What Severance Pay Rules Must Employers Follow in Mongolia?

Which Employees Qualify for Severance Pay?

• Employees whose employment is terminated due to staff redundancy or downsizing initiated by your company.
• Employees dismissed because your company is liquidated or its operations are terminated in Mongolia.
• Employees who can no longer perform their job for health reasons confirmed by a competent medical opinion.
• Employees whose military or public service obligations require termination of their employment contract.
• Employees with an indefinite or fixed-term contract who have completed at least six months of continuous service, unless a more generous policy applies.
• Employees covered by a collective agreement or company policy that promises severance in wider circumstances than the Labour Law requires.

What Are the Legal Timelines for Paying Severance?

You should pay statutory severance in Mongolia on or before the employee’s final working day, together with their last salary and unused leave compensation. The Labour Law requires timely settlement of all final payments when the employment relationship ends, and delays can be treated as a wage violation. In practice, many employers complete payment within three to five business days to allow for payroll processing and bank transfers. If there is a dispute over the amount, you should still pay the undisputed portion immediately and document any ongoing calculations. Clear written confirmation of the severance calculation and payment date helps reduce the risk of claims or inspections.

What Penalties Apply if Severance Is Not Paid Correctly?

If your company fails to pay severance correctly in Mongolia, authorities may treat this as a breach of the Labour Law and a wage underpayment. Labor inspectors can order you to correct the violation, and employees can claim unpaid severance, interest, and damages through the courts. Non-compliance can also affect your company’s reputation and increase the risk of audits or disputes with staff.

• Unpaid severance can be reclaimed from your company as wage arrears plus statutory interest.
• Labor inspectors may impose administrative fines on the employer and, in some cases, responsible managers.
• Courts can award compensation for losses caused by unlawful termination or delayed payment.
• Repeated or serious breaches can trigger closer monitoring and more frequent inspections.
• Disputes over severance can lead to litigation costs and disruption to your HR operations.

Does Outsourcing Employment via an EOR Change Severance Liability?

Using an Employer of Record (EOR) such as https://www.playroll.com/employer-of-record does not remove the need to follow Mongolia’s Labour Law, but it changes who is the legal employer of record on paper. In an EOR model, the EOR entity is typically responsible for calculating and paying severance in line with statutory rules and any agreed policies. Your company still bears the commercial and budget responsibility, because severance costs are usually recharged to you under the service agreement. If the EOR mishandles severance, employees will generally pursue claims against the legal employer, while your company may have contractual recourse against the EOR. Clear contracts, local legal review, and regular audits of termination practices are essential to avoid unexpected liabilities.

Be 100 Percent Compliant in Offering Severance with Playroll

Playroll helps your company navigate Mongolia’s severance rules by combining local legal insight with structured HR processes. Our team tracks changes to the Labour Law, collective agreements, and market practice so your severance offers stay compliant and competitive. We standardize documentation around termination reasons, notice, and severance calculations, reducing the risk of errors or inconsistent treatment across your Mongolian workforce.

When you engage Playroll as your global partner, we can operate either as your Employer of Record or support your existing Mongolian entity with compliant payroll workflows. We help you model severance costs before you take restructuring decisions, align internal policies with statutory minimums, and execute final payments on time. That way, your team can focus on business priorities while we handle the details that keep your company fully compliant.