8 Chapter Labor
1 Chapter Basic knowledge
2 Chapter Investment Environment
3 Chapter Establishment
4 Chapter M&A
5 Chapter Corporate Law
6 Chapter Accounting
7 Chapter Tax
8 Chapter Labor
9 Chapter Q&A
The results from the fourth quarter of the 2016 Labour Force Survey showed that the number of economically active population aged 15 and beyond has reached 1239.8 thousand at the national level, were number of males is 659.7 (53.2%) thousand and 580.1 (46.8%) thousand persons were females.
The above mentioned survey revealed that the number of unemployed people amounted to 107.0 thousand persons, were number of males is 67.0 (62.6%) and 40.0 (37.4%) thousand persons were females. The unemployment rate raise at 8.6% at the national level, down 0.8 percentage points from the preceding quarter and up 0.3 points compared with the same period of the previous year.
According to the Ministry of Labour and Social Protection, there were 47.3 thousand persons is seeking for work, of which 34.3 thousand persons (72.5%) were registered as unemployed and the remaining 13.0 thousand persons (27.5%) were the employed who is looking for another job.The number of registered unemployed was 34.3 thousand persons, down to 348 persons (1.0%) from the same period of the previous year and 160 persons (0.5%) from the previous month. Of which, 17.8 thousand (52.0%) were women.■Wage by industry and careerPositionAverage SalaryCityPostedManagerMNT 15,000,000Ulan Bator19 Feb 2017Other Automobile CareerMNT 15,000,000Ulan Bator30 Jan 2017Finance ManagerMNT 123,076Ulan Bator26 Jan 2017AccountantMNT 11,760,000Ulan Bator26 Jan 2017Oil & Gas EngineerMNT 39,000,000Ulan Bator11 Jan 2017Other Management CareerMNT 18,000,000Ulan Bator26 Dec 2016Hotel ManagerMNT 500,000Ulan Bator09 Dec 2016HousekeeperMNT 5,000,000Ulan Bator05 Dec 2016General ManagerMNT 30,000,000Ulan Bator16 Nov 2016IT Project ManagerMNT 12,000,000Ulan Bator03 Nov 2016
■Comparison of average wages in neighboring countries (East Asia)CountryCountry’s Currency2013SourceNotesMongoliaTugrik557 550Mongolia National Statistics Office: Average Wages and Salaries Sample SurveyTaiwan (China)New Taiwan Dollar45 664Statistical Office of Taiwan (China): Employee Wage SurveyRefers to wages in industry and servicesMacau (China)Pataca12 145Statistics and Census Survey: Macau SAR Government: Manpower Needs and Wages Survey – Manufacturing, hotels, restaurants, insurance, and financial intermediation activitiesAn average of biannual data is used. Refers to wages in hotels and restaurantsChina, urban unitsYuan renminbi4 290National Bureau of Statistics China: Statistical YearbookAnnual data are divided by 12. Refers to wages in urban State owned, urban collective, and other ownership unitsChina, private enterprisesYuan renminbi2 726National Bureau of Statistics China: Statistical YearbookAnnual data are divided by 12; refers to wages in urban private unitsHong Kong (China)Hong Kong Dollar13 807Census and Statistics Department of Hong Kong: Quarterly Report of Wage and Payroll Statistics (Labour Earnings Survey)An average of quarterly wage rate data are taken. Refers to wages in private sectors; excludes mining and quarrying, information and communication, construction, hawkers or taxis. Companies with 10+ employees. Company size coverage varies per industry.Democratic People’s Republic of KoreaWon3 110 992Ministry of Labour of Korea: Labour Force Survey at EstablishmentsRefers to wages in private establishments with five (5) or more persons engaged.
■History of Labor Union
· 1917 – Mongolia’s first two trade unions, which had mostly Russian and few Mongolian members, were established.
· 1921 – Mongolian trade union were reestablished with 300 members
· 1925 – Unions were reorganized in 1925 into Mongolian, Chinese, and Russian chapters.
· 1927 – 115 delegates, representing 4,056 union members, held the First Congress of Mongolian Trade Unions, establishing the Mongolian trade union movement in the form it still maintained in the late 1980s. In 1927, as in the late 1980s, the organization and functions of Mongolia’s trade unions were patterned on those of the Soviet Union
· 1980s – the highest-level trade union organization was the Mongolian Trade Unions Congress, which was convened every five years. In the interim, trade union affairs were run by the Central Council of Mongolian Trade Unions. The chairman of the Central Council was a member of the Mongolian People’s Revolutionary Party Central Committee and of the Presidium of the People’s Great Khural.
