Negotiations over Montenegro’s new General Collective Agreement have stalled after employers requested detailed legislation and cost calculations for the government’s proposed Euro Model wage and tax reform. The Montain Employers Federation (UPCG) has said it cannot support completion of the agreement until the government clarifies the impact of the Euro Model on payroll expenses and the broader wage structure. The government has accepted trade-union demands to raise the calculation value used under the collective agreement from €90 to €100, with implementation planned. The existing General Collective Agreement expired at the end of April. A replacement requires agreement between the government, trade unions and employers.
Euro Model and Collective Wage Framework
The Euro Model envisages minimum net wages of €1,000, €1,250 and €1,400, depending on qualification level, from 2027. Employers have said they need to determine how payroll taxes, social contributions and other labour costs will change before assessing the impact of the proposed wage system.
The collective agreement adds another cost component because its wage coefficients and employment rights directly influence companies’ labour expenses. The planned increase in the calculation value from €90 to €100 would raise pay for employees whose salaries are calculated directly through collective-agreement coefficients. The actual impact would differ according to sector, qualification and employment contract. Combined with higher statutory minimum wages, the changes could narrow differences between lower-paid employees and workers with higher qualifications or supervisory responsibilities.
Companies could therefore face pressure to adjust broader salary scales rather than only wages directly affected by the minimum-wage changes.
Business Cost Planning
The timing of the negotiations creates uncertainty for companies preparing staffing and investment plans for 2027. Labour-intensive sectors including tourism, retail, construction, transport and hospitality have significant payroll costs, making changes in the effective cost per employee relevant to operating margins.
The government has argued that higher wages can be supported through changes to taxes and social contributions, limiting the increase in employers’ overall labour costs. Detailed legislation and sector-level calculations have not yet been published. UPCG is seeking those details before committing to the new collective agreement.
Fiscal and Sector Effects
The government expects the Euro Model to raise household incomes while changing payroll taxation. Changes in tax and contribution rates can affect public revenue, depending on employment, taxable wages, consumption and other revenue sources. The authorities have indicated that the 2027 budget deficit could initially widen before returning toward 3% of GDP, making the structure of the labour reform relevant to public finances as well as companies.
Trade unions have called for higher wage protections amid increased living costs, particularly for housing and food. Montenegro has also recorded strong nominal wage growth and relatively robust tourism revenues. The government has accepted the trade unions’ demand to increase the collective-agreement calculation value to €100.
Impact on Companies
Montenegro’s economy is dominated by small and medium-sized enterprises, which may have fewer options for absorbing higher labour costs than larger companies. Businesses could respond through price increases, reduced staffing, slower hiring or greater use of labour-saving technology. The effects could vary between industries. Tourism companies may be able to transfer part of higher costs to foreign visitors, while regional competition can limit price increases. Retail businesses can adjust prices and margins, but face competition from other operators.
Construction companies could incorporate higher labour expenses into property prices, while exporters have less scope to increase prices because they compete on international markets. These differences are why employers have focused on total labour costs rather than net wages alone.
Talks with the Government
UPCG is expected to discuss the issue with Prime Minister. The discussions will address the relationship between the proposed wage increases and the collective-bargaining process. Employers are seeking clarity on the final minimum wages, tax rates, contribution structure, wage coefficients and implementation timetable before calculating the impact on their 2027 costs. Without those details, the collective agreement and the Euro Model could produce separate changes to the wage base and payroll taxation, making it difficult for businesses to assess their combined effect before the 2027 budget cycle.
