CO₂ emission quotas drive high electricity prices and reduce the competitiveness of European industry; secondly, that energy connectivity across Europe is insufficient, which Bulgaria also experiences. The consensus is that regulations - especially in the ESG area should be reduced, if not eliminated, or at least drastically cut, with a goal of 35% reduction by the end of this European Commission mandate.
The annual labor shortage in Bulgaria is approximately 230,000 people. For years, Bulgaria has significantly outpaced other European countries in labor cost growth, with double-digit increases each year. Public sector wages now consistently exceed those in the private sector, and since public sector employees do not pay personal social security contributions, their disposable income is even higher. Automatic mechanisms governing public sector salaries, as well as the minimum wage determination system, should be reviewed this year.
A significant portion of employers can no longer afford to expand their business or invest in production facilities due to lack of available workforce. Access to financing in Bulgaria is good; interest rates remain reasonable, and no significant increases are expected. The capital market has also seen renewed activity following Bulgaria’s entry into the eurozone. However, the main limiting factor today is workforce availability, which constrains both domestic and foreign investment. Low unemployment and high employment rates are positive, but from an investor perspective, they indicate a tight labor market and high labor costs.
Unfortunately, much of public discourse in Bulgaria focuses on criminal and political issues rather than Europe’s main economic priorities: competitiveness, regulatory reduction, and investment in high technologies. High technology sectors cannot function without skilled workers. Education in Bulgaria is viewed mainly as a financial issue, with discussions limited to funding schools. Vocational education is poorly understood; globally it prepares students for the labor market, whereas in Bulgaria it prepares them for higher education, resulting in redundant spending, students learn similar material in 11th–12th grade and then again in university. There is little meaningful discussion about education quality, teaching methods, or external assessment outcomes. The system’s problems are not financial, but require painful reforms and internal changes in mindset.
Access to workers from third countries currently provides the only relief for businesses. The claim that these workers “take jobs from Bulgarians” is incorrect; these are positions no one else wants. Hiring workers from third countries is more expensive than employing Bulgarians due to additional costs for transport, accommodation, language training, etc., but employers have no alternative. Restricting this process would exacerbate workforce shortages, as there are not enough prepared local candidates for these roles.
The Bulgarian Industrial Association (BIA) supports proposed reforms to the social security system, including the introduction of multi-fund pensions. This reform is essential to allow for greater returns and fairer pensions from the second pillar. Current restrictions on pension fund investments are substantial, with many funds invested abroad. The reform will allow more funds to flow to Bulgarian companies and give insured persons a choice among three investment plans: conservative, balanced, and dynamic. While this is a step in the right direction, its effects will be long-term rather than immediate.
The lack of a regular state budget is a problem for many sectors. Businesses find it difficult to plan due to uncertainty over upcoming changes. It appears that continuing extensions of the budget are likely, with the timing of a regular budget still uncertain.
