Category Archives: Employment

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.

Restriction on Forced Labor



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On July 2, 2021, the Parliament of Mongolia approved a new Labor law. The law will come into force on January 1, 2022. Therefore, we are preparing to introduce the regulation of forced labor which is one of new and specific regulations of the law.

In Mongolia, the forced labor is prohibited. The new law introduces the term of forced labor. The law set forth that “Forced labor is that the performance of work or service against the will of a person through intimidation, the use of force or the threat of use of force, with the imposition of fines and penalties.”

However, the law states that the following works and services do not apply to the forced labor. These include:

  • working for basic education;
  • performing the military work and services by conscripts;
  • light landscaping and cleaning work for residents of the territory, cities, villages and settlements;
  • work and services to be performed under the direction and supervision of a government agency or official while performing community service or serving a sentence in accordance with a valid court decision. It shall be prohibited to employ or transfer a convict to any individual, business entity or organization;
  • work and services related to the defense of the country, the protection of human life and health, the prevention of disasters, catastrophes and accidents, and the immediate elimination of their consequences;

A person or legal entity that engages in forced labor, mediates or organizes forced labor is subject to a fine of MNT 5,400,000 to MNT 17 million or imprisonment for a term of 1 to 5 years in accordance with Criminal Code.

Employer Initiated Termination



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Employer mistakes or misunderstanding of the law is a common cause of disputes related to employment termination. A recent review of employment issues found that it is common for employers in Mongolia to make process errors when terminating an employment contract.

In particular, this type of dispute is common due to procedural errors in decision-making on the grounds of redundancies, reducing number of staff, and incompetence in terms of occupations/position, skills, and health.
In light of recent changes to the Labor Law of Mongolia we will review key provisions of the old Labor Law and compare with the new provisions of the 2021 Labor Law.

Under the 1999 Labor Law, an employer terminated an employment contract on one of the following grounds.

  1. 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;
  2. 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;
  3. an employee has attained 60 years of age and is eligible to receive a pension;
  4. repeated breach by the employee of the labor disciplinary rules or commission or a serious breach for which the employment agreement specifically provides termination of the labor relations;
  5. 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;
  6. an employee is elected or appointed to another salaried work;
  7. arising on the grounds set forth in the contract.

Under the 2021 Labor Law, most of these termination grounds remain in place, However # (6) and (7) are excluded. The new regulation provides grounds for termination of employment if an employee is found to have forged documents proving his / her education, profession and qualifications at the time of hiring.

Additionally, (2) profession, qualification level, and health are separated and given as two separate grounds.  In terms of profession and qualification level, the precondition was set in law to warn the employee on the grounds that he / she is found to be incompetent in terms of profession and qualification and to provide them possible time to improve their profession and qualification level and performance of work. A medical condition must determine by a decision of the hospital’s labor inspection commission.

(4) Labor disciplinary: For repeated disciplinary violations.

In practice, the most common legal grounds used by an employer to terminate an employment contract are (1) and (2). Common mistakes made by employers are not giving notice within the legal timeframe, not being signed and certified by the employee when issuing termination notice, issue dismissal/termination order without waiting for the notice period to expire, failure to allow to perform the employee’s duties without issuing termination order, and hand over timeframe not being included in the termination order.

An employee’s failure to qualify for a work in terms of profession, skills, or health is often mistaken for dismissal at the discretion of the director or head of the company and organization without a formal decision from the industry or organization’s qualification commission or attestation and medical labor verification commission.

In order to correct above mistakes, if employer follows the following steps when terminating an employee’s employment agreement pursuant to 1999 Labor law:


a) The termination of an employment contract shall be notified 30 days in advance, a 45-day notice shall be given in the event of a mass dismissal, and a 60-day notice shall be given if the contract is terminated.
b) Upon receipt of the notice, the employee shall sign a copy thereof. One copy is kept by the employee and the other by the employer
c) Provide the employee with the opportunity to perform his or her duties during the notice period.
d) Employer should pay a severance pay in an amount equal to employee’s average salary for 1 month or more if employee who has been dismissed on the grounds that employee acted for military service, a business entity or branch has been liquidated, position demolished, reducing number of employees, disqualified for work in terms of profession or health. In connection with severance pay there is no upper limit, but 1 month severance pay meets legal requirement. In the event of a mass dismissal, the amount of the severance pay shall be determined in consultation with the employee’s representatives.
e) Termination/dismissal order shall be issued. This order shall specify the legal grounds for termination and the deadline for hand over the work.
f) The employer must make a complete record in the social and health insurance book and provide the termination order, social and health insurance book, and severance pay on the last day of dismissal/termination.

