Category Archives: Employment

What is the difference between Salary and Remuneration?



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Under the Labor Law, an employee’s remuneration consists of base salary, additions, additional pay, vacation pay, bonuses and incentives.  

Additions are paid to certain employees depending on specialty rank or degree, abnormal working conditions or responsibilities, as well as for utilizing the employee’s high professional skills or work experience in respect of Contract employees. Additions could also include similar additions provided by law, collective agreement or internal policies. 

Additional pay includes overtime pay, pay for performing work outside the scope of one’s job duties or job position (including simultaneously or in combination with the current job), pay for substitution of another employee, and other similar additional pay stated in law, collective agreement or internal policies (work rules). In respect of Contract employees, additional pay may be paid on the basis of work results.

Bonuses and incentives are paid for the employee’s work result or contribution to the company’s achievement, which include bonuses, one-time monetary incentive for completing a certain special task, and other monetary incentives paid pursuant to law, agreement or internal policy. The remuneration does not include the following: 

      - all types of statutory benefits, including for pregnancy and maternity leave, loss of working ability, unemployment, pension etc. 

      - reimbursements; and 

      - allowance income, including for transportation, fuel, housing and meal discounts.

The remuneration structure above applies to expats employees under contracts as well.

What is an Employer’s Responsibility for Social Insurance?



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Lately, our Mongolian lawyers have assisted the client to establish a company, and which has led to the next inquiry about what responsibilities the company (an employer) will have after the company establishment. One of the considerations is the employer’s duty to pay insurance premiums of its employees.

Mongolian Social Security system provides benefits such as the retirement, health, disability, and unemployment for every single person who are currently employed within Mongolian territory including citizens of Mongolia, foreign employees and stateless persons. Social Security contribution is the premium levied on both employers and employees to fund the Social Security program.

The Social Insurance Law of Mongolia has determined the social insurance premium rates that both employers and employees are required to pay. As of 2023, depending on the industry, rate of premium payable by employer’s payroll is between 12.5% to 14.5%. Employee premium rate is fixed at 11.5% from salary and similar income but employee monthly contributions are capped at the minimum wage MNT 550,000.

An employer should be registered to the General authority for social insurance and responsible for withholding social insurance premiums and transferring them to the authorities on a monthly basis. Also, the employer is required to submit a report on the monthly social insurance premium payment to the social insurance within the 5the of the following month. Primary and accounting records and balance statement related to social insurance should be kept in accordance with the relevant procedure.

New Regulation on Non-Competition Agreements



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Our Mongolian lawyers were recently approached with a request to assist a client to confirm the legality of non-compete obligations under an employment contract for a mining services company.

Employer companies often ask whether they can oblige employee not to work in the company engaged in the similar type of activity or working after terminating an employment contract. This is regulated in the Labor Law of Mongolia as non-compete obligation under additional term of employment agreement.

In order to protect industrial and business secrets, an employer is given right to provide for an additional term in an employment contract or conclude a supplementary contract with employee creating non-compete obligations. Such agreements create an obligation for the departing employee not to work for a directly competing organization, or individual for a period of time after the termination of the employment relationship, or the employee himself/herself shall not engage in directly competitive activities.

The period of validity of additional non-competition clause or supplementary contract in the employment contract is not more than 1 year after the termination of the employee’s employment contract. After the termination of the employment, the employer shall pay the employee a monthly allowance in an amount equal to at least 50% of the last month’s salary during the period of validity of the additional non-competition clause or supplementary contract.

Meaning of last month’s salary is the salary that includes the base pay, additional pay, extra pay, annual leave pays and bonuses.

What to Consider when Entering into an Employment Agreement (Part 3)



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Finally let’s look more closely into employment agreement with special conditions, and other additional clauses that may be included in any type of employment agreement.

So when should employer enter into employment agreement with special conditions and what are its specifics?

