Negotiations on Montenegro’s new General Collective Agreement have effectively stalled after employers said they would not proceed until the government explains how its proposed Euro Model wage and tax reform will affect payroll costs and the wider wage system.
The government has accepted trade-union demands to increase the calculation value used in the collective agreement from €90 to €100, with implementation envisaged from Jan. 1, 2027.
But the Montenegrin Employers Federation, UPCG, said it could not support completion of the new agreement before the government provides detailed legislation and cost calculations for the Euro Model.
That creates a second labour-market uncertainty just months before the government wants to introduce substantially higher minimum wages.
The Euro Model envisages minimum net salaries of €1,000, €1,250 and €1,400, depending on qualification level, from 2027.
Employers have repeatedly said they need to understand how payroll taxes, social contributions and other labour costs will change before they can assess the impact.
The collective agreement adds another layer because wage coefficients and employment rights negotiated under it directly affect the cost base of companies.
The existing General Collective Agreement expired at the end of April.
A replacement requires agreement among the government, trade unions and employers.
Without employer participation, implementation of the new framework becomes difficult.
The dispute therefore moves beyond a technical negotiation over the value of a coefficient.
It exposes a broader sequencing problem in the government’s 2027 labour reform.
Companies are being asked to discuss new collective wage obligations while they still do not know the complete tax and contribution framework that will apply to those wages.
That makes budgeting difficult.
Employers typically prepare annual staffing and investment plans months before the start of a new financial year.
For labour-intensive sectors such as tourism, retail, construction, transport and hospitality, payroll is one of the largest operating expenses.
Even a relatively modest change in the effective cost per worker can materially alter margins.
Montenegro’s planned wage increases are much larger than modest adjustments.
The government argues that higher wages can be supported through changes to taxes and contributions, limiting the increase in employers’ total labour costs.
But full legislation and sector-level calculations have not yet been published.
UPCG wants those details before committing to the collective agreement.
The government’s acceptance of the move from €90 to €100 in the wage calculation value would by itself increase pay for workers whose salaries are derived directly from collective-agreement coefficients.
The actual effect would vary according to sector, qualification and employment contract.
Combined with higher statutory minimum wages, however, it could compress salary structures.
Companies may need to increase not only the lowest wages but also pay above the minimum to preserve differences between qualification levels, supervisors and skilled staff.
That is a common secondary effect of large minimum-wage increases.
If lower-paid workers receive sharp increases while higher-paid employees do not, wage differentials narrow and employers can face pressure to adjust the entire salary scale.
The fiscal effect is equally important.
The government expects the Euro Model to support higher household income while reforming payroll taxation.
But lower contribution or tax rates can reduce public revenue unless they are offset by stronger employment, higher taxable wages, consumption or other sources.
The authorities have indicated that the 2027 budget deficit could initially widen before moving back toward 3% of GDP.
That makes the design of the labour package relevant not only for employers but also for public finances.
Trade unions see the issue differently.
Workers have faced higher living costs, particularly for housing and food, while Montenegro has recorded strong nominal wage growth and relatively robust tourism revenues.
Unions have therefore pressed for a higher calculation value and stronger wage protection.
The government has accepted their demand for the increase to €100.
The problem is that agreement on the desired wage outcome has moved faster than agreement on who ultimately bears the cost.
The private sector is particularly sensitive because Montenegro’s economy is dominated by small and medium-sized enterprises.
Large companies may be able to absorb higher labour costs through productivity improvements, automation or price increases.
Small hospitality, retail and service businesses have fewer options.
Some may respond by raising prices.
Others could reduce staffing, limit new hiring or shift investment toward labour-saving technology.
The effects could differ sharply by sector.
Tourism companies can potentially pass part of the cost to foreign visitors, although regional competition limits how far prices can rise.
Retailers can adjust margins and prices but face strong competition.
Construction companies may pass labour increases into new property prices.
Exporters have less room because they compete directly on international markets.
That is why employers have focused on total labour cost rather than net salary alone.
The UPCG is expected to discuss the issue with Prime Minister Milojko Spajić on Sept. 23.
That meeting could become an important test of whether the government can align its wage policy with the collective-bargaining process.
The most immediate requirement is clarity.
Companies need to know the final minimum wages, tax rates, contribution structure, coefficient system and implementation timetable before they can calculate the 2027 impact.
Without that information, negotiations risk becoming fragmented.
One agreement can raise the wage base while another reform changes payroll taxation, with businesses unable to assess the combined result until late in the budget cycle.
Montenegro’s labour-market debate is therefore moving from politics toward arithmetic.
The government has set ambitious wage targets and accepted a higher collective-agreement coefficient.
Employers are now asking for the numbers underneath them.
Until those numbers are clear, the new collective agreement is likely to remain part of the unresolved cost of Montenegro’s 2027 wage reform rather than a completed element of it.
