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Employment in Mongolia

Employment law in Mongolia is covered by the Labour Code of 1999. Employment law in Mongolia is largely influenced by the former Soviet system, and is known for very favourable treatment of employees. While the Civil Code allows for freedom of contract in the sense that contracts between employers and employees can be executed in any language, all documents filed with the relevant government agency must be translated into Mongolian. For these and many other reasons the following are only guidelines in the broadest sense, and professional legal services are recommended when employing in Mongolia.

Key points on employment in Mongolia

There are several key areas to be aware of within Mongolia’s employment regulatory framework, especially for companies that plan to initiate a full local office and human resources department.  These challenges can be mitigated by use of a locally sourced payroll provider who is familiar with all of the local laws and rules for both local employees as well as foreign nationals.

  1. Contracts

    Labour contracts must contain the following basic conditions, at a minimum:

    • The name or title of the position of employment
    • Duties and work to performed
    • Amount of basic salary or salary of the position
    • Working conditions

    Parties are forbidden from independently changing the conditions stipulated within a labour contract. Both parties must have agreed upon terms, otherwise the contract is considered invalid.

  2. Probation periods

    The maximum term of the probationary is 6 months. The exact duration of probationary period is to be determined at the employer’s discretion.

  3. Termination Procedures

    A labour contract can be terminated upon initiation by either the employee or the employer. Unless otherwise stated in the contract, employees are able to leave their position after 30 days of giving notice.

    Grounds for terminating employment include:

    • Mutual agreement by the parties to do so
    • If the employer or employee has died
    • If the labour contract has expired and both parties have decided not to extend the contract
    • If a legal authority has so demanded
    • If an unjustifiably dismissed employee has been reinstated o their previous position
    • If an employee has been enlisted for army service
    • If a court decision prevents an employee from performing their work duties as a result of a criminal offence

    Employers who terminate a labour contract with an employee must establish a time for the transfer of duties to the new employee and provide this information when dismissing the original employee. Employers are obliged to provide the dismissed employee with the decision on the dismissal, any legally required dismissal allowances, as well as a letter of reference about the occupation, profession, specialisation, position and remuneration at the request of the employee.

  4. Statutory Leave

    There are laws that regulate leave periods based on years of service and the type of leave requested, including:

    1. Annual Leave: the basic annual leave entitlement is 15 days, or 20 days if the employee is under 18 years of age. There may be additional leave days awarded on the basis of the tenure of employment ranging from 3 days to 14 days, depending on the length of employment.

    2. Maternity Leave: Female employees are entitled to 120 days of maternity leave. Adoptive mothers are entitled to the same leave period.

    3. Sick Leave: If an employee contracts a normal disease of domestic injury and therefore rendered unable to perform their duties, as determined by a competent medical authority, then they are entitled to sick leave for the duration of such temporary inability.

  5. Pensions & Benefits

    The system of welfare and benefits is complex in Mongolia, and are enforced for Mongolian employees in particular.  There are requirements for both employee and employer contribution rates based on a percentage of salary.

    The categories of Welfare Contributions include:

    • Pensions:  Employer contributes 7% of salary and employee contributes 7%
    • Medical Insurance:  Employer contributes 2% of salary and employee contributes 2%
    • Benefit Insurance:  Employer contributes from 0.4-3% of employee’s salary and there is no employee contribution
    • Unemployment Insurance:  Employer contributes 0.2% of salary and employee contributes 0.2%

Outsourcing Employment Through a GEO Employer of Record Service

Compliance with local employment requirements is just one of the issues foreign companies face when employing staff in Mongolia. For companies which intend to employ their staff directly through their incorporated Mongolia entity, professional legal advice is recommended. Shield GEO provides an alternative path for companies to outsource the employment of their staff in Mongolia.

As a Global Employer Organization (GEO), Shield GEO acts as the Employer of Record and ensures the employment is compliant with host country regulations regarding employment. In addition Shield GEO will handle payroll processing, tax and immigration. Using Shield GEO is the fastest and most cost effective way to deploy local and foreign workers into Mongolia.

 

The Shield GEO solution is an attractive alternative where

– the company is looking to employ staff quickly

– the company doesn’t have an appropriately incorporated entity in Mongolia

– the company wants to work within a defined budget

– the company wants to limit its initial commitment in Mongolia

– the company needs help with tax, employment, immigration and payroll compliance in Mongolia

 

Shield GEO can contract directly with the company to employ and payroll their staff in Mongolia. Shield GEO supplies local employment contracts for the staff which ensure that local statutory requirements are met covering issues such as termination, probation periods, leave entitlements and statutory benefits.  Shield GEO is able to advise companies how to cover local employment regulations whilst still providing consistent global employment policies. Understand more about outsourced employment through Shield GEO.

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