Employment agreement with special conditions should be concluded when hiring an executive level employee. In addition to specifying in employment agreement main terms and conditions provided by Labor Law, parties may also specify the expected final results of employee’s work, his/her duties and responsibilities, procedure to evaluate the agreement, and amount of compensations, bonuses, benefits and percentage of profit margin to be paid to employee. Employer may also specify in the employment agreement rights and assets made available to employee, his/her right of possession, use and disposition, liability for damage to employer’s assets and fiduciary obligations to employer. Aside from general grounds for terminating an employment agreement, Labor Law also provides four additional grounds for terminating an employment agreement with special conditions at the initiative of employer.

Pursuant to Labor Law noncompetition clause, confidentiality clause, training clause and clause for full liability for damage to employer’s assets may be included in employment agreement.

Non-competition clause. When entering into employment agreement with special conditions employer may include non-competition clause in the agreement or conclude ancillary non-competition agreement with employee. Duration of non-competition clause must not exceed one year after termination of employment agreement. Labor Law provides that after termination of employment, employer must pay employee at least 50 percent of his/her last month’s salary on a monthly basis during the term of non-competition clause or non-competition agreement. Terms and conditions of non-competition clause do not if employee is employed abroad.

Training clause. Upon agreement by parties an ancillary training agreement or training clause may be included in the employment agreement, where terms and conditions of any training provided to employee by employer must be set out. After the training, parties must agree on duration of employee’s continued employment in the company, which cannot exceed three years. Upon termination of the employment agreement at the initiative of employee, with the exception when employer partially or fully exempts employee from paying the expenses, employee must reimburse the employer training expenses proportionately to the time he/she not worked.

Employer should adopt regulation on storing and handling company’s confidential information, and must approve a list of jobs/positions that bear full liability for damage to employer’s assets.

What to Consider When Entering into an Employment Agreement (Part 2)



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This week we continue the topic of issues the employer and employee should consider when concluding an employment agreement. The first post reviewing these issues can be found here.

Part-time employment agreement

Pursuant to Labor Law (Law) part-time employee means an employee who works less hours than a full-time employee. Law specifies that reducing work hours of a full-time employee in accordance with the law is not considered as working part-time. Employer may hire an employee to work part-time work and pay him/her a salary commensurate with the work performed and hours worked.

Employment agreement for employees working from home

Upon agreement employee may choose to work from home or any other place or location of his/her choice that is other than employer’s, using employer’s or own equipment and materials, under the supervision of employer. In this case employer is responsible for inspecting the safety of equipment and other tools used by employee working from home and providing safety instructions.

Chapter 6 of Law does not apply to employees working from home. Meaning that general provisions and regulations regarding work hours, rest hours, leaves and holidays does not apply to employees working from home.

Remote employee employment agreement

Upon agreement employer may allow employee to perform his/her duties remotely online, either permanently or partially.

In addition to specifying main conditions of the agreement provided by Law, remote employee employment agreement must specify place or location where employee shall perform his/her duties, term/deadlines and form of handing over the work performed, and amount of compensation payable by employer in the event of use of employee’s own assets and equipment to perform duties.

Unless otherwise provided by Law, part-time employee, employee working from home or remote employee has the same rights and obligations as a full-time, permanent employee of the employer or other employees performing similar duties, and is subject to provisions and regulations of labor laws, collective agreements, collective bargaining agreements and internal labor regulations.

When concluding any type of mentioned employment agreements main conditions provided by Law must be specified in employment agreement, which are name of the job or position, duties to be performed specified in the job description, place or location of the job, amount of salary and work conditions.

What to Consider when Entering into an Employment Agreement (Part 1)



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Let’s look into what should both employer and employee consider when concluding an employment agreement.

Pursuant to Labor Law, depending on legal status of employer, there are employment agreement with individual-employer and employment agreement employer, which is legal entity. About regulation of employment agreement with individual-employer is briefly discussed in previous article.

Aside from common employment agreement, where employer is a legal entity and where it is concluded for permanent positions, Labor Law (Law) distinguishes seven other types of employment agreement.

