How to Use An Employer of Record in
Mongolia

Hiring in Mongolia requires navigating the Labour Law of Mongolia (2021) which mandates written contracts within three business days of employment start, strict termination procedures requiring trade union notification, and employer social insurance contributions totaling 12.5% of gross salary. An Employer of Record becomes your legal Employer of Record in Mongolia, allowing you to hire compliantly within days without registering a local entity. The EOR removes the risk of penalties from the General Agency for Specialized Inspection for late social insurance registration, which must occur within five business days of hire, and ensures every contract meets the mandatory clauses under Article 39 of the Labour Law.

What Is an Employer of Record in Mongolia?

An Employer of Record in Mongolia is a third-party organisation that becomes the legal employer of your staff under Mongolian law, handling all statutory obligations, payroll, and compliance while you retain full operational control. The EOR holds the employment contract, files mandatory registrations with the General Agency for Social Insurance and the General Department of Taxation, and assumes liability for compliance breaches. You direct the employee's work, set objectives, and manage performance exactly as you would with your own entity.

Under Mongolia's Labour Law of 2021, every employment relationship requires a written contract containing mandatory elements including job description, remuneration structure, working hours, and social insurance terms. Employers must comply with sectoral collective agreements where they exist, provide minimum annual leave of 15 working days, and contribute 12.5% of gross salary to social insurance funds. The EOR ensures your contracts include all mandatory clauses, calculates and remits contributions to the correct funds, and applies the correct overtime rates of 1.5x for the first two hours and 2x thereafter as required by Article 84 of the Labour Law.

You retain day-to-day management, assign tasks, evaluate performance, and define role scope. The EOR owns payroll processing, employment contract issuance, statutory filings with the General Agency for Social Insurance and tax authorities, compliance with the Labour Law and associated regulations, and termination procedures including severance calculation and trade union notification.

How Does an Employer of Record Work in Mongolia?

When you engage an Employer of Record in Mongolia, they become the legal employer while you direct the employee's daily work. The process follows Mongolia's Labour Law requirements, ensuring every hire is compliant from contract drafting through payroll and termination. Here's how it works step by step.

Step 1: Define Role Terms

You provide the EOR with the job title, salary, work location, and any specific terms you want included. If a sectoral collective agreement applies to your industry in Mongolia, the EOR will confirm minimum wage and benefit standards that override your proposed terms. The EOR reviews your requirements against the Labour Law to flag any non-compliant provisions before drafting begins.

Step 2: EOR Compliance Check

The EOR verifies that the proposed salary meets or exceeds the national minimum wage, which as of 2026 is MNT 660,000 per month for full-time employees. They confirm working hours do not exceed 40 hours per week under Article 81 of the Labour Law and that the role classification is correct for tax and social insurance purposes. Misclassification can result in back-tax liabilities and penalties from the General Department of Taxation, so this step is critical.

Step 3: Employment Contract Drafted

The EOR prepares a written employment contract in Mongolian, as required by the Labour Law, containing all mandatory clauses under Article 39. These include the job title and description, place of work, start date, remuneration and payment terms, working hours and rest periods, annual leave entitlement, social insurance enrollment details, and termination notice requirements. Fixed-term contracts are permitted but cannot exceed two years without converting to indefinite-term under Article 35, and the probation period cannot exceed three months for most roles or six months for managerial positions. The contract must be signed within three business days of the employee's start date and one copy provided to the employee.

Step 4: Government Registrations

The EOR registers the employee with the General Agency for Social Insurance within five business days of the employment start date, as mandated by the Social Insurance Law. They also notify the General Department of Taxation to ensure the employee is correctly enrolled for personal income tax withholding. Late registration with the General Agency for Social Insurance triggers penalties starting at MNT 50,000 and can result in the employer being liable for retroactive contributions plus interest.

Step 5: Payroll in Local Currency

The EOR processes monthly payroll in Mongolian tögrög (MNT), as salaries must be paid in local currency under Article 76 of the Labour Law. They calculate and withhold personal income tax at progressive rates of 10% on the first MNT 4,800,000 annual income and 25% on amounts exceeding that threshold, and remit it to the General Department of Taxation by the 10th of the following month. The EOR also deducts the employee's 11.5% social insurance contribution and submits it alongside the employer's 12.5% contribution to the General Agency for Social Insurance.

Step 6: Ongoing Compliance

The EOR files monthly social insurance contribution reports to the General Agency for Social Insurance by the 5th of the following month. They submit monthly personal income tax withholding returns to the General Department of Taxation by the 10th. The EOR ensures compliance with annual leave accrual, which increases by one day per five years of service up to a maximum of 21 working days under Article 87 of the Labour Law. They monitor changes to the Labour Law, social insurance rates, and collective agreements, adjusting payroll and contracts as required. The EOR also maintains personnel records for at least 50 years as mandated by the Labour Law for social insurance and pension purposes.

