Montenegro, Labor Policies and Practices, Business Environment
Montenegro’s total labor force consists of approximately 250,000 people with almost 50,000 workers, or close to 20 percent of the labor pool, employed in the public sector. The unemployment rate was 24 percent as of December 2021, according to the country’s Unemployment Agency. As the result of the Europe Now reform program passed in December 2021 and taking effect as of January 2022, the minimum wage in Montenegro has almost doubled from EUR 250 to EUR 450 per month, which has also led to the increase of the country’s average salary from EUR 537 to EUR 686 per month. A stated goal of the reform program was to tackle the informal economy, estimated at almost 30 percent of GDP, with large numbers of workers officially earning only the minimum wage, but receiving additional payments in cash out of sight of the tax authorities.
Finding skilled middle managers represents a serious challenge for its member companies, and many foreign companies choose instead to hire foreigners for skilled positions. To tackle youth unemployment, Montenegro is prioritizing efforts to improve practical job skills, including English language training and digital literacy. However, university students in Montenegro obtain little or no practical work experience while studying for their bachelor’s degree. It is widely mentioned in business circles that Montenegrin young adults prefer public sector work to private companies, despite the higher salaries, due to the perceived job security and less demanding workload. 2019 was marked by the intensive work on the Labor Law in a form of a dialogue among social partners regarding disputable legal solutions and the new Labor Law has been adopted in December 2019.
Over the past few years, private sector employment has increased, and total employment in the public sector (including SOEs) has decreased. Employment in Montenegro is led by three major sectors: tourism, maritime and offshore jobs (including on cruise ships or freighters), and manufacturing.
The new Montenegrin Labor Act introduced important employment regulations. The maximum duration of a fixed-term contract has been extended from 24 months to 36 months. Employers that employ more than 10 employees must adopt an internal general policy which lists positions and sets out job descriptions. Part-time positions cannot be for fewer than 10 hours per week, except for the GM/CEO. Full-time positions are 40 hours per week. Minimum statutory annual leave is 20 working days for regular jobs and 30 working days for jobs with severe conditions where full-time work hours are reduced from 40 to 36 hours per week. As of October 2019, Sunday became a non-working day for trade shops in Montenegro. Employees who have a six-day long work week are entitled to a minimum of 24 working days of annual leave. Employers are obliged to adopt an annual leave plan prior to April 30 each calendar year for the current year. Employers are not allowed to compensate employees for unused annual leave, except in the case of employment termination that occurs before the employee has consumed his or her entire annual leave allowance for the given year. Should an employer’s operations be shut down, employees can receive 60 percent of their average salary earned over the previous six months, but not less than the minimum wage, for a maximum period of four months within a given calendar year.
The new Labor Law contains an explicit provision stating that an employer may only pay salaries to the employee’s bank account. Employment may not be terminated during pregnancy or maternity/ parental leave, except in case of a serious breach of work duties. Maternity leave may be taken for 365 days, beginning 28 days prior to childbirth. In cases in which employees claim unlawful termination, the employee must initiate proceedings before the Agency for Peaceful Resolution of Labor Disputes or before the Centre for Alternative Dispute Resolution. After doing so, the employee may initiate court proceedings against the employer. Court proceedings must be initiated within 15 days from the end of the mandatory mediation. The statute of limitations for monetary claims arising out of employment is four years from the date on which the obligation became due. Claims for payment of pension and disability insurance contributions are not subject to any statute of limitations.
The procedure for determining a breach of work duties has been adjusted, now allowing for dismissal for breach without having to first conduct disciplinary proceedings in the following cases: (i) if the employee’s behavior is such that he/she cannot continue to work for the employer (e.g. coming to work intoxicated; drinking or using narcotics during work; refusing to undergo a medical examination to determine intoxication; abusive, offensive, or inappropriate behavior towards customers or employees, etc.); (ii) if the employee knowingly provided inaccurate data during the hiring process; (iii) abuse of sick leave; (iv) failure to return to work after the end of unpaid leave.
The Law on Peaceful Resolution of Labor Disputes was adopted in 2007. It introduces out-of-court settlements of labor disputes. The Law on the Employment of Nonresidents took effect in 2009 and mandates the government to set a quota for nonresident workers in the country. In December 2020, the Government established a quota 20,454 work permits for foreigners in 2021. Procedures for hiring foreign workers were simplified, and taxes for nonresident workers have been significantly decreased to help domestic companies that are experiencing problems engaging domestic staff, particularly for temporary and seasonal work.
The Law on Foreigners in Montenegro came into force in 2015. At the beginning of 2016, amendments suggested by AmCham Montenegro and business organizations (including the Montenegrin Employers’ Federation, Montenegrin Chamber of Economy, Montenegro Business Alliance, and Montenegrin Foreign Investors Council) were adopted that improve and liberalize Montenegro’s business environment. According to changes to the law, businesses are no longer required to provide official records proving that the company was unable to hire Montenegrin nationals with the required skills before hiring foreigners.
Changes were made to the Law on Pensions and Care of Invalids in 2017, including gradually increasing the age of retirement from 65 to 67 years (for both men and women) by 2042. These revisions are designed to eliminate anticipated shortfalls in the pension fund. The amended Law on Pensions and Care of Invalids which improves the conditions for retirement and harmonization of pensions, and increases the minimum pension was adopted in July 2020. The new Law improves the conditions for retirement, because one quarter of the period of service that was the most unfavorable for future retirees is excluded from the accounting period.
Until 2008, there was only one trade union confederation at the national level in Montenegro, the Confederation of Trade Unions of Montenegro (SSCG). SSCG is the successor of the former socialist trade union and inherited the property, organizational structure, and rights to participation in the tripartite bodies on the national level. As of 2008, a new confederation, the Union of Free Trade Unions of Montenegro (USSCG), split away from SSCG.
All international labor rights are recognized within domestic law, such as freedom of association, the elimination of forced labor, child labor employment discrimination, minimum wage, occupation safety and health, as well as weekly working hours.
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