Apprenticeship employment agreement

In order to provide an employee with work experience and skills employer may conclude an apprenticeship employment agreement. Term of regular apprenticeship employment agreement is up to three months with possibility of extending once for no more than three months. However, term for professional apprenticeship employment depending on characteristics of the profession and professional experience and skills to be acquired may be up to two years with possibility of extending once for no more than one year. Salary of an apprentice must be determined by agreement based on his/her duties, work experience and skills, and must not be less than 70% of the salary of a full-time permanent employee performing similar work.

Employment agreement for trainees

An employer, student and educational institution may conclude a tripartite traineeship agreement in order to provide vocational education and training to students of vocational educational institutions, combine theoretical knowledge with practical experience, gain work experience and skills. Term of employment agreement for trainees is up to three years, depending on the profession to be acquired. Salary of a trainee must be negotiated but not less than minimum wage, taking into consideration the ratio of study and working time, the quality and volume of work performed, as well as financial aid received from the educational institution.

Pursuant to Law at the end of agreement term employer is not obliged to hire apprentice or trainee on permanent basis, unless otherwise agreed by parties. Other provisions and regulations of Law, including provisions and regulations regarding employee allowances, surcharges and compensations also equally apply to apprentices and trainees.

Probationary employment agreement

When hiring an employee, employer may conclude probationary employment agreement to ensure that the employee meets the requirements of the job or position. Term of probationary employment agreement is up to three months with possibility of extending once for no more than three months. Salary of probationary employee must be not less than salary offered for the job or position. If employee is hired for one-time seasonal work, as replacement of a permanent employee or for temporary job or position to conclude a probationary employment agreement is prohibited.

Types of Employment Under the New Labor Law



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As previously discussed here, the revised Labor Law came into force on January 1st of this year. Many of our clients have already have updated their employment agreements and internal labor regulations. However, some are still in progress in this matter. In some cases client have asked our Mongolian lawyers what types of employment agreements are permitted under the new Labor Law?

The revised Labor Law (Law) provides for a wider variety of employment agreement types. Even though Law provides general rules and requirements for all types of employment agreements, depending on legal status of employer, occupation characteristics, job description and other factors, the type of employment agreement shall vary.

The Law provides for slightly different regulation for employment agreement between employee and an individual as employer than common employment agreement, where the employer is a legal entity. Pursuant to Law such employment agreement should be concluded between the individual employer and and the worker. This uniquely type of labor arrangement is intended to accommodate a more rural employment environment. Due to the characteristics of rural work, the working schedule and resting hours are more flexible than in a typical employment arrangement. With this type of contract, the parties may agree for the employee to live and work directly in the employer’s residence or other facility, and in this case, the employer is required to provide normal living conditions to employee.

With regards to common employment agreement, Law distinguishes following types of employment agreements: apprenticeship employment agreement, employment agreement for trainees, probationary employment agreement, part-time employment agreement, employment agreement for employees working from home, remote employee employment agreement and employment agreement with special conditions (such as an executive employment agreement). Even though some types of employment agreement may sound to be somewhat similar to each other, they do differ in purpose and regulation. Also, Law separately regulates agreement for supply of labor. However, Law specifies that job placement services are not regulated by this Law, but are regulated by Employment promotion law.

Resolving Individual Labor Disputes Under the New Labor Law of Mongolia



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In the previous post, we mentioned that under the newly revised Labour Law labor disputes in Mongolia may be classified as individual labor rights disputes or collective interest labor disputes. The revised Labour Law introduced significant changes in the mechanisms and procedures for resolution for various types of labour dispute. Here we will describe the new mechanisms put in place for the resolution of individual labor disputes.

Under new Labor Law, legal entities with 20 or more employees are required to establish a permanent part-time Labor Dispute Resolution Commission (“Commission”) which shall manage the conciliation process for individual labor rights disputes. This requirement comes into effect on January 1, 2022. For companies with less than 20 employees, the revised Labour Law establishment of such Commission to resolve disputes at the company level is optional.