Step 7: Termination and Severance

Mongolia requires just cause for employer-initiated termination under Article 98 of the Labour Law, which lists 13 permissible grounds including redundancy, employee incapacity, and serious misconduct. The EOR calculates required notice periods, which vary by length of service: one month for employees with less than one year of service, two months for one to five years, and three months for over five years, though collective agreements may specify longer periods. Severance pay is mandatory for redundancy and certain other terminations, calculated as one month's average salary per year of service, with a minimum of two months' pay. The EOR notifies the relevant trade union at least 30 days before redundancy terminations if the employee is a union member, prepares the termination letter citing the legal ground, calculates all final payments including unused leave, and processes the final payroll.

Employment Laws and Compliance an Employer of Record Handles in Mongolia

When you hire through an Employer of Record in Mongolia, they take on full compliance responsibility under the Labour Law of 2021 and associated regulations, so you don't need to build an in-country HR function or worry about keeping up with legislative changes.

• Employment Contracts: Every contract must be written in Mongolian and signed within three business days of employment start under Article 39 of the Labour Law. The EOR ensures all mandatory clauses are present including job description, remuneration, working hours, social insurance enrollment, and termination terms. Failure to provide a compliant written contract can result in fines of up to MNT 300,000 per violation from the General Agency for Specialized Inspection.
• Personal Income Tax Withholding: Employers must withhold personal income tax at 10% on annual income up to MNT 4,800,000 and 25% on amounts exceeding that threshold, and remit it to the General Department of Taxation by the 10th of the following month. The EOR calculates withholding on every payslip, submits monthly returns, and issues annual tax certificates to employees. Late or incorrect remittance triggers penalties of 0.3% per day on the outstanding amount.
• Social Insurance Contributions: Employers contribute 12.5% of gross salary to the General Agency for Social Insurance, covering pension (8%), health (2%), unemployment (1%), industrial accident (0.5%), and sickness/maternity (1%). Employees contribute 11.5%. The EOR registers employees within five business days of hire, submits monthly contribution reports by the 5th, and remits payments by the 10th. Non-compliance can result in penalties, retroactive liability, and employee inability to claim benefits.
• Annual Leave: Employees are entitled to a minimum of 15 working days of paid annual leave under Article 87 of the Labour Law, increasing by one day per five years of service to a maximum of 21 working days. The EOR tracks accrual, approves leave requests in coordination with you, and pays out unused leave upon termination at the employee's average daily wage over the preceding 12 months.
• Termination and Severance: Employer-initiated termination requires just cause under Article 98 of the Labour Law. The EOR calculates notice periods ranging from one to three months depending on tenure, notifies trade unions 30 days before redundancy terminations, and processes severance pay of one month's average salary per year of service for eligible terminations. Wrongful termination can result in reinstatement orders and compensation of up to 12 months' salary.
• Working Time Limits: Standard working hours cannot exceed 40 hours per week or eight hours per day under Article 81 of the Labour Law. The EOR monitors timesheets to ensure overtime is compensated at 1.5x for the first two hours and 2x thereafter, and that weekly rest periods of at least 42 consecutive hours are provided. Violations can trigger inspection findings and fines from the General Agency for Specialized Inspection.
• Health and Safety: Employers must comply with the Law on Occupational Safety and Health and provide mandatory annual health examinations for employees in hazardous roles. The EOR ensures workplace injury reporting to the General Agency for Social Insurance within 24 hours, investigates incidents as required, and maintains occupational safety records. Non-compliance can result in workplace closure orders and criminal liability for serious breaches.
• Data Protection and Privacy: The Law on Personal Data Protection (2021) requires employers to obtain employee consent for processing personal data, implement security measures, and notify the Personal Data Protection Authority of data breaches within 72 hours. The EOR processes employee data lawfully, maintains records of consent, and ensures cross-border data transfers comply with adequacy requirements.
• Collective Agreements: Sectoral and enterprise-level collective agreements can override individual contract terms where they provide more favorable conditions to employees. The EOR monitors applicable collective agreements in your industry, applies any mandatory wage floors or enhanced benefits, and ensures compliance with collective agreement termination procedures which may require longer notice periods or higher severance.
• Trade Union Notification: Under Article 99 of the Labour Law, employers must notify the relevant trade union at least 30 days before terminating an employee for redundancy if the employee is a union member. The EOR manages this notification process, provides the union with termination grounds and severance calculations, and addresses any union objections before finalizing the termination.

How Much Does It Cost to Use an Employer of Record in Mongolia?

