Hire in Mongolia through our Employer of Record (EOR)

An Employer of Record (EOR) is a third-party organization that takes on the legal and administrative responsibilities of employing workers on behalf of another company. This arrangement allows businesses to hire employees in countries where they don't have a legal entity, effectively expanding their global reach without the need to establish a local subsidiary or navigate complex international employment laws.

For a country like Mongolia, with its unique cultural and economic landscape, an EOR can play a crucial role in facilitating international business operations and fostering economic growth. By providing a streamlined solution for foreign companies to hire local talent, EORs can help bridge the gap between Mongolia's rich resources and global markets.

How Does EOR Work?

An Employer of Record operates by:

1. Becoming the legal employer: The EOR takes on the role of the official employer for tax and legal purposes, while the client company maintains day-to-day management of the employee.

2. Managing payroll and benefits: The EOR handles all aspects of payroll, including salary calculations, tax withholdings, and disbursement of payments in compliance with local laws.

3. Ensuring compliance: EORs stay up-to-date with local labor laws, tax regulations, and employment standards, ensuring that all hiring practices and employment terms are compliant.

4. Handling administrative tasks: From onboarding new employees to managing time-off requests and terminations, the EOR takes care of all HR-related administrative duties.

5. Providing local expertise: EORs offer valuable insights into local business practices, cultural norms, and market conditions, helping foreign companies navigate the Mongolian business landscape more effectively.

Benefits of Using an EOR

Employing an EOR in Mongolia can offer numerous advantages:

1. Rapid market entry: Companies can quickly establish a presence in Mongolia without the need to set up a legal entity, saving time and resources.

2. Risk mitigation: EORs assume much of the legal and compliance risks associated with employment, protecting the client company from potential liabilities.

3. Cost-effectiveness: By eliminating the need for a local subsidiary, companies can save on setup and operational costs.

4. Access to local talent: EORs can help businesses tap into Mongolia's skilled workforce, particularly in sectors like mining, agriculture, and technology.

5. Flexibility: Companies can easily scale their operations up or down without the complexities of managing a local entity.

6. Cultural bridge: EORs can help foreign companies navigate Mongolia's unique cultural landscape, fostering better relationships with local employees and partners.

7. Simplified expansion: For companies looking to test the Mongolian market or expand their operations gradually, an EOR provides a low-risk entry point.

By leveraging the services of an Employer of Record, businesses can effectively navigate Mongolia's evolving economic landscape, tapping into its rich resources and talented workforce while minimizing risks and operational complexities.

Mongolia's employment landscape is characterized by a young, growing workforce with increasing urbanization. The country has made strides in education, but faces challenges in aligning skills with job market demands. While agriculture remains significant, the service sector is rapidly expanding, and the mining industry plays a crucial role in the economy. The workforce is marked by gender disparities in participation rates and a growing need for technical and digital skills.

Overview of Labor Laws

Mongolia's labor laws aim to protect workers' rights and regulate employment relationships. Key aspects include:

• Employment Contracts: Written contracts are mandatory, specifying terms of employment, duties, and compensation.
• Working Hours: Standard workweek is 40 hours, with overtime limited to 4 hours per day and compensated at higher rates.
• Minimum Wage: Set by the government and reviewed periodically.
• Leave Entitlements: Employees are entitled to annual paid leave, sick leave, and maternity/paternity leave.
• Termination: Specific grounds for termination are outlined, with notice periods and severance pay requirements.
• Social Security: Employers and employees contribute to social insurance funds covering pensions, health insurance, and unemployment benefits.

Cultural Considerations

Understanding Mongolian workplace culture is crucial for effective employment practices:

1. Collectivism: Emphasis on group harmony and cooperation over individual achievement.
2. Respect for Authority: Hierarchical structures are common, with deference shown to superiors and elders.
3. Indirect Communication: Preference for context-based, non-confrontational communication styles.
4. Relationship Building: Personal connections are valued highly in business interactions.
5. Work-Life Balance: While traditionally blurred, there's a growing desire for clearer boundaries, especially among younger workers.
6. Flexibility: Cultural emphasis on hospitality may lead to unexpected personal commitments affecting work schedules.

