1. Registering a Business
Mongolia has a relatively transparent and uncomplicated
business registration process. For both joint-ventures and sole proprietorships,
the process begins at the Foreign Investment and Foreign Trade Agency
(FIFTA). FIFTA can independently approve all ventures with a capital
investment and does not discriminate according to the amount invested.
For joint ventures, the
foreign and Mongolian companies file an application and a joint venture
agreement. A fully foreign-owned company submits information on its activities
along with the application letter. FIFTA charges $12 USD for certificates
of approval.
The joint venture must register the company name with
the Registration Office of the General Department of State Taxation to
insure no two companies have the same name. To become a legal entity in
Mongolia, the company must receive final approval from the General Department
of State Taxation. The Department registers the business entity and makes
the registration public. The General Department of State Taxation requires
a $10 filing fee and the following documents from the prospective joint
venture partners:
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The agreement and charter signed by all parties involved
in the venture.
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The certificate of approval from FIFTA.
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A notarized schedule showing the equity share held by
each partner.
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The account numbers of Tugrik and hard currency accounts
in a local bank to be used by the venture.
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A copy of the foreign company representative's passport.
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A certificate showing the amount of capital held by
the foreign company in its home country.
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A certificate of approval from the local administration
where the venture will be based in Mongolia.
Applicants may need additional documents and/or pay additional fees on
a case-by-case basis.
A representative office of a foreign entity may initially register for
3 years. The initial registration fee is $700, of which $500 is transferred
to the State Taxation Department and $200.00 goes to FIFTA. Each extension
of up to 2 years costs $300.
2. Official Regulations on Employment in Mongolia
The Labor Law and several other statutes officially regulate
employment in Mongolia. Translations of these regulations are available
in English from the Ministry of Justice. According to the Ministry of
Social Welfare and Labor the following regulations apply to the
employment of foreign and Mongolian workers.
Non-Mongolian Employees
The Foreign Investment Law of Mongolia states, "A
business entity with foreign investment shall primarily employ citizens
of Mongolia. Persons may be hired from abroad for a job requiring special
or high qualifications." If hiring a person from abroad, a joint
venture or Mongolian firm applies to the Agency for Labor Coordination
under the Ministry of Social Welfare and Labor for work permits before
a foreign employee begins work in Mongolia. The
company should provide names of potential employees, dates of birth, professions,
housing arrangements and copies of employment contracts.
If the local employer cannot show that the foreign worker
possesses skills unavailable in Mongolia, he must pay a monthly tax for
each employee who works in place of a Mongolian. Businesses may be exempt
if they can show the foreign worker possesses skills unavailable in
Mongolia.
Mongolian Employees
Mongolia has high levels of unemployment and under-employment.
It also has shortages of some skilled workers, especially those with foreign
language ability. Most Mongolians are literate and generally perceived
as hard working. However, skill levels, particularly managerial skill
levels and self-discipline remain more suited to a centrally-planned economy.
By regulation, employers should hire local employees through a local Labor
Exchange. Such exchanges maintain information banks on those looking for
work and potential employers. In
practice, employers usually hire most local employees by word of mouth.
Employers may also
advertise positions in Mongolian and English-language newspapers.
Terms of Employment
The employer and the employee usually negotiate the terms
of employment. However, the government provides guidelines. Depending
on the industry and nature of the operation, a firm may need to negotiate
its agreements with an independent trade union. In general, the firm may
negotiate the rate of pay directly with the employee as long as it meets
the minimum wage. The government revises minimum wage periodically to
account for changes in the cost of living.
Companies generally pay 19 or 20 percent of payroll costs
to the government for pensions, health coverage, and other allowances
(depending on the kind of business). The standard workweek is 40 hours.
Employer and employee may negotiate contracts with longer or shorter hours.
The Labor Law of Mongolia sets compensation for overtime, night work dangerous
jobs, and layoffs. Overtime pay for employees is one and one-half times
or more than the regular wage. When a company lays off a worker, the company
must compensate the worker with an amount equal to the average wage for
a period of not less than one month.
The Labor Law stipulates different hours and conditions
for children from the age of 14 through 17. The Labor Law describes the
official holidays (eight per year). It sets the amount of vacation time
allowed, which depends on the length of service. Workers should have a
vacation at least once a year. The basic annual leave period is 15 working
days. The law also requires an additional number of annual leave days
according to the number of years an employee has worked. The Labor Law
grants 120 days of maternity leave to mothers. Upon expiration of maternity
and annual leave, mothers with children under three years of age may take
additional leave if they so desire. The employer must hire her back to
the same position when she returns to work.
Depending on years of service, the general retirement
age for men is 60. Depending on years of service and number of children,
the general retirement age for a woman is between 45 and 55. Labor law
does not require businesses to provide employees with housing. |
