Montenegro

Employer of Record - Montenegro

Skuad’s Montenegro EOR (Employer of Record) solution allows your organization to expand into Montenegro without having to go through the hassle of setting up a local entity. To democratize opportunities and provide remote work opportunities, Skuad’s global HR platform enables the hiring of top talent from anywhere in the world and helps manage their onboarding process, payroll, and benefits. Your business can use Skuad to identify great individuals, create remote teams and skip the trouble of ensuring compliance with local labor and tax laws.

Montenegro at a glance

Montenegro is a Balkan country located on the Adriatic coast. The official language is Montenegrin and the capital city is Podgorica which is also the largest city. It is a small nation with a population of just over 0.6 million and a GDP of USD 6.23 billion. The country’s economy is mostly made up of the services sector and the currency in use is the Euro. Book a demo with Skuad to learn more about Montenegro.

Employment in Montenegro

Montenegro’s labor law was passed in 2008 and updated in 2020. Any employee must be at least 15 years of age although those under the age of 18 need written consent from parents/guardians and certification from a health authority that he/she is capable of performing the job. To understand employment in Montenegro better, get in touch with Skuad.

Employment Contract

The employment contract must be made in writing before the start of work and must include the following information -

Book a demo with Skuad to understand the rules regarding employment contracts in Montenegro.

Types of Visas in Montenegro

Montenegro issues two types of visas - short-stay and long-stay visas. The short stay is valid for a year and allows for multiple entries with a maximum stay duration of 90 days in 6 months. The long-stay visa or temporary residence permit is for those who enter the country to work or study and intend to stay for more than 90 days in a stretch. It is valid for a year and needs to be renewed. Documents required to obtain the temporary residence permit are -

• a copy of the passport which will be valid until after the permit expires
• Educational Qualification
• Clean criminal record
• Proof of solvency
• Place of residence
• Offer of employment
• Enrollment in a health insurance program

A work permit (also known as an employment permit) is required for all employees and the application process for the same must be handled by the employer. This can take anywhere between two to six weeks to process and must be planned in advance. The documents required are the same as for obtaining a temporary residence permit. There are two other types of permits that are issued. For seasonal work or work with a pre-defined duration, a standard permit is issued. A personal work permit places the holder on equal footing with a Montenegrin citizen in terms of employment rights and he/she has free access to the labor market. This is the only type of work permit that is issued without proof of employment. Learn more about the various types of visas in Montenegro at Skuad.

Payroll and Taxes in Montenegro

For both organizations and employees, residents ( a company that is registered in Montenegro or an individual that has lived in Montenegro for more than 6 months) are taxed on worldwide income while non-residents are taxed only on income from Montenegro operations.

Personal Income is taxed at 9% which is levied on the entire amount. For salaries exceeding the average annual pay in Montenegro, a tax of 11% is levied on the exceeding amount. In addition, a surtax of 13% is levied which is payable to the municipality where the employee resides. Social security contribution is 24% of the income with the split being 15% for pension and disability insurance, 8.5% for health insurance, and 0.5% for unemployment insurance.

The standard corporate income tax rate is 9%. A withholding tax of 9% is charged on dividends, royalties, and interests paid to non-resident entities. Social security contributions of the employer are 5.5% for pension and disability insurance, 2.3% for health insurance, and 0.5% for unemployment insurance. On transfer of immovable property, a transfer tax of 3% needs to be paid.

The tax year is the calendar year and while organizations have to file tax returns within three months after year-end, only those employees receiving income from multiple sources need to file returns by April 30 of the following year.

Value Added Tax of 21% is charged on products in Montenegro, although certain essential supplies are taxed at a much lower rate of 7% while exports attract 0% tax.

Organizations that have very few employees in Montenegro can consider payroll outsourcing. This helps them save the effort and cost of having to hire additional employees to ensure appropriate payment, withholding tax, filing reports, and other functions. This is advantageous since the local partner to whom payroll is outsourced will understand the nuances of the law and ensure compliance. However, the partner does not become the Employer of Record and only handles payroll and related tasks meaning that incorporation and other responsibilities of handling employees still lie with your organization.