■Freedom of Association
The Mongolian Labour Law of 1999 entitles workers to form or join independent unions and professional organizations of their choosing and protects rights to strike and to collective bargaining
[Sole labour dispute]
Under the Mongolian Labour Code of 1999, this is a disagreement arising between the parties to a labour contract, concerning the right to work and related legal interests.
[Collective labour dispute]
This is a disagreement arising between the parties participating in the contracts and agreements during the negotiations, conclusion, implementation, monitoring/supervision, and enforcement of contract and agreements;
■How to solve labor dispute
In Mongolia, a collective labour dispute is reconciled and settled by:
1. Inviting intermediaries;
If an employer does not respond to the demand within the term specified or the representatives of the employees considering the employer's reply is unacceptable, an intermediary will be invited to settle the collective labour dispute. The parties shall agree with each other on the appointment of an intermediary, and if they are not able to come to an agreement, the Governor of the given sum or district shall be requested to appoint one. In such cases, the Governor of the sum or district shall appoint an intermediary within 3 working days.
2. Having the matter considered by a labour arbitration court.
The parties has no right to refuse to participate in the reconciliation measures specified in 116.1 of this section. For the purpose of supporting their own demands during the reconciliation measures, the representatives of the employees has the right to organize a meeting and demonstrations in accordance with the law. Representatives of the employees, intermediaries and labour arbitrators shall be obligated to pursue all legal possibilities to settle the collective labour disputes.
The parties has no right to repudiate the intermediary appointed by the Governor. The regulation on settlement of collective labour disputes with the participation of an intermediary shall be approved by the Government.
An intermediary is entitled to require and receive from the employer of the relevant documents and information concerning the collective labour dispute.
■Overview of Labor Standards Act
The Labour Code of Mongolia was passed on May 14, 1999.
The purpose of this Code law is to determine the common rights and duties of employers and employees who are parties to labour relations based on an employment agreement, to define collective agreement, collective bargaining, collective and individual labour disputes, labour conditions, management, control, and liabilities for breach of the legislation, and to ensure equality of the parties.
■ System for flexible employment
[Rules of an employee´s transfer]
An employer can transfer the employee to another position only in exceptional cases:
1. To prevent a natural disaster or industrial accident to happen, or to repair their consequences. In such a case, the transfer shall not exceed 45 days;
2. During idle time of the employee, with the employee's consent.
In case of transfer of an employee to another permanent workplace (i.e. in another city or aimag) at the employer’s initiative, the receiving employer’s shall compensate family transportation and moving costs of such employee.
Trade union officials cannot be transferred to another job position without consent.
[Trial employment period]
The trial employment period or probation period is for a maximum of 6 months. The exact duration of the probationary period is to be determined at the employer’s discretion.
[Contracts of fixed-term employment]
Under Section 23 of the Mongolian labour Code of 1999, a labour contract shall be fixed term or open-ended. For fixed-term employment contracts, the Labour Law established conditions where the employment contract may be lawfully terminated, prior to the end date of the contract. These conditions include situations where both parties agree to terminate an employment contract prior to the end date of the contract or if an employee is required to undertake active military service.
■Rules of labour protection
The law protects the right of workers to participate in trade union activities without discrimination, and the government has protected this right in general. Also, special rules are accorded to female employees, minors, disabled persons, dwarfs and elderly people.
[Shorter working hours]
In Mongolia, the regular working hours are 40 hours a week or 8 hours per day. Shortened hours may apply for pregnant employees or a woman with a breast-feeding child. According to Sec. 107 of the Mongolian labour Code of 1999, if a medical conclusion is made relating to the easing of working conditions of a pregnant woman or a woman with a breast-feeding child, the working hours of that woman shall be reduced or she shall be transferred to other work not hazardous to her health.
■Labor standards in Mongolian Labor Law
In Mongolia, the amount of the basic salary, establishing or changing its form, salary distribution date (pay day), extra pay and additional pay, a bonus, extra pension, benefit, payment amount, labour norms and quotas are indicated in the labour contracts. The amount of the payment during down time, determined by the collective contract, shall be 60% or more of the employee's basic salary and shall not be less than the minimum labour remuneration.
If an employee has worked on public holidays and was not compensated with another rest day, he shall be paid double his average remuneration.
If an employee who has worked overtime or on the weekly rest days and has not been compensated with other rest days, he shall be paid one and half times or more of his average remuneration.
[Night hours pay]
If an employee who worked during night hours and who has not been compensated with rest, the additional pay shall be regulated by the collective and labour contracts.
[Regular vacation pay]
During the regular annual paid leave of the employee, he/she shall be granted a regular vacation payment. A regular holiday payment shall be established by the average remuneration of that working year.