Challenges of Direct Hiring

Employers face several challenges when directly hiring in Mongolia:

1. Skill Mismatch: Difficulty finding candidates with the right mix of technical and soft skills for modern business needs.
2. Language Barriers: While English proficiency is improving, it can still be a challenge in professional settings.
3. Cultural Adaptation: Foreign companies may struggle to align their practices with local cultural norms and expectations.
4. Legal Compliance: Navigating complex labor laws and ensuring full compliance can be daunting for foreign entities.
5. Retention: High competition for skilled workers in urban areas can lead to retention challenges.
6. Infrastructure: Underdeveloped infrastructure in some areas can complicate recruitment and work arrangements.
7. Gender Disparities: Addressing and overcoming gender gaps in workforce participation requires targeted strategies.

Understanding these aspects of Mongolia's employment landscape is crucial for companies looking to establish a presence or expand their operations in the country. Partnering with a global Employer of Record like Rivermate can help navigate these challenges, ensuring compliance with local laws and cultural sensitivity in employment practices.

Mongolia's payroll and tax system is designed to support the country's social welfare programs while ensuring fair contributions from both employers and employees. The system encompasses various social insurance funds and a progressive personal income tax structure. Understanding these components is crucial for businesses operating in Mongolia to maintain compliance and for employees to comprehend their financial obligations.

Employer Contributions

Employers in Mongolia play a significant role in funding the country's social welfare programs through mandatory contributions to several social insurance funds. These contributions are calculated based on the employee's gross salary and vary depending on the specific fund and, in some cases, the industry risk classification.

The primary social security contributions made by employers include:

1. Pension Fund: 8.5% of the employee's gross salary
2. Health Insurance Fund: 2% of the employee's gross salary
3. Employment Benefit Fund: 1% of the employee's gross salary
4. Unemployment Fund: 0.2% of the employee's gross salary
5. Industrial Accident and Occupational Disease Insurance Fund: 0.8% to 2.8% of the employee's gross salary, depending on the industry's risk classification

In total, employer social security contributions range between 12.5% and 14.5% of an employee's gross salary. These contributions must be paid monthly to the General Agency for Social Insurance by the 10th of the following month. Failure to meet payment deadlines can result in penalties and interest charges.

Employers are responsible for accurately calculating and timely remitting these contributions. Compliance is crucial to avoid legal and financial consequences.

Employee Contributions

Employees in Mongolia also contribute to the social welfare system through various deductions from their gross salary. These contributions are essential for funding personal benefits such as pensions, health insurance, and unemployment protection.

The primary social security contributions made by employees include:

1. Pension Fund: 8.5% of gross salary
2. Health Insurance Fund: 2% of gross salary
3. Employment Benefit Fund: 1% of gross salary
4. Unemployment Fund: 0.2% of gross salary

The total mandatory social security contributions for employees amount to 11.7% of their gross salary. Additionally, employees may be subject to a 1% deduction for a mandatory health insurance scheme.

Mongolia employs a progressive personal income tax (PIT) system. All taxpayers benefit from a standard deduction applied to their gross income before calculating their taxable income. While employees are typically responsible for filing their own tax returns, employers may assist with the calculation and withholding of PIT.

It's important for both employers and employees to stay informed about any changes to income tax brackets and rates, as these can be adjusted periodically by the Mongolian government.

By understanding and adhering to these payroll and tax obligations, both employers and employees contribute to the stability and growth of Mongolia's social welfare system while ensuring compliance with local regulations.

Mongolia offers a comprehensive set of employee benefits, combining mandatory provisions with optional perks to create attractive employment packages. As an Employer of Record (EOR), Rivermate expertly manages these benefits, ensuring compliance with local regulations while helping companies provide competitive offerings to attract and retain top talent. By partnering with an EOR, businesses can navigate the complexities of Mongolia's benefit landscape with ease, focusing on their core operations while leaving the intricacies of benefit administration to experienced professionals.

Mandatory Benefits

In Mongolia, employers are legally required to provide the following benefits:

• Social Security Contributions:

  • Employer contribution rates range from 12.5% to 14.5%
  • Employee contribution rate is 11.5% of their salary
  • Covers pension, disability insurance, and unemployment insurance

• Paid Leave and Time Off:

  • Annual Leave: Minimum 15 days, increasing with length of service
  • Public Holidays: Paid leave for all national holidays
  • Sick Leave: Paid sick leave as outlined in the employment contract
  • Maternity Leave: 126 days of paid leave, with an additional 30 days unpaid if needed

Optional Benefits

To enhance their employment packages, many Mongolian employers offer additional benefits such as:

• Health and Wellness Benefits:

  • Supplemental health insurance plans
  • On-site fitness facilities or gym memberships
  • Health screenings