The 2021 Labor Law has not made any significant changes to the termination process and will follow the above- mentioned process by labor law 1999. As for the change, it is not necessary to allow an employee during the period of termination notice and it is possible to dismiss him / her after payment including notice period. Massive dismissal lasts 90 days. Massive dismissal is determined that the number of employees in an organization with a certain number of employees is fired.


If the employee has been terminated on the grounds of the employer has transferred ownership, the business entity or organization has been liquidated, position demolished, reducing number of employees, disqualified for work in terms of profession and health, following a severance pay amount shall be paid. Severance pay has to be paid in equal amount of basic salary as follows.


a) If worked for 6-2 years, 1 month or more basic salary
b) If worked for 2-5 years, 2 months or more of basic salary
c) If worked for 5-10 years, equivalent to 3 months or more of basic salary
d) If worked for 10 or more years, 4 or more months basic salary

In the event of a mass dismissal, the employer shall negotiate with the employee’s representatives, but the amount of the severance pay shall not be less than that specified above.


The termination order shall be issued in writing prior to the handover and shall be presented to the employee and a copy of the decision shall be handed over. If the employee refuses to accept the decision, it shall be deemed that the decision has been sent by mail to his / her place of residence.


Upon the employee’s request, the employer is obliged to provide a reference within 5 days.

Basics of Mongolia Unemployment Insurance



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Right to get unemployment compensation

The employee or insurer is entitled to get the compensation if employee were paying the unemployment insurance fees 24 months before he or she get unemployed and moreover employee must be paid the insurance 9 months continuously.  If insurer or employee get unemployment compensation previously, then they must be paid the unemployment insurance fee for 12 months, in this occasion, they are eligible to obtain the compensation. 

Compensation amount

Compensation will be granted considering the period of employee has been paid the insurance and the compensation will be provided as a percentage of below amount of last 3 months’s average salary or equivalent amount of payment. 

Work period of paid insurance Percentage of compensation
Until 5 years 45%
5-10 years 60%
10-15 years 60%
Above 15 years 70%

Minimum standard of compensation is no less than minimum wage of 75 percentage.

Employee or insurer is obliged to register the unemployment with 14 days after completed the handover work with employer, if there is reasonable reason for employee for the delay, it should be registered in 3 months with employment department or social insurance organization.

Employment department or social insurance organization will make a decision whether to grant compensation or not within 14 days after receiving the application and relevant document

The compensation will be granted to the employee or insurer within 76 working days after the registration of unemployment.  The employment department or social insurance organization will calculate the compensation and pay it up to two times per month.

Required documents to get the compensation

Following documents need to be collected in order to obtain the compensation:

  1. Application
  2. Social Insurance Book
  3. Termination order by employer

Reduction for the unemployment insurance

If employer or insurer has not been taken or obtained any compensation from unemployment insurance fund in 5 years, following year’s insurance fee will be reduced by 10 percentage. If employer and insurer continually meeting the above requirement, the reduction will be increased by 10 percentages, but it should not be exceeded 50 percentages. 

Employment Termination by Mutual Agreement



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Yesterday we looked at termination of a Mongolian Employment Agreement due to an employee’s failure to meet disciplinary standards. In this post, we will look at another option for ending an Employment Agreement – termination by mutual agreement.

Where a company is not satisfied with an employee’s work performance but is not able to point to a series of breaches of discipline or an occurrence of serious breach and does not have procedures in place for a review Commission, the company has the option to directly negotiate with the employee, via a proposal to the employee to terminate employment. Mongolian law allows for termination of an Employment Agreement at any time if both parties agree. Often the agreement will entail some amount of severance compensation for the employee. Such severance compensation is not legally required but is required as a practicality to obtain the voluntary departure of the employee. Where a mutual agreement on termination is reached, it will legally be considered termination under the initiative of the employee, and the company’s risks of rulings against it at court are greatly diminished.

If employee agrees to such proposal, an employee must provide employer with written termination notice and may leave his/her workplace 30 days after presenting termination notice, unless the parties agree otherwise.

An employee’s written termination notice should come solely from employee’s own will and without improper influence or pressure from employer. So, if client will choose to negotiate with the employee, it is best to make sure the dismissed employee is happy with the termination deal and has no reasons to go to court against the employer. This is obviously most easily achieved by offering the employee generous terms of departure.