· August 1, 1998 - Law of Mongolia on Minimum Wage was passed
· April 5, 2011- Minimum Wage Resolution was published by the Ministry of Social Welfare and Labour
As of 2011, the minimum wage for Mongolia is MNT140, 400 per month and MNT835.71 per hour. The government consults with social partners before fixing the minimum wage rate taking account of proposals of national organizations representing employers’ and workers’ interests. It takes into account the cost of living, economic growth and the employment situation. The minimum wage rate is established annually.
In Mongolia, the employer may pay additional compensation other than the basic salary based on an employee’s performance. Additional pay shall be calculated from the main salary and provided to an employee. In addition, if the employee exceed to his basic duties and has been simultaneously or jointly performing other another job or position, or substituted for another absent employee, or performed duties not specified in the job description, or has worked during the night or overtime. The amount shall be determined by the collective contract and agreed to by the employee.
Additional pay is also given when an employee has worked on public holidays and was not compensated with another rest day. He/she shall be paid double his average remuneration. If an employee who has worked overtime or on the weekly rest days has not been compensated with other rest days, he/she shall be paid one and half times or more of his average remuneration.
The Mongolian Labour Code of 1999 also provides an extra pay for a specialization degree or working conditions and other extra pay shall be established by the collective contract and paid based on the job description of the employee. Also, additional compensation shall be given in case of transfer to another territory, expenses with respect to transportation, per diem allowances of an employee, and his/her family's transportation who is elected or appointed from one city or image to another city, or within one image or city from one sum or khoroo to another sum shall be compensated by the organization in which he/she receives.
■Rules of retirement
State Social Insurance General Office began a system of individual pension accounts for persons born on or after January 1, 1960. In this system, the total lifetime amount of contributions made by the worker and employers on the worker's behalf determines the worker's pension. The Social Insurance Law of 1994 established the current pension system in Mongolia. It is one of the social insurance programs of the government. Pension policies are formulated by the Ministry of Social Welfare and Labour (MSWL) and implementation of pension schemes, collection of premiums and payment of benefits are under the State Social Insurance General Office which is under the supervision of MSWL.
The pension system covers employees in the public sector, employees in the private sector and those who are self-employed. In this system, each year's contribution income is used to finance benefit payments due during the year. Retirement age is 60 years old.
■Employment of minors
Under the 1999 Mongolian Labour Law, a person who reaches 14 years of age may enter into a labour contract for the purpose of imparting vocational guidance and work experience, but only with the consent of his/her parents or guardians and the state administrative organization in charge of labour issues. Upon reaching 15 years of old, a person may enter into a labour contract provided he/she secure the permission of his parents or guardians. The right to enter into a labour contract without parental permission is given to persons who are at least 16 years old. An employee 14 -18 of years of age may be employed after he undergone medical examinations, and further biannual medical examination shall be compulsory until he reaches 18 years of age.
[Prohibitions and restrictions in employing minors]
1. It is prohibited to employ a minor in a job which would negatively affect intellectual development and health.
2. It is prohibited to require a minor employee to perform overtime work or to work on public holidays or weekends.
3. Employment of a minor in a job under abnormal or special conditions shall be prohibited.
4. It is prohibited to require a minor to lift or carry heavier loads than the load prescribed by the member of Government in charge of labour issues.
■Protection of female employee
Under the 1999 Mongolian Labour Law, female employees have the following benefits;
1. Maternity leave
2. Baby care leave
3. Leave for an employee who has adopted a new-born child
4. Reduction of hours of work or transfer to another job of pregnant woman and woman with a breast-feeding child
5. Additional provision of a break for breast-feeding and care of a child
The Labour Law also protects female employees by providing prohibitions, limitations and restrictions to employers’ actions where female employees in specific circumstances are concerned;
1. Prohibition of dismissal of a pregnant woman or a woman with child under 3 years of age. This also applies to single fathers.
2. A list of jobs prohibited to women adopted by the member of the Government in charge of labour issues.
3. Restriction on night and overtime work and assigned trips for pregnant woman, mother of a child under 8 years of age, or a single mother of a child under 16 years of age without her consent. This also applies to single fathers.
4. It is prohibited to require a woman to lift or carry heavier loads than the load prescribed by the member of Government in charge of labour issues.
■Protection of disabled persons
Under Mongolian Labour Law, if the physical condition of a disabled or dwarf person does not impede such a person from performing work or is not contrary to the working conditions, refusal to admit such person to the job due to such reason shall be prohibited. A disabled or dwarf person shall be employed at a level of not less than 3% of its total staff by a business entity or organization having more than 50 employees, unless it is contrary to the job or production feature. Otherwise, the business entity shall pay a monthly payment for each vacancy they should have employed.The amount of the payment shall be set up by the Government and shall be deposited in the State general budget and expended on financing social protection activities devoted to disabled persons.
