Employer of Record in Mongolia

Expanding into new markets like Mongolia offers immense opportunities for global businesses, but it also introduces the complexities of international employment. Successfully hiring employees in Mongolia requires a thorough understanding of the country's specific labor laws, tax regulations, and social security obligations. Non-compliance can lead to significant legal and financial penalties, making it essential for companies to establish a compliant and efficient hiring framework.

When considering hiring talent in Mongolia, companies typically have several options available. Each method comes with its own set of advantages and challenges, and the best choice often depends on the company's long-term strategy and resources.

• Establishing a local entity: This traditional approach involves registering a subsidiary or branch office in Mongolia. While it grants full control over operations, it is often a time-consuming and expensive process, requiring significant upfront investment in legal, administrative, and financial setup.
• Engaging an independent contractor: Companies can hire individuals in Mongolia as independent contractors. However, this carries the risk of misclassification if the working relationship resembles that of an employee, potentially leading to legal issues and back taxes.
• Utilizing an Employer of Record (EOR) service: An EOR like Rivermate allows companies to hire employees in Mongolia without needing to establish a local legal entity. The EOR acts as the legal employer, handling all compliance, payroll, and HR functions, while the client company retains full control over day-to-day management.

How an EOR Works in Mongolia

An Employer of Record (EOR) simplifies international hiring by taking on the legal responsibilities of employment in Mongolia. Rivermate, as your EOR partner, ensures that your Mongolian employees are onboarded and managed in full compliance with local regulations.

• Compliant employment contracts in line with Mongolian labor law.
• Payroll processing and tax withholdings, including social security contributions.
• Registration with local authorities for all necessary employment and tax purposes.
• Management of employee benefits, leave entitlements, and expense reimbursements.
• Handling employment termination in accordance with Mongolian legal requirements.
• Providing local HR support and expertise to both the client and the employee.

Benefits for Companies Hiring in Mongolia Without Establishing a Local Entity

Partnering with an EOR offers strategic advantages for businesses looking to expand into Mongolia quickly and compliantly, without the burden of entity establishment.

• Rapid market entry: Hire employees in Mongolia in days or weeks, not months.
• Reduced legal and financial risks: The EOR assumes responsibility for compliance with Mongolian labor and tax laws.
• Cost-effective expansion: Avoid the significant expenses and administrative overhead of setting up and maintaining a local entity.
• Access to top talent: Recruit and onboard skilled professionals in Mongolia, regardless of your company's physical presence.
• Focus on core business: Delegate all employment-related administration to the EOR, allowing your internal teams to concentrate on strategic initiatives.

Rivermate's transparent pricing model eliminates complexity with a single, competitive monthly fee per employee. Unlike traditional PEO providers, our pricing in Mongolia includes comprehensive HR support, benefits administration, compliance management, and access to our proprietary dashboard for real-time workforce analytics. No hidden costs, no setup fees—just straightforward pricing that scales with your business needs while ensuring full legal compliance in Mongolia.

Employers in Mongolia must contribute 10.2% of each employee's gross salary to social security, covering pension (7%), social insurance (1%), health insurance (2%), and unemployment (0.2%). They are also responsible for withholding and remitting income tax, which is progressive: 10% for monthly income up to 180,000 MNT and 20% for amounts above that. Employees can reduce taxable income through deductions such as pension, social, and health insurance contributions, as well as charitable donations and education expenses, provided they submit supporting documentation.

Key compliance deadlines include monthly payroll tax returns by the 10th of the following month, social security contributions by the 20th, and annual income tax filings by February 15. Foreign workers and companies face additional considerations like tax residency, treaties, and potential permanent establishment rules, requiring careful adherence and professional advice.

Mongolia's salary landscape in 2025 varies significantly by industry, role, and location, with Ulaanbaatar offering higher compensation. Typical monthly salaries range from 1.8 million MNT for quality control inspectors to 8 million MNT for senior geologists in mining, and from 2 million to 7.5 million MNT for IT and finance roles (see table below). The national minimum wage is set at 550,000 MNT per month, and employers must ensure compliance, with exceptions for trainees under strict regulations.

Compensation packages often include bonuses such as annual, performance, and holiday bonuses, along with allowances for housing, transportation, and meals. Overtime pay is typically at 1.5x the regular rate. Salaries are predominantly paid monthly via bank transfers, with payslips detailing gross pay, deductions, and net salary. Market trends indicate upward salary pressure driven by economic growth, foreign investment, and skills shortages, especially for specialized roles, with continued growth forecasted for 2025.

Mongolian labor laws mandate a minimum of 15 paid annual leave days for employees after six months of continuous service, with potential for additional days based on hazardous work conditions or collective agreements. Unused leave can often be carried over, subject to legal and contractual terms. Public holidays include New Year's Day, Lunar New Year, International Women's Day, Nauryz, Children's Day, Naadam Festival, and Independence Day, with observance shifting if falling on weekends. Employees working on public holidays are typically entitled to overtime pay or compensatory time off.

