The “Europe Now 2” program is set to affect micro and small enterprises in Montenegro quite differently than medium and large companies. While larger firms are likely to absorb the operational challenges stemming from the program more easily, micro and small businesses will face significant hurdles, potentially leading some to cease operations or shift to the informal sector.
With the program’s new laws taking effect, employees across Montenegro will begin receiving increased salaries starting in October. The most substantial increases will benefit those earning minimum wage, with workers holding secondary education receiving €600 and those with university degrees getting €800. However, individuals with university diplomas who qualify for positions requiring only a high school education will not see these salary increases due to the reduction of pension contributions from 20.5% to 10%.
The Union of Employers of Montenegro (UPCG) reports that, based on discussions with its members, the implementation of the “Europe Now 2” program is expected to proceed smoothly from a technical standpoint. However, they recognize that the financial impacts will vary across different companies.
For many businesses, the program may offer advantages, but for others—especially micro enterprises and entrepreneurs in northern municipalities—the challenges could be significant. To alleviate the burden on typical employers, particularly those seeking workers for positions requiring up to level V qualifications, the UPCG has proposed establishing two minimum wage levels. They believe that the benefits of higher wages and savings from reduced pension contributions will provide crucial support to vulnerable sectors of the economy.
The UPCG also highlights the long-standing issue of the informal economy and illegal business practices, which have traditionally been more visible in the employment sector. Despite various measures, illegal work often remains unaddressed, leading to widespread frustration. They argue that combatting all forms of the informal economy should be a top government priority, as bringing business activities into the legal framework would contribute significantly to GDP growth and overall societal benefits.
On the other hand, the Montenegrin Employers’ Association (CUP) expresses more severe concerns, stating that employers are technically prepared for the changes, as they have no alternative. They emphasize that companies must be ready for the potential consequences of the program, which they have come to expect from a politically influenced business environment.
Business representatives feel sidelined in discussions that could adversely affect their operations, which they believe ultimately harms the state and society as a whole. They observe a trend of populism that prioritizes short-term political interests over sound economic policy, leading to an environment where dissenting opinions are discouraged.
This silence from the business community stems from a desire to focus on their operations without becoming entangled in political turmoil. They believe any feedback they might offer would likely be ignored. Additionally, they recognize the need to strengthen their organizations to protect their interests against political and other forms of unpredictability.
The lack of a clear response regarding the expected impacts of the “Europe Now 2” program can be attributed to various factors, with the topic often overshadowed by political events. However, it is anticipated that the consequences of the program will become clearer in about six months, prompting further discussion and analysis. Nevertheless, there are concerns that any shortcomings of the program may be reframed as successes.
The program will impact micro and small businesses, which are predominant in Montenegro, in a significantly different way compared to medium and large enterprises. While larger companies will likely manage the operational challenges more effectively, micro and small businesses that employ many workers will face serious difficulties. This could lead to some shutting down and others transitioning to the informal economy.
However, this does not imply that medium and large enterprises will be exempt from challenges; the program will also affect their profitability. Nonetheless, their size will help them mitigate adverse impacts without drastic disruptions, although they may still face reduced profits.
The prevailing narrative around the program suggests that increased wages will lead to economic prosperity in Montenegro, which contradicts established economic principles. The argument posits that administrative wage increases, independent of business performance metrics, will drive economic growth and improve living standards. The outcomes of this approach will be revealed in the coming months, but the expected economic prosperity conflicts with established economic theories. It is crucial to clarify the results of the program, as its effects will not be immediate but will manifest over time in various ways.
The costs associated with adapting to the “Europe Now 2” program will not fall on employers. Changes resulting from new regulations will incur expenses for software adjustments and compliance training. However, discussions with major software providers suggest that the financial burden of adapting to the “Europe Now 2” program will not be passed on to employers. The general secretary of the Institute of Certified Accountants of Montenegro (ISRCG) believes that the Ministry of Finance will provide timely subordinate legislation necessary for the effective implementation of the new laws. The ISRCG will continue to support the business community in adapting to the program.
In light of these recent changes, a seminar will be held on October 16, featuring representatives from the Tax Administration and the Ministry of Labor, Employment and Social Dialogue. Participants will receive a calculator for calculating personal income under the new legal framework.