Under Mongolian Labor Law of 1999, an employment agreement must be in writing and should have the following basic terms otherwise it would be invalid;
· job title or name of a position;
· job duties specified in the position description;
· amount of basic or position salary;
· labor conditions.
The parties may agree on additional terms and conditions, however, any term which is less favourable than those provided in the legislation or collective agreements shall be null and void. The employment agreement takes effect from the date of signing by the parties.
[Termination of Employment contract]
1. Termination by Employee
Unless otherwise provided in the law or an employment agreement, an employee shall have the right to leave his or her workplace upon the expiration of 30 days after submitting his or her request of resignation to the employer, in which case the employment agreement shall be considered as terminated. An employment agreement may be terminated prior to the above mentioned time limit due to a valid reason or by an agreement with respect to the time of resignation with the employer.
2. Termination by Employer
Change of ownership or affiliation of a business entity or organization shall not serve as a ground for termination of an employment agreement.
Notice of termination of an employment agreement pursuant to the following terms shall be given to the employee one month prior to such termination:
· liquidation of the employer's business entity or organization, branch or unit thereof, abolition of the job or position within it, or reducing the number of employees;
· where it has been determined that the employee fails to meet the requirements of the job or position due to the lack of professional qualifications or skill, or health reasons;
An employer shall pay to an employee whose agreement is terminated on the grounds mentioned above, a severance pay in an amount equal to at least the employee's average salary for one month. This severance pay shall also be payable to an employee whose employment agreement is terminated because he or she has been called to active military service or has attained 60 years of age and has become eligible to receive a pension. In the case of a mass redundancy of employees an employer shall agree the amount of the severance pay to be paid through negotiations with the representatives of employees.
An employment agreement may also be terminated by an employer when:
· repeated breach by the employee of the labor disciplinary rules or commission of a serious breach for which the employment agreement specifically provides termination of the labor relations (serious negligence);
· where it has been determined that an employee who is responsible for assets or money has lost the trust of the employer due to an act or omission (financial negligence);
· an employee is elected or appointed to another salaried work; or
· grounds set forth in the contract.
[Prohibition on Termination of Employment Contract]
It shall be prohibited to terminate an employment agreement with an employee whose job or position is retained, unless the business entity or organization is liquidated.
An employee shall retain a job or position in the following circumstances, even though an employee is not performing his or her job duties:
· the employee performs duties by election in a state body for a period of up to 3 months;
· the employee is on an annual vacation;
· the employee is undergoing medical examinations, acts as a donor, or is on leave pursuant to a medical certificate or at employer's permission or;
· the employee is on pregnancy, maternity or child care leave;
· the employee is participating in negotiations to conclude a collective agreement or bargain, or is participating in a lawfully organized strike;
· with respect to an employee who has received a call-up under the decision of the military call-up commission for active military service;
· such other cases as provided in the legislation, collective or employment agreements.Additionally, the Labor Law prohibits employers to terminate an employment agreement with an employee who is pregnant or has a child less than three years old unless such employee has conducted financial or serious negligence or the employer is liquidated.
The Social Security System in Mongolia is composed of five major systems:
1. Pension Insurance
2. Benefit Insurance
3. Health Insurance
4. Industrial accident and occupational disease Insurance
5. Unemployment Insurance
■Social Security Law
The Social Insurance Law of 1994 established the pension system in Mongolia. Pension policies are formulated by the Ministry of Social Welfare and Labor (MSWL) and implementation of pension schemes, collection of premiums and payment of benefits are under the State Social Insurance General Office which is under the supervision of MSWL. Social insurance shall be either compulsory or voluntary.
■Payment of social insurance premiums
Under the Law on Social Insurance of 1994 as amended in 1997, the payment of premium shall be as follows (Premium amount as a percentage):
Type of Insurance
Employer's payroll and similar revenue
Insured's salary and similar income
Industrial accident and occupational disease insurance
1.0, 2.0 and 3.0
The minimum amount of social insurance premium to be paid monthly by an insured as defined in article 4 (3) of this law shall be not less than amount calculated in relation to the minimum salary level fixed by the Government and followed at the time:
· Pension insurance: 3.5%
· Benefit insurance: 1.0%
· Industrial accident and occupational disease insurance: 1.0%
■Procedure for payment of social insurance premiumsEmployers shall retain social insurance premium due to be paid by insurees from their wages and other similar income at each pay, calculated in the amounts and in the proportions stated in the Labor Law of 1999, and shall transfer it to the central bank account of the insurance authority in the same month.