Breach of Employment Discipline



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We have been posting series of articles describing the process for termination of an Employment Agreement for failure of the employee to perform. In short, it is not easy unless the company has a clearly defined and regularly used process for employee performance evaluation via a special review “Commission”. In practice, many smaller companies may not have such rules and will not have the time or resources to devote to such a review process by a formal Commission. If this is the case, what alternative options are there for a company to terminate an unsatisfactory employee?

If employee performance is an issue, our Mongolian lawyers advise our clients to look for patterns in breaches of employee discipline. Job “performance” and “discipline” are different grounds for termination under Mongolian law. Article 40.1.4 of the Labor Law provides that an Employment Agreement may be terminated at the initiative of the employer if the employee repeatedly “breaches employment discipline” or conducts a serious breach, as specified in the Employment Agreement, for which immediate termination of the Employment Agreement is stipulated. This may be useful as in many cases where an employee’s performance is inadequate there will also be breaches of discipline to consider.

Many Mongolian companies treat issues such as being late to work, poor work performance, or non-performance of assigned tasks as a breach of employment discipline under Article 40.1.4. Companies normally will specify within an internal employment handbook or rulebook a list of actions and behaviors which will be considered breach of employment discipline.

Where an employee has repeatedly breached employment discipline as outlined in the company rules the employer may choose to terminate the Employment Agreement. In making such determination, the employer must demonstrate multiple separate breaches of discipline. Each breach must be determined and proven separately. Each breach should be supported by a separate item of evidence. It is not mandatory for employer to impose disciplinary sanction on employee for every occurrence of breach, however the breach must be formally noted (usually via a disciplinary warning letter).

Under article 131.1 of the Labor law there are three types of disciplinary sanctions the employer may impose on an employee: a warning, decrease employee’s salary by up to 20 percent for up to 3 months, dismissal (termination of employment). Legislation does not require the employer to impose disciplinary sanctions in any particular order.

A Serious Breach under Article 40.1.4 includes actions or inactions which contradict the Employment Agreement obligations of the employee and which cause negative impact on the rights and interests of the employer such as damage of the employer’s property or harm to employer’s business or reputation. Actions which will be considered serious breach must be specified (listed) in the Employment Agreement. In the event of occurrence of any of the specified serious breach events, the employer may immediately terminate the Employment Agreement (a single occurrence is enough to support termination).

So, where an employee whose job performance is a problem also frequently comes into the office late or violates company policies regarding use of vehicles or communications with clients or co-workers, these disciplinary infractions may be used to build a case for termination of employment due to breach of discipline. Assuming all infractions are properly documented, this approach is less likely to be found to have been improperly applied by a court.

Termination of employment under Article 40.1.4 does not require severance compensation and there is no requirement for a notice period. Companies may consider termination under Article 40.1.4 in alternative to forming a Commission and doing a performance evaluation. A series of infractions and warning is all that is required to establish the legal case for termination.

What is the Mongolia Employment Performance Review Commission?



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We had mentioned in our previous blog post about Employment Agreement termination due to lack of performance that a determination on non-performance must be made by a formal “Commission” of some sort. What is this Commission? How is it formed? Who should participate and sign off? What are its functions? We will review these questions below.

We note that in most cases it will likely not be appropriate to establish a review Commission and organize evaluation of skill or qualification for a single employee, regardless of whether management may think this employee’s performance has not been sufficient. As a matter of practical law in Mongolia, such a situation will likely be viewed by a court as discriminatory and likely based on personal reasons not truly related to job performance.

What exactly is the Commission required by Mongolian law? It is not simply a Human Resources professional or department. The company should have an established internal policy regulating the establishment and conduct of the professional review Commission, including appointment of members, number of members, rights and responsibilities of commission, operational procedures of commission, and other key points.

Within such policy there should be terms and regulations as to how employees’ skills or qualifications are to be evaluated for different jobs and positions taking into account the key skills and qualifications or requirements for different positions.

The Commission may take the form of an annual performance review conducted by Human Resources and other personnel duly appointed to participate according to the company’s rules for conduct of the Commission. During which the performance of each employee is evaluated along clear criteria set out for their respective position.  If an employee’s performance was found to be unacceptable by such Commission, the employee may be rightfully and legally terminated at initiative of employer. The Commission may include members of Human Resources department but should also include additional management personnel.

In practice, individuals in the following positions are often appointed as members of the Commission:

  • member of organization’s senior management);
  • head of unit/division/department;
  • employee’s supervisor;
  • HR manager(s).

