Montenegrin retailer Tobacco S Press has estimated that the government’s proposed Euro Model wage reform would increase its annual labour costs by at least €3.3 million, warning it could respond by closing around 150 outlets and cutting about 350 jobs.
The company’s estimate provides one of the first detailed corporate calculations of the potential impact of the reform, which the government wants to introduce from Jan. 1, 2027.
The Euro Model proposes minimum net monthly wages of €1,000, €1,250 and €1,400, depending on qualification level, alongside changes to payroll taxation and social contributions.
Tobacco S Press said the €3.3 million estimate assumes it retains its existing workforce and sales network.
The company reported net profit of around €324,000 in the previous year, meaning the additional labour cost it calculates would be roughly ten times that level.
Its projections are company estimates rather than an independent assessment of the final legislation, which has not yet been fully costed or published.
The company said maintaining its current structure under the proposed model could therefore be economically unsustainable and warned that at least 150 locations and around 350 jobs could be at risk.
The figures sharpen a debate that until now has centred largely on broader warnings from employers.
The Montenegrin Employers Federation has called for the reform to be postponed and scaled back, arguing that businesses need detailed calculations of total labour costs before making 2027 staffing and investment plans.
Employers have also sought phased implementation.
The government argues that changes to taxes and contributions can offset part of the increase in net salaries, supporting household income without imposing the entire cost on companies.
Businesses say the final gross cost remains unclear.
That distinction is critical for low-margin sectors such as retail.
A company operating a large network of small outlets has a high number of employees relative to revenue and limited ability to generate large productivity gains at each location.
Even relatively small increases in the cost per worker can therefore materially change the economics of marginal stores.
The Tobacco S Press calculation suggests the reform could accelerate consolidation in precisely those sectors.
Companies may close weaker locations, automate more functions or reorganise staffing rather than absorb higher payroll expenses across the existing network.
The impact would not necessarily be uniform.
Stores with higher turnover could absorb additional labour costs more easily, while locations with thin margins would face stronger pressure.
Higher retail prices are another possible response, although competition and household purchasing power limit how much cost companies can pass on to customers.
The reform may also affect wage structures above the minimum.
If lower-paid employees receive large statutory increases, companies may need to lift wages for supervisors and more experienced staff to preserve salary differentials.
That can make the overall payroll effect larger than the number of workers formally earning the minimum wage would suggest.
The government has said the wider Euro Model could affect more than 250,000 employees.
Its fiscal and economic impact has not yet received a detailed public assessment from Montenegro’s major international economic partners.
The European Commission has said it needs the formal proposal and government projections before judging the measures, while the World Bank is reviewing their potential impact on Montenegro’s medium-term macro-fiscal framework.
That places increasing pressure on the government to publish company-level and sector-level calculations before implementation.
The Tobacco S Press estimate does not prove that other businesses would face comparable costs.
But it illustrates the type of decision companies may make if the tax offsets prove insufficient: fewer locations, fewer employees or higher prices.
For Montenegro’s labour market, the central issue is therefore moving beyond the headline increase in net wages.
The reform’s success will depend on whether businesses can finance those wages without reducing employment or investment sufficiently to offset the gains for workers who keep their jobs.
Tobacco S Press has now put a number on that risk: €3.3 million in additional annual labour costs against €324,000 of recent profit.
The government’s next challenge is to show how the final tax structure changes that calculation.
