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Mongolia: Decision on Increasing Civil Servant Salaries and Pensions

(Feb. 2, 2015) It was reported on January 19, 2015, that on January 15, the Mongolian government issued a decision to increase salaries and pensions for the country’s civil servants by 10%. The move is based on the Agreement of Labor and Society, a municipal labor concession agreement reached by the Trilateral National Commission for Labor and Social Agreement, comprising the Ministry of Labor, the Mongolian Trade Union, and the Joint Union of Employers. (E. Oyundari, Salary and Pensions to Be Increased by 10 Percent, M.A.D. (Jan. 19, 2015).)

In 2014, MNT250 billion (about US$129 million) had been allocated for state employee pension and salary increases; in the 2015-2016 budget, an additional MNT103 billion will be allocated, with MNT90 billion going to the salary increases for civil servants and MNT13 billion dedicated to pension and allowance increases. According to labor representatives, the salary and pension increases are urgently needed, because salary increases have not been keeping up with inflation. (Id.)

The agreement also provides that Mongolians earning the minimum wage will be exempt from payment of personal income tax, in order to boost the taxpayers’ real income. (Id.) Under Decree No. 7 of April 11, 2013, issued by the Commission, the minimum hourly wage was set at MNT1142.85 (about US$0.59), resulting in a monthly minimum wage of MNT192,500 (about US$99). (Minimum Wage Has Been Increased and Effective from September 2013, INFOMONGOLIA.COM (Sept. 2, 2013).) The personal income tax rate in Mongolia is 10%. (Mongolia – Individual Taxation, IBFD Tax Research Platform (last reviewed Sept. 1, 2014), International Bureau of Fiscal Documentation online subscription database.)

Critics of the agreement question the funding of the increases for government workers, given that the state budget is “in crisis,” but a member of the Mongolian Parliament stated that the government has estimated that imposition of a tax on imported oil products and a higher excise tax would fund the measures. The final decision to impose such taxes has not yet been made, however. (Oyundari, supra.)

On a separate issue, the Commission agreed that when a decision to liquidate, to file for bankruptcy, or to initiate job cuts is about to be made, a private employer “should discuss the decision in advance with employee protection agencies and take measures to save jobs.” (Id.)