Health Insurance in Mongolia is governed by the Citizen’s Health Insurance Law.
There are two (2) types of coverage, the compulsory and the voluntary.
[Compulsory health insurance]
Compulsory health insurance is provided by state insurance organization.
The following citizens of Mongolia shall be due to compulsory insurance:
· Employees of business entities, institutions and organizations;
· Owners of business entities and sole proprietors;
· Children under 16 (general secondary school students under 18);
· Students of professional schools;
· Citizens for whom their pension is the only income;
· Mothers (fathers) taking care of their babies under the age of 2 (twins under 3);
· Persons on regular military service;
· Citizens specified in Article 12 of the Public assistance Law;
· Convicts serving sentence;
· Citizens of Mongolia other than those specified in paragraph 1 above
[Voluntary health insurance]
Voluntary, additional insurance may be conducted by insurance carriers of any form of ownership. Foreign nationals and stateless persons may be insured on voluntary basis.
[Health care insurance services]
The health care services provided to insured are:
· Out-patient care services;
· In-patient care services.Out-patient and in-patient care services shall be provided to insured as provided in law by licensed and accredited health facilities of all ownership. The state central administrative body in charge of medical matters shall approve the list of care services and list of health institutions providing such care services on the basis of proposals from Insurance Council.
Visa and Foreign working permit
In order to get working permit and work legally in Mongolia, a foreign employee must be sponsored by a local Mongolian company. Eligibility for work permits depends on being on local payroll received from a registered Mongolian entity. The Mongolian government requires that only 5 to 20% of a company’s workforce can be foreign, depending on the industry and the total number of employees a company employs.
■Application and requirements for working permit and visa
The process for a visa citizen employee of limited liability companies on Mongolian payroll is as follows:
1. Invitation Letter.
A sponsoring Mongolian company must submit a request letter to the Immigration Agency, which will consult with the Labor and Welfare Agency before authorizing the Ministry of Foreign Affairs and Trade to issue a visa invitation letter. The ministry then forwards this letter to the embassy or consulate in the applicant’s country of residence.
2. HG Work Visa.
The prospective employee must apply for a 30-day visa at the embassy or consulate abroad based on a visa invitation letter. With an issued visa, a foreigner may enter Mongolia.
3. Address Registration.
Upon arrival to the country, a foreign citizen must register at the Immigration Agency within seven days of arrival, including non-work days.
4. Work Permit
The company must obtain a work permit after the foreigner has arrived in Mongolia. Work permit application is done with the Labor and Welfare Agency.
5. Visa Extension and Long-term Residence Permit.Within ten days of arrival, the 30 day visa must be converted into a year-long multiple entry work visa. Conversion is arranged at the Ministry of Foreign Affairs and Trade and during conversion, a foreigner must also apply for a long-term residence permit which will be valid until the validity of the work permit.
1. Mongolia Labor Code 1999
2. National Statistics Office of Mongolia. Socio-economic Situation of Mongolia (2017/1) Monthly Bulletin of Statistics
3. International Labor Organization Regional Office for Asia and the Pacific. Regional Economic and Social Analysis Unit (RESA). Global Wage Report 2014/15. Asia Pacific Supplement. Wages in Asia and the Pacific Dynamic but uneven progress.
6. Labor Force Participation and Earnings in Mongolia. Altantsetseg Batchuluun 2 , National University of Mongolia Bayarmaa Dalkhjav 3 , National University of Mongolia . March 4, 2014
10. Audier & Partners- FOCUS- Mongolia's human resources framework. January 2015
11. KPMG Investment in Mongolia. 2016 Edition
13. Operations Evaluation Department, Asian Development Bank. ADB Evaluation Study. Rapid Sector Assessment. October 2008. Mongolia: Health and Social Protection
14. Minter Ellison Employment in Mongolia at a glance
16. Law of Mongolia on Social Insurance 1994
17. Law on Individual Pension Contribution Accounts
18. Asian Development Bank. Social Protection Project Briefs: Enhancing Mongolia's Pension System
19. Asia Pacific Observatory on Health Systems and Policies. Health Systems in Transition Vol. 3 No. 2 2013. Mongolia Health System Review
20. Mongolian Citizen's Health Insurance Law (CHIL)
23. International Labor Organization Regional Office for Asia and the Pacific. Regional Economic and Social Analysis Unit (RESA). Global Wage Report 2014/15. Asia Pacific Supplement. Wages in Asia and the Pacific Dynamic but uneven progress