The total cost of using an Employer of Record in Mongolia has two components: the EOR service fee and statutory employer on-costs. Statutory costs are fixed by Mongolian law and apply to every employer, whether you use an EOR or operate your own entity. Playroll's EOR service fee starts from $399 per employee per month and is billed separately from payroll, giving you a single predictable cost for full employment compliance, payroll processing, and ongoing legal support.

Let's look at an example that includes a base salary and the EOR service fee.

The EOR service fee covers employment contract drafting and updates, monthly payroll processing in MNT, all statutory filings and contributions to the General Agency for Social Insurance and General Department of Taxation, ongoing compliance monitoring including Labour Law changes, termination management including severance calculation and trade union notification, and direct employee support in Mongolian and English.

Employer of Record vs Setting Up an Entity in Mongolia

The decision between using an Employer of Record and establishing your own entity in Mongolia depends on your hiring timeline, team size, and long-term commitment. Foreign companies typically register a Limited Liability Company (LLC) or a Representative Office, though only an LLC can employ staff. Registration requires a local registered address, notarized documents, and approval from the Foreign Investment and Foreign Trade Agency, taking between six and ten weeks and costing $3,000 to $8,000 in legal, notary, and registration fees.

For companies hiring fewer than 10 to 12 employees in Mongolia, an Employer of Record is almost always the faster and more cost-effective route.

Playroll also supports your long-term growth through its Global Entity Setup product, which handles entity incorporation and local payroll in 120+ countries, so you can transition from EOR to your own compliant entity in Mongolia when the time is right, without switching providers or rebuilding your HR processes.

How Long Does It Take to Hire Someone in Mongolia Through an Employer of Record?

You can hire an employee in Mongolia through an Employer of Record in 5 to 10 business days from the moment you confirm the candidate and employment terms.

• Stage 1: Contract preparation and signing (1 to 3 business days): The EOR drafts a compliant employment contract in Mongolian containing all mandatory clauses under Article 39 of the Labour Law, sends it to you and the employee for review, and collects signatures. Timing depends on how quickly you and the employee review and return the signed contract, and whether any negotiation on terms is required.
• Stage 2: Government registrations (2 to 5 business days): The EOR registers the employee with the General Agency for Social Insurance and notifies the General Department of Taxation, which must be completed within five business days of the employment start date under the Social Insurance Law. Missing this deadline can result in penalties starting at MNT 50,000 and the employer being liable for retroactive contributions, so the EOR prioritizes this stage.
• Stage 3: Payroll configuration and first cycle (1 to 2 business days): The EOR configures the employee in the payroll system, sets up bank payment details, and confirms personal income tax and social insurance deductions. Mongolia follows a monthly pay cycle with payment typically on the last working day of the month, so the first payslip is processed in the month following the start date.
• Stage 4: Mongolia-specific requirements (parallel, no additional time): If the employee is joining a role covered by a sectoral collective agreement, the EOR verifies compliance with any additional wage floors or benefits, but this runs in parallel with contract drafting. No unique Mongolia requirement adds material time if documents are complete.

Timelines can extend if the employee lacks required identity documents such as a valid Mongolian citizenship certificate or social insurance number, if bank account setup is delayed, or if the employee requests contract amendments after initial drafting. Delays in signing the contract by you or the employee are the most common cause of extended timelines.

By comparison, setting up your own LLC in Mongolia and then hiring takes six to ten weeks for entity registration alone, plus the five to ten business days for the hire itself.

How Playroll's Employer of Record Process Works in Mongolia

Playroll handles the full employment lifecycle in Mongolia, from compliant contract drafting through payroll and termination, so you can focus on managing your team.

1. You define the hire

You provide the job title, salary, start date, and any specific employment terms you want included. Playroll's team reviews your requirements against the Labour Law of Mongolia and any applicable collective agreements to confirm compliance.

2. Playroll prepares the employment contract

Playroll drafts a written employment contract in Mongolian containing all mandatory clauses under Article 39, including job description, remuneration, working hours, social insurance enrollment, and termination terms. You and the employee review and sign, and Playroll ensures the contract is executed within three business days of the start date as required by law.

3. Employee onboarding and payroll go live

Playroll registers the employee with the General Agency for Social Insurance and the General Department of Taxation within five business days of the start date, configures payroll, and processes monthly salary payments in Mongolian tögrög with all statutory deductions. The full onboarding process takes 5 to 10 business days from contract signature to first day of work.

4. Playroll manages ongoing compliance

Playroll submits monthly social insurance and tax filings, tracks annual leave accrual, monitors changes to the Labour Law and social insurance rates, and manages termination procedures including severance calculation and trade union notification. If your hiring in Mongolia grows to where a local entity makes sense, Playroll can handle that too through its global entity setup service, allowing you to transition without changing providers or rebuilding your payroll infrastructure.