For each company the Commission shall be composed of representatives of the employer and the trade union of the business entity or organization, or in the absence of a trade union, an equal number of employees elected by the general meeting of employees.

The Commission is primarily responsible for the preliminary resolution of labor disputes, in particularly individual rights disputes arising in the organization. The disputing party shall have the right to apply to the Commission for resolution of the labor rights dispute within 90 days from the date when he / she knew or should have known about an alleged violation of his / her rights.

For those companies which have not established a “Commission”, or in disputes between “individuals”, the dispute shall be submitted for “conciliation” procedure to the local Tripartite Labour Rights Dispute Settlement Committee at the soum and district level. In the event the disputing parties do not agree with the decision of the Tripartite Settlement Committee, they may file a lawsuit at Civil court (“Court“) within 10 working days from receiving the decision.

In some cases, the court shall have authority to hear the case and decide directly without going through a preliminary conciliation settlement process. These include:

  • claims for damages to the life and health of employees in the performance of their duties;
  • An employee’s complaint that the employer’s illegal decision to terminate the employment agreement, and transfer or reassign the workers position.

Under the new Mongolia Labor Law, detailed rules and regulations are expected to be adopted for implementing the mechanisms for the conciliation procedures and pre-trial settlement of labor disputes.

Resolving Collective Labour Disputes



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The revised Labour Law introduces major changes in the procedures and mechanisms for resolution of various types of labour disputes. In the case of a collective labour disputes, the new law requires the parties to first negotiate toward an agreement and make every effort to resolve the dispute by amicable way.

If no agreement can be reached, the dispute shall be settled with the support of a Labour Mediator. If parties cannot reach the decision on appointment of a Labour Mediator, the General Authority for Labour is able to appoint a Labour Mediator.

If a labor dispute cannot be resolved with the participation of the Labour Mediator, the disputing party is able to apply to the Tripartite Labour and Social Partnership Committee to resolve the dispute through formal Labour Arbitration. The relevant Tripartite Labour and Social Partnership Committee shall establish a Labour Arbitration panel consisting of three arbitrators to consider the dispute. The decision of the Labour Arbitration shall be final with no opportunity to appeal. The disputing party shall not appeal to the court unless there is cause for concern that the Labour Arbitration procedure has been violated.

Disputing parties in collective action employment disputes are required to participate in the Labour Mediation and Labour Arbitration procedures described in the law, and are specifically not permitted to engage in coordinated industrial actions such as labor strikes and lock-outs.

Labor Disputes



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This week, we will introduce new regulations regarding the the settlement of labor disputes in Mongolia under the new Labor Law of Mongolia.

The previous Labor Law classified labor disputes as either individual or collective disputes, and the centralization of the power to resolve labor disputes in the courts was time consuming and limited in the ability of parties to reach an agreement, which was a problem for both the employee and the employer.

Therefore, in order to solve the above-mentioned difficulties, the new Mongolian Labor Law classifies labor disputes as either “Labor Interest” or “Labor Rights” disputes and establishes a mechanism for settlement of such disputes before the litigation stage.

In the law, “Labor Rights Dispute” means a dispute between the parties related to the implementation or interpretation of labor legislation, all types of collective agreements, collective bargaining agreements, employment contracts and internal labor norms, while a “Labor Interest Dispute” means a dispute concerning with establishing the collective bargaining, and all types of collective agreements, collective bargaining agreements, and amendments to employment contracts.

Labor Rights Disputes are to be resolved by the newly established Labor Rights Dispute Resolution Commission (“Commission”) which is established in all types of business entity and organization  and Tripartite labor dispute resolution committee in the local soum or district (“Committee”), or the court. As for Labor Interests Disputes, the law provides for a procedure for resolving disputes of interest by consensus, at the next stage through labor mediators and labor arbitration, and as a last resort, organizing strikes.

Under the new law, the implementation of a pre-trial conciliation and pre-trial settlement mechanism will enable employees and employers to resolve disputes quickly and reduce the current workload of the courts.