Do I Need a Local Entity to Hire in Mongolia?

In Mongolia, a "local entity" typically refers to a recognized business presence, such as a subsidiary or branch office, that can act as an employer. This setup is essential for managing payroll and fulfilling employment obligations in compliance with local laws.

Without establishing a local entity, you generally cannot perform key employer functions like registering for payroll, managing social security contributions, or issuing compliant employment contracts. However, using an Employer of Record (EOR) can simplify this process, allowing you to hire employees while ensuring compliance with local regulations.

What is Required to Employ Someone in Mongolia?

• Local employing entity required to directly employ? Yes (You must have a local entity to employ directly)
• Payroll registration required? Yes (Registration with the General Authority for State Registration is necessary)
• Withholding/tax remittance required? Yes (Employers must withhold income tax and remit it to the tax authority)
• Social contributions required? Yes (Mandatory contributions to the Social Insurance Fund are required)
• Local employment agreement required? Yes (Written employment contracts are mandatory under the Labor Law)
• Mandatory benefits to budget? Yes (Includes social insurance, annual leave, and sick leave)
• Works council/collective agreements considerations? Usually (Applicable in many sectors, influencing employment terms)

Best Options If You're Hiring in Mongolia

Can I Hire Contractors Instead of Setting Up an Entity?

Yes, but you should be cautious about the classification of contractors versus employees.

While hiring contractors can be a flexible option, Mongolia has strict labor laws that protect workers, and misclassifying a contractor as an independent worker can lead to legal issues. It's essential to ensure that the contractor operates independently and is not integrated into your business operations.

• Ensure the contractor has multiple clients and is not exclusively working for your company.
• Maintain clear boundaries regarding control over work hours and methods.
• Document the contractor's independent status through a well-defined contract.

How Long Does Entity Setup Take And What Does It Cost?

Typical entity setup timeline: It often takes 4–8 weeks to set up an entity in Mongolia, depending on the type of business and required registrations.

Ongoing cost categories (entity route):

• Accounting, bookkeeping, and statutory filings: Estimated 1,000,000–2,500,000 MNT per month ($290–$725)
• Payroll provider: Estimated 100,000–300,000 MNT per employee per month ($29–$87)
• Employer registrations and recurring compliance: Estimated 500,000–1,000,000 MNT per year ($145–$290)
• Corporate tax filings and annual reporting: Estimated 1,000,000–3,000,000 MNT per year ($290–$870)

EOR cost components (no-entity route):

• A per-employee EOR service fee (from $399 per month with Playroll)
• Pass-through statutory costs (e.g., employer social security contributions, typically around 10% of gross salary)
• Any optional benefits you choose to provide beyond statutory minimums

How an Employer of Record Can Help You Hire in Mongolia

Hiring in Mongolia can be complex, but it doesn’t have to require setting up a local entity or taking on long-term overhead. With an Employer of Record like Playroll, you get a simple, predictable way to hire compliantly while keeping costs transparent and under control. We help you:

• Hire employees in Mongolia quickly without establishing a local entity, eliminating incorporation costs, ongoing administration, and exit complexity.
• Stay fully compliant with local payroll, tax, and employment regulations with Playroll’s managed payroll services.
• Control your total employment costs, with a clear monthly EOR service fee (from $399 per employee).
• Focus on growing your business, while we manage contracts, payroll, compliance, and labor law obligations end to end.
• Scale up or exit the market easily, without the financial or legal burden of closing a local entity.