What Severance Pay Rules Must Employers Follow in Montenegro?

Which Employees Qualify for Severance Pay?

• Employees whose employment is terminated for business reasons such as redundancy, restructuring, or technological changes.
• Employees who are dismissed because they have permanently lost the ability to perform their job, as confirmed by competent medical or disability authorities.
• Employees on open-ended (indefinite) contracts who have completed at least two years of continuous service with your company, where statutory conditions are met.
• Employees whose fixed-term contracts are converted to redundancy terminations before the agreed end date, if the reason is no fault of their own.
• Employees who are terminated in line with a collective redundancy program or social program that provides for severance benefits.
• Employees covered by a collective agreement or individual contract that grants severance in wider circumstances than the Labour Law minimum.

What Are the Legal Timelines for Paying Severance?

In Montenegro, severance must be paid at the time the employment relationship ends, or no later than the regular payroll date following the termination, so the employee is not left without income. In practice, you should aim to pay severance together with the final salary and unused holiday pay. The termination decision and severance calculation should be delivered in writing so the employee can verify the figures. Where a social program or collective agreement sets a specific deadline, you must follow that shorter timeline. If you agree to pay in installments, obtain the employee's written consent and ensure the full amount is paid within the period allowed by law and contract.

What Penalties Apply if Severance Is Not Paid Correctly?

If your company fails to pay severance correctly in Montenegro, you risk labor inspections, financial sanctions, and potential court claims from former employees. Authorities can review your termination decisions, calculations, and payment records, and non-compliance can quickly become more expensive than paying the correct severance in the first place.

• Labor inspectors may order you to pay outstanding severance with statutory default interest.
• Monetary fines can be imposed on the company and responsible managers for breaches of the Labour Law.
• Employees can file lawsuits seeking unpaid severance, interest, and reimbursement of legal costs.
• Courts may invalidate an unlawful termination, exposing you to reinstatement or additional compensation.
• Repeated violations can damage your reputation and increase the likelihood of deeper inspections into your HR practices.

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 Montenegro's severance rules, but it shifts much of the day-to-day compliance work. In a typical EOR model, the EOR is the legal employer on paper and is responsible for drafting contracts, processing terminations, and calculating and paying severance under Montenegrin law. Your company still makes the business decision to end the engagement and must fund any severance owed. If the structure or instructions you give lead to an unlawful dismissal, you can still face commercial or contractual exposure. A well-structured EOR relationship helps ensure that severance is handled correctly, documented properly, and paid on time.

Be 100 Percent Compliant in Offering Severance with Playroll

Managing severance in Montenegro means juggling statutory rules, collective agreements, and individual contracts, all while handling sensitive conversations with departing employees. Playroll helps your team standardize this process, so every termination is backed by compliant documentation, accurate calculations, and clear payment timelines. You stay in control of business decisions, while we keep the local legal details on track.

With Playroll as your global employment partner, you can hire in Montenegro confidently, knowing that severance, notice, and final pay are all aligned with current labour regulations. Our experts monitor legal changes, coordinate with local advisors, and embed those updates directly into your workflows. That way, your HR and finance teams avoid surprises, reduce legal risk, and protect your employer brand when roles need to change.