Employees are entitled to paid sick leave upon providing a medical certificate, with compensation levels increasing with length of service and social insurance contributions. Parental leave includes around 120 days of paid maternity leave, approximately 14 days of paid paternity leave, and adoption leave under similar conditions. Additional leave types such as bereavement, study, and sabbatical leave are available, often at employer discretion or contractual agreement.

Mongolian labor laws mandate core employee benefits including social insurance, paid annual leave (minimum 15 days), public holidays, sick leave, maternity leave, minimum wage, and severance pay. Employers must contribute to social insurance covering pensions, unemployment, work accidents, and maternity benefits. In addition to these mandatory benefits, many companies enhance their packages with optional perks such as private health insurance, extra leave, performance bonuses, training, transportation, housing allowances, and life insurance to attract skilled workers.

Health coverage is primarily provided through a national system funded by employer and employee contributions, but private insurance is increasingly common for broader and faster access to healthcare services. Pension contributions are mandatory, with some firms offering supplementary plans like defined contribution or benefit schemes for added retirement security. Benefit packages vary by industry and company size, with larger firms and sectors like mining offering more comprehensive perks, while SMEs focus on basic benefits. Employers must ensure compliance with legal requirements to avoid penalties, carefully budgeting for both mandatory and optional benefits.

Employment agreements in Mongolia are vital for defining the employer-employee relationship, ensuring compliance with the Labor Law. They must include mandatory clauses such as parties involved, job description, start date, working hours, salary, workplace, leave entitlements, termination conditions, confidentiality, and governing law. Mongolia recognizes two main contract types: fixed-term (for specific durations) and indefinite-term (ongoing until termination). Proper drafting helps prevent disputes and legal issues.

Probation periods are allowed up to three months, during which employees have full rights, and employers can terminate employment with short notice if standards are not met. Confidentiality and non-compete clauses are enforceable if reasonable in scope and duration; additional compensation can strengthen non-compete enforceability. Contract modifications require written consent from both parties, and termination procedures depend on the reason, with legal notice periods and severance pay applicable, especially in cases of redundancy or liquidation.

Mongolia is increasingly adopting remote work, driven by technological progress and employee demand for better work-life balance. While there is no specific legislation for remote work, existing labor laws govern remote employment, emphasizing clear employment contracts, employer responsibilities for safe work environments, and compliance with labor standards. Employees have negotiation rights for work-from-home arrangements, but no explicit legal entitlement.

Flexible work options such as telecommuting, flexible hours, and part-time work are common, with companies focusing on attracting talent and reducing costs. Key considerations include data security, equipment provision, expense reimbursement, and reliable technology infrastructure. Employers must ensure secure network access, provide communication tools, and offer technical support to maintain productivity. Transparent policies on equipment and expenses are vital for effective remote work management.

Mongolian labor law mandates specific procedures for employee termination, emphasizing notice periods, severance pay, and lawful grounds. Notice periods vary by contract type and tenure, with a minimum of 14 days for fixed-term contracts, 3 days during probation, and 30 days post-probation for indefinite contracts. Employers can extend these periods, but failure to comply may lead to penalties.

Severance pay is generally required when employees are terminated without cause, redundancy, or due to illness/disability, typically amounting to one month's average salary. It is not obligatory for dismissals due to gross misconduct. Grounds for termination include misconduct, theft, damage, repeated failure, substance abuse, or confidentiality breaches (with cause), and redundancy, restructuring, or end of contract (without cause). Proper documentation and procedural steps—such as written notices, consultations, and final payments—are essential for lawful termination.

Employees are protected against wrongful dismissal, with rights to appeal, potential reinstatement, and protections against discrimination and termination of pregnant employees. Employers must ensure compliance to avoid legal disputes and reputational harm.

Mongolia's growing economy offers expanding opportunities for freelancers across sectors such as IT, creative services, consulting, education, and construction. Employers should understand the legal distinctions between employees and independent contractors, primarily based on control, financial risk, and relationship permanency. Misclassification risks legal and financial penalties, so clear criteria are vital.

Engagements require well-structured contracts outlining scope, payment, IP rights, confidentiality, and termination. IP ownership should be explicitly addressed to prevent disputes, with options for assignment or licensing. Contractors are responsible for their own taxes and social insurance contributions, including income tax, social insurance, and VAT if applicable.

Mongolia's expanding economy attracts foreign workers, requiring compliance with specific visa and work permit regulations. The primary work visa is the HG Visa, issued after an employer sponsors the applicant, who must meet criteria such as a valid job offer, proof that no qualified Mongolian national is available, and submission of documents like passport copies, educational credentials, medical exams, police clearance, and employment contracts. The application process involves employer-initiated submission to government agencies, with processing times ranging from 4 to 8 weeks and fees between $100-$300.

Permanent residency is possible after five years of legal employment, through investment, or family ties, requiring continuous residence, a clean criminal record, financial stability, and language proficiency. Dependents can be sponsored via dependent visas, contingent on proof of relationship and financial support.

Employers must ensure all foreign employees hold valid permits, monitor renewal deadlines, and comply with labor laws. Employees are obligated to adhere to visa conditions, report changes, and renew permits timely. Non-compliance can lead to fines, deportation, or entry bans, emphasizing the importance of strict adherence to Mongolian immigration regulations.