• Financial Benefits:

  • Meal allowances
  • Transportation allowances or subsidies
  • Performance-based bonuses
  • Profit-sharing programs

• Work-Life Balance Benefits:

  • Flexible work schedules
  • Remote work options
  • Additional paid vacation or personal leave days

• Family-Friendly Benefits:

  • Childcare assistance or on-site facilities
  • Extended parental leave

• Professional Development:

  • Training programs
  • Conference attendance
  • Tuition reimbursement

• Additional Perks:

  • Life insurance
  • Team-building activities
  • Recreational programs

By offering a mix of mandatory and optional benefits, employers in Mongolia can create comprehensive and competitive packages that cater to the diverse needs of their workforce. As an EOR, Rivermate ensures that these benefits are managed efficiently and in compliance with local regulations, allowing businesses to focus on their core operations while providing attractive employment terms to their staff.

The process of termination and offboarding in Mongolia is governed by the Labor Law of Mongolia, which outlines the regulations for dismissal, notice periods, and severance pay. Understanding these aspects is crucial for both employers and employees to ensure a smooth and legally compliant termination process.

Lawful Grounds for Dismissal

In Mongolia, employment contracts can be terminated through various means:

1. Mutual agreement between the employer and employee
2. Employee-initiated termination
3. Employer-initiated termination

Employer-initiated dismissals can occur due to:

• Organizational restructuring or downsizing
• Liquidation or bankruptcy of the enterprise
• Employee's failure to meet performance standards
• Repeated violations of workplace rules
• Absenteeism or serious breaches of the employment contract
• Employee's imprisonment

Notice Requirements

The notice requirements for termination differ based on who initiates the process:

• For employee-initiated terminations, a minimum of 30 days' written notice is required.
• For employer-initiated terminations:
  • Standard termination requires 30 days' written notice
  • Mass dismissal requires at least 45 days' written notice

Severance Pay

Employees may be entitled to severance pay in certain scenarios:

1. Dismissal due to restructuring or downsizing:

   • Employees may receive an amount equivalent to their average monthly salary, based on their employment duration.

2. Termination due to enterprise liquidation:

   • Employees may receive an amount equivalent to their average salary for a duration determined by their length of service.

Offboarding Process

While the Labor Law doesn't specifically outline an offboarding process, it's good practice for employers to:

1. Conduct an exit interview
2. Retrieve company property
3. Revoke access to company systems and facilities
4. Process final payments, including any severance pay
5. Provide necessary documentation, such as a letter of recommendation if appropriate

By following these guidelines and adhering to the Labor Law of Mongolia, employers can ensure a legally compliant and professional termination and offboarding process.

Mongolia, with its vast steppes and rich cultural heritage, has been attracting an increasing number of foreign workers in recent years. For those considering employment opportunities in this unique Asian country, understanding the visa and work permit requirements is crucial.

Visa Requirements

Foreign nationals planning to work in Mongolia typically need to obtain a work visa before entering the country. The process usually involves the following steps:

1. Secure a job offer from a Mongolian employer
2. The employer applies for a work permit on behalf of the foreign worker
3. Once the work permit is approved, the foreign worker can apply for a work visa

Work visas are generally valid for up to one year and can be renewed if the employment continues.

Work Permit Process

Obtaining a work permit in Mongolia involves several steps:

1. The Mongolian employer must register with the Labor and Social Welfare Service Office
2. The employer submits an application for a work permit, including necessary documents such as the foreign worker's qualifications and job description
3. The Labor and Social Welfare Service Office reviews the application and issues the work permit if approved

Work permits are usually valid for one year and can be renewed annually.

Important Considerations

• Quota system: Mongolia implements a quota system limiting the number of foreign workers in certain sectors
• Labor market test: Employers may need to demonstrate that no qualified Mongolian citizens are available for the position
• Processing time: The entire process can take several weeks to a few months, so it's advisable to start early
• Document requirements: All documents must be translated into Mongolian and notarized

Exemptions

Some categories of foreign workers may be exempt from standard work permit requirements, including:

• Diplomatic and consular staff
• Foreign investors meeting specific criteria
• Certain highly skilled professionals in specialized fields

Understanding and navigating Mongolia's visa and work permit requirements can be complex. It's advisable for both employers and foreign workers to consult with local experts or consider partnering with a global employment solution provider like Rivermate to ensure compliance with all regulations and a smooth transition into the Mongolian workforce.