The company Human Resources unit usually organizes the evaluation: assists and advises the Commission to plan and organize the evaluation, announces the upcoming evaluation, organizes actual evaluation process, combines results, presents results to the commission for review, etc. The Commission itself plans the evaluation, develops the tests and tasks for evaluation, reviews the results of evaluations, presents the results and reviews of evaluation to organization’s management, etc. Based on the evaluation results and Commission’s reviews the employer decides whether to promote, send to training, or dismiss respective employees. In most company policies there are two types of evaluation: scheduled and unscheduled evaluations. Scheduled evaluations may take place annually, or once in two or three years. It depends on organizations preference. Unscheduled evaluations usually take place at the request of employee: when an employee requests for promotion or for transfer to new job or position. Unscheduled evaluation may also take place at the initiative of employer: when employer proposes to employee a promotion or transfer to new job or position.

It is interesting to note that a spontaneous employer initiated review Commission will be considered valid for purposes of a planned promotion, but as mentioned above, will likely not be considered valid for purposes of intended termination.

Terminating Mongolia Employment Agreements for Non-Performance – Not So Fast



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A client recently came to our Mongolian lawyers with a question regarding termination of an Employment Agreement (check out yesterday’s post to understand the differences between an Employment Agreement and an Employment Contract) for inability of the employee to meet performance expectations.

Article 40 of the Labor Law sets out the grounds for termination of an Employment Agreement at the initiative of the employer. Pursuant to Article 40.1.2, an Employment Agreement may be terminated at the initiative of the employer if it has been determined that the employee fails to meet the requirements of the job or position due to a lack of professional qualifications or skills. The Supreme Court of Labor Law as issued an official interpretation of this provision clarifying the meaning. The official interpretation states that the provisions of article 40.1.2 of Labor law refer specifically to an official finding and formal decision as to the employee’s condition as issued by a professional skill assessment “Commission” established by the employer organization (the company) or industry (in which company operates). The official interpretation of the law also states that the employer’s determination of the employee’s professional ability and skill for the job or position as unqualified for reasons such as absence of tertiary education or an education certificate shall not be grounds for the employer to terminate the Employment Agreement. In other words, the actual skills demonstrated on the job must be considered through a formal review process.

If the employer wants to dismiss an employee on the grounds of Article 40.1.2 of the Labor Law, the employer must obtain a proper evaluation of the employees’ skills or qualification and a decision of a Commission (as described above) that states that the employee is unqualified for the job or position. If such is not obtained and the dismissed employee is unhappy with the employer’s decision and goes to court, there is a high chance that the employer will lose in the court and will have to re-hire the employee or potentially pay additional damages in compensation due to illegal dismissal.

Proper termination of employment on grounds of Article 40.1.2 of the Labor Law should be done through the employer’s establishment of a professional skill assessment Commission. Such commission should properly organize an evaluation of skill or qualification of all employees with respect to their jobs and positions, including presentation to employees of official results of evaluation, obtaining each employee’s opinion on his/her evaluation results, presentation of commission’s decision, and so on.

If based on the official results of the review and commission’s decision the employer decides to dismiss the employee, employer must provide a written Termination Notice to the employee 1 month prior the termination. The Employer must issue a decision (usually a CEO’s order) specifying a period for the employee to hand over his/her duties, the date of employee’s last work day (same date as termination of Employment Agreement), and the amount of severance pay. Pursuant to the Labor Law, when terminating employment on grounds of Article 40.1.2 the employer must pay to employee a severance pay in the amount equal to at least one month average salary of employee.

Compliance with all proper procedures by the employer leading to the termination is important. In practice, employees dismissed on grounds of article 40.1.2 of the Labor law are frequently unhappy and often go to court against employer. In such case, for an employer who did not comply with all proper procedures as mentioned above (terminating the employee via the Commission process) this may result in a court finding in favor of the employee. If the employer is not able to provide clear documentary evidence that the employee indeed does not qualify for the job or position, the court is likely to find that the termination was based on personal (non-professional) reasons, resulting in a ruling against the employer.

Note that there are other options for an employer initiated termination under Mongolian law, which we will review in coming blog posts.

Mongolia Employment Contracts: One Size Does Not Fit All



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A longstanding client of the firm which operates a company in Mongolia posed a simple question to our Mongolian lawyers, asking the best way under Mongolian Employment law to fire an employee who has not lived up to performance expectations. The question is interesting because it requires first determining what type of employee is to be terminated. In Mongolian law, not all employment relationships are equal. There are two difference kinds of employment in Mongolia each with different rules and different processes for termination of the employee.

