Montenegro’s economic system prioritizes business and has a low corporate tax rate, making it an ideal location for starting a new business. The country boasts a safe investment environment with strong economic freedom and monetary stability. The World Bank has repeatedly ranked Montenegro among the top 50 countries suitable for starting a business.
With a strategic location, low tax rates, and abundant employee support, Montenegro is a promising destination for foreign investments. If you are looking at setting up a new business and hiring employees in Montenegro, here is a little guide on its labor laws. Read this article to discover the labor regulations and unearth several compliance strategies for your new venture in Montenegro.
Applicability of the Act
Montenegro labor law applies to all employees working within the country’s limits, regardless of nationality. Additionally, the law applies to those who work abroad for an employer based in Montenegro and those who work in the public sector within Montenegro.
Foreign employees must obtain temporary residence permits and work permits or work registration certificates before entering into an employment contract and legally working in the country.
Montenegro has two types of employment contracts:
- A fixed-term contract must not exceed 2 years in Montenegro.
- Employment established for a definite period turns into an indefinite period employment if the employee continues working after the contract expires.
- There is no fixed period of employment under an indefinite contract.
Any type of employment contract must precede a written contract before the commencement of work by an employee. The language used in the employment contract is not specified, but all official employment documents should either be in Montenegrin or provided in a bilingual format. The contract must enumerate the details of the employee’s compensation, benefits, and conditions of termination, according to Montenegro labor law.
Key Provisions of the Act
Montenegro labor laws have been carefully drafted to guarantee equal rights and liberties to employers and employees. Here are the key provisions of Montenegro labor law that employers should refer to before starting a new venture in the country:
- Montenegro labor laws assert that an individual has to be at least 15 to seek employment.
- Additionally, they need to have written approval from their parents, adoptive parents, or legal guardians to be able to work.
- Their work must not hamper their health or education and should not be against the law.
- In Montenegro, the probationary period is usually six months long.
- After three months of evaluating the employee’s work, if it is found that their performance is not satisfactory, the supervisor can request a review of their skills and form a commission to assess the same.
- Employees are entitled to work 40 hours a week.
- The work timing is usually between 10 PM and 6 AM next morning.
- All employees are entitled to a break during their regular work day.
- The duration of this break is not defined by law.
- It can be negotiated mutually by the employer and the employee, according to Montenegro labor laws.
- According to the labor regulations in Montenegro, all employees are entitled to a weekly leave of at least one full day. This day is usually Sunday.
- If the nature of an employee’s work demands them to work on a Sunday, they should be assigned another complete day of rest as agreed between the employee and the employer.
- Employees below the age of 18 are entitled to 2 days of leave weekly and one of these days has to be a Sunday. Also, if on a certain occasion, an employee has to work on a Sunday, they shall be given an additional day of leave on the following week, according to the labor code of Montenegro.
- A maximum of 10 hours of overtime work is allowed under Montenegro labor laws.
- An employer must also issue a written letter to authorize overtime work to the employee before its commencement.
- However, if the work is urgent and it is not possible to provide written authorization, the employer may give oral instructions for overtime work. The employer must subsequently provide a written letter to the employee within five days after the employee works overtime, according to Montenegro labor laws.
Termination of employment
According to Article 51 of Montenegro labor law, there are certain circumstances under which an employer may terminate the employment contract with the employee. The circumstances are stated below:
- If the employee is found to have provided false information during the hiring process or while taking on the job position in the company.
- If the employee violates a non-compete agreement without the employer’s knowledge
- If the employee is absent for more than two consecutive working days or intermittently for more than five working days in a year without furnishing the employer with valid reasons
- If the employee arrives at work intoxicated, is caught consuming drugs or alcohol during work, or refuses to take a drug or alcohol test when requested.
- If the employee uses company property against company policy.
- If the employee misuses the right to leave for temporary inability to work, including working for another employer during the period of absence or not reporting their absence to the employer within five days.
- If the employee violates safety regulations and endangers their or other employees’ health or causes work-related illnesses.
- If the employee behaves violently, indecently, or insults clients or employees.
- If the employee doesn’t return to work within two working days after the end of unpaid leave or 30 days after the reason for their work inactivity has been resolved without a valid reason.
- If the employee commits a criminal offense related to their work or workplace.
- An employee’s contract can also be terminated based on the mutual agreement between the employer and the employee.
The notice period also applies to both the employees and the employer. Employees must give 30 days of notice period to their employer if they want to resign. If an employee is terminated, they must give the employee 30 days’ notice, according to Montenegro labor laws.
An employee can avail of 7 days of paid leave in one year. Here is a table of how many days of leave can be taken by employees in certain circumstances:
Number of days
5 business days
Birth of children
3 business days
Care for a child
3 business days
Death of relatives
1 business day
Illness of an immediate family member
7 business days
Doing away with natural disasters that have happened in the household
3 business days
Participation in the public manifestation of national and international significance
2 business days
Use of prevention of work-related disability and recreation leave
5 business days
1 business day
5 business days
Moving household from one place to another
1-3 business days
- Montenegro’s labor laws have stated that every expectant mother must be given 98 days of paid maternity leave in Montenegro. This included 28 days of leave before the expected delivery date and 70 days postpartum.
- To avail of this leave, the pregnant employee must serve a written application to the employer.
- Mothers can take a two-hour break for breastfeeding until the child is one year old.
- Pregnant employees can take additional days off or pregnancy-related appointments every month.
- Once the maternity leave is over, the mother or father can take parental leave.
- This is available until the child turns one.
- Both parents have equal rights on parental leaves. However, it can not be used simultaneously by both parents.
- The minimum wage in Montenegro increases semi-annually.
- As of 2023, the minimum wage in Montenegro is 450 Euros per month.
- Employees are entitled to severance pay of a minimum of ⅓ of their average salary per year of service.
- The severance pay that an employee is entitled to receive must be at least equivalent to three months’ worth of their pay or the average pay in Montenegro, whichever amount is more suitable to the employee concerned.
- When an employee retires, the employer must give them severance pay equal to three times the minimum net salary within 30 days of retirement.
- Additionally, if the employee or a member of their immediate family passes away, the employer has to lend financial assistance equal to at least two times the minimum net salary of the employee.
When setting up a business in a new country, employers must review the compliance guidelines and penalties for violations. If overlooked and violated, labor laws can attract huge fines for employers.
If employers in Montenegro do not abide by the guidelines on minimum working hours, they can be subjected to heavy penalties. The fine will be between EUR 2,000 to 20,000 for each violation if an individual act as a legal entity. If the employer is an entrepreneur, the fine will be between EUR 600 to 6,000 for each violation.
Compliance Strategies for Employers
There are certain foolproof strategies for employers to remain compliant in a foreign land and emerge as successful businesses:
- Hire an HR manager: A company can set up a dedicated HR team to effectively manage employees. They will be responsible for overseeing all the employee benefits, training development, compliance, and payroll.
- Outsourced firm: Companies can seek the expertise of third-party organizations like Multiplier for compliance-related functions such as employee onboarding, EOR-POR, and background checks.
How Can Multiplier Help?
With the help of the team of experts, you will receive support in seamlessly ensuring complete compliance with employment contracts, taxes, and benefits across different countries. We offer automated and multilingual employment contracts to you. Get in touch with Multiplier today to maximize business benefits across the globe!