Montenegrin retailer Tobacco S Press estimates that the government’s proposed Euro Model wage reform would add at least €3.3 million to its annual labour costs and could put around 150 outlets and 350 jobs at risk. The government plans to introduce the reform. The proposal would establish minimum net monthly wages of €