The Labor Law of Mongolia provides for 2 types of employment: (1) Employment pursuant to an “Employment Agreement” and (2) Employment pursuant to an “Employment Contract”. It is important to understand that that these are two distinct types of employment under Mongolian law, subject to different rules, not simply a difference in translation.

In Mongolia, most employment relationships are pursuant to an Employment Agreement, which is basically described as an agreement to be employed for general purposes. While the actual role the employee performs may vary, no particular or unique skills are required on the part of the employee. This type of employment is defined by an Employment Agreement.

However, under the Mongolia Labor law, when an employer hires someone specifically for his/her high skills or unique talents an Employment Contract may be concluded, rather than a simple Employment Agreement. The Mongolian government puts out a list which sets out the positions subject to an Employment Contract.  According to the list, an employer may conclude an Employment Contract with Directors, Chief Executive Officers, General Managers, Division (department) Managers, and Chief (head) of Divisions (departments).  Other types of employees may only be hired pursuant to an Employment Agreement.

There are several differences between an Employment Agreement and an Employment Contract. Generally, an Employment Agreement for a permanent position is concluded for an indefinite term or if the parties mutually agree for a specified term. In the latter case, at the expiration of the term of the Employment Agreement if the parties do not propose its termination, and the employee continues to perform his/her work, the Employment Agreement is considered to be extended for the initial term.

Whereas, an Employment Contract may be concluded for up to a maximum of 5 years. When concluding an Employment Contract, among other terms, the parties must specify in the Employment Contract a detailed procedure for the evaluation of performance of the employee under the Employment Contract. When this is included in the Employment Contract, it is relatively easy to conclude upon evaluation of the employment contract whether the employee has sufficiently performed his/her duties. If the employee as performed sufficiently, the Employment Contract may be extended.

An Employment Contract must specify in detail all duties, responsibilities, rights, privileges, benefits of the employee, including a description of assets to be given under employee’s responsibility, the rules of possession, the use and disposition of such assets, final results to be achieved by the employee, the liabilities of the employee. Because under an Employment Contract the employer hires the employee specifically for his/her high skills or unique talents, such employee has more responsibility, accountability, rights, privileges and benefits than a “regular” employee employed under an Employment Agreement.

Expat Visa and Work Permits in Mongolia: Part III



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We continue our guide to Mongolia visa and work permits. In this article we shall cover work permit visas (HG visa). (Don’t forget to also check out Part I and Part II)

Work permit visas (HG visa) are issued to foreign citizens, who work in Mongolia under labor contract. HG visas are valid for up to 1 year, depending on employer’s request. Holders of these visas are required to obtain residence card from Immigration Agency and work permit from Labor and Welfare General Agency.

There are several key considerations that employer should be aware of. A key influence is that a foreign employee quota is set by the Government of Mongolia every year for local and foreign companies in Mongolia. This usually ranges from 5% to 80% depending on the sector in question. Generally, however, the default quota for companies is 5%. Another key condition is that employer must pay a workplace fee. Employer must pay on monthly basis a workplace fee, equal to twice the minimum wage set by the Government, for every foreign employee they hired.

So, if you, an employer, have decided to hire a foreign employee then as usual you must first provide a visa invitation letter for your foreign employee. Firstly, employer must obtain a work permit letter from Labor and Welfare General Agency at least one month prior to employee’s arrival to Mongolia. Thereafter a request must be submitted along with required packet of documents (including a work permit letter) to the Immigration Agency. Once Immigration Agency permits to issue a visa, then a visa invitation letter must be forwarded to the embassy or consulate in foreign employee’s country of residence, where he/she applies for HG visa. HG visas are valid for 183 days upon their issuance until the entry into Mongolia.

Upon arrival of foreign employee to Mongolia, employer must register him/her with the Immigration Agency within 7 days, obtain a residence card within 21 days and obtain work permit within 10 business days.

If necessary employer may apply for a single exit-entry, two-time exit-entry or multiple exit-entry visas (valid for either six months or one year) depending on employee’s or employer’s needs. HG visas may be renewed.

Also, there are other visa options for those who seek to engage in other types of activities, such as employment in NGOs, religious organizations and other. Therefore, companies inviting foreigners should carefully choose what visa suit their purpose before applying for visa.