In Mongolia, there are three primary forms of work contracts:
- Permanent Employee
- Contract Employee
- Outsourced or Temporary Employee
Other forms of contracts exist, but these are the three you should be most familiar with when you consider your options in Mongolia.
A. Permanent Employees:
Most employees prefer and will advocate for a contract with permanent employment status, since it is intrinsically more solid and less dangerous in their perspective.
The major benefit to the business is that the attraction of a permanent employment makes it simpler to attract talent and secure employee loyalty. Furthermore, there is no need to pay overtime allowances for management positions since Mongolian managers are expected to “take one for the team” as and when required.
The disadvantage is that it is more difficult to fire personnel who do not perform well.
B. Contract Employees:
Contracts are usually for a specific number of months, such as three, six, or twelve months. Many firms believe that using this method of employing individuals is less hazardous because it is easier to dismiss contract employees at the end of their contract term simply by refusing to renew it.
Employers’ duties to contract employees, such as providing social security benefits, paid leave, and pension plans, were formerly quite lax, although this has strengthened in recent years.
Even if they are on three-month contracts that you keep extending, contract employees are now entitled to paid vacation after six months of employment.
They should also have the option of joining the national social security system.
Many businesses utilize fixed-term contracts as a way to test the waters without committing to a long-term commitment. If you fire a permanent employee after their three or six-month trial period, you must pay them one month’s severance pay.
You do not have to pay severance if you dismiss a contract employee after the same period, but you should be prepared to provide acceptable grounds for not renewing their contract.
The only true advantage of being on a fixed-term contract is that employers are required to pay all contract employees overtime pay.
Many companies used to recruit contract workers and just keep renewing their contracts, often for years, so that they could fire them whenever it was convenient for them.
Long-term contract employees, on the other hand, are now considered to be entitled to the same protection as permanent employees, and must be given with social security benefits, paid leave, and the right not to be fired without cause or compensation, according to the courts.
Contracts are helpful for testing the waters, but they should not be misused or utilized indefinitely.
C. Outsourced or Temporary Employees:
Typically used for administrative or secretarial staff, but also for interim management roles when a temporary manager is required.
The person will not work for you or be on your payroll; instead, they will work for the temporary agency, which will bill you for the hours they worked.
You have no responsibility to the employee if they are not appropriate, which is an advantage to you as an employer.
You may just request a replacement from the agent. You also don’t have to pay for their transportation to work, paid time off, social security benefits, payroll administration, and so on.
They are a ready-to-use solution. At first appearance, the only two disadvantages are that the pool of persons ready to perform temporary employment in specialized fields is fewer and that the cost is greater.
A temporary employee’s hourly cost will often be 150 percent to 160 percent of the cost of a contract or permanent employee.
This is because the additional money covers the agent’s costs of supplying the employee with social security benefits, travel expenses, training, paid leave, payroll and HR services, employee assistance, and, of course, the agency charge.
These are all expenditures that you, as the company, would have to face otherwise, thus the real cost is comparable to hiring a permanent employee.
The benefit is that you won’t need to maintain a huge back-office to handle all of the aforementioned HR tasks.
It might be a very smart route to go if you need to hire rapidly to create a presence in the market. You may also “test before you buy” because most temporary agencies provide “temporary-to-permanent” solutions, which allow you to engage a temporary employee and then hire them permanently after paying the agency a buy-out charge.
It also allows you to shrink in a weak economy without having to make significant redundancy payouts. This is a common option, especially for recruiting back-office personnel.