Talk to Skuad to learn more about payroll and taxes in Montenegro.

Business Opportunities in Montenegro

Montenegro’s economy is largely dependent on tourism and there is great potential in the hospitality sector with resorts, hotels, restaurants, and entertainment avenues for visitors. Real estate is also a profitable venture with an increasing demand for housing and land. Construction gets a fillip from these two sectors as luxury hotels, apartments, and entertainment centers need to be designed and built. The renting of motorcycles, cars, and even service apartments for foreigners who want to stay for a while and travel around the country are viable business opportunities in tourism. For those who are willing to invest a large amount of capital, mining for coal in the basin of Maoče is a potential investment opportunity.

Learn more about business opportunities in Montenegro at Skuad

Incorporating a holding company in Montenegro

Setting up a subsidiary in Montenegro is easy as the government is welcoming to investments and acts quickly on requests. It also limits the parent company’s liability and allows for expansion and diversification. Since the company will be registered in Montenegro, it will be treated as a domestic business even though the majority shareholder is a foreign entity. Corporations generally prefer to establish a private Limited Liability Corporation (LLC) since the minimum share capital required is 1 EUR and only one founder is required for registration. A private LLC can have a maximum of 30 shareholders. If the company’s share capital exceeds 25,000 EUR, it must be reorganized as a joint-stock company that is governed by a board of directors and audited.

Documents required to establish an entity in Montenegro are -

• Address of parent entity
• Industry/sector in which it intends to do business
• Name and legal documents of the parent entity
• Company’s articles of association
• Balance sheet
• Name and address of entity being established

The authorities will then issue a VAT number, a tax identification number, and customs authorization. The company has to then open a bank account, create the company seal, and register employees at the tax administration office.

Talk to us to evaluate your strategy for doing business in Montenegro.

Professional Employer Organization

Hiring professionals from a foreign country is a tedious and time-consuming process that can prove to be unnecessarily expensive if legal compliance is not ensured. A professional employer organization steps in by becoming the Employer of Record in the country, thereby assuming liability and handling the operations. These can include, withholding of taxes, payroll processing and employer payroll tax filing, health benefits, retirement vehicles, compensation in case of accidents, etc.

Conclusion

Skuad’s Employer of Record service allows you to not only hire employees but also discover great talent. Our tech-enriched HR platform enables you to provide a seamless onboarding experience from anywhere in the world. We allow your organization to focus on getting the best results and take care of the creation of local entities, compliance with labor and tax laws, etc. Book a demo with us to see how Skuad can benefit your organization and allow you to go global from the comfort of your desk. Book a demo today.

FAQs

1) What is an employer of record in Montenegro?

In Montenegro, an Employer of Record (EOR) is a service that handles all legal and HR responsibilities for hiring staff on behalf of another company. This includes payroll, tax filings, and compliance with local labor laws, enabling businesses to employ in Montenegro without setting up their own entity.

‍2) What is the employment contract in Montenegro?

In Montenegro, an employment contract must be written and include specific details such as the identity of the parties, job description, location, start date, duration (if fixed-term), working hours, salary, and other employment conditions. This contract is mandatory for establishing a formal employment relationship, ensuring protection and clarity for both the employer and employee.

3) What is the EU employer of record?

An EU Employer of Record (EOR) is a service provider that legally employs staff on behalf of another company within the European Union. This arrangement helps companies manage payroll, taxes, and compliance with local employment laws without needing to establish their own entity in the EU. It's particularly useful for companies looking to expand quickly across multiple EU countries.

4) What are the employment laws in Montenegro?

Employment laws in Montenegro are primarily governed by the Labor Law, which provides frameworks for employment contracts, working conditions, minimum wage, working hours, holidays, leaves, and employee protections. The law aims to balance the rights and duties of employees and employers, promoting fair and safe working environments.

5) How much is labor salary in Montenegro?

The average labor salary in Montenegro varies by sector but generally is around 780 EUR per month. Salaries in the capital and sectors like IT and finance tend to be higher than in rural areas or less specialized industries. To calculate cost of employment in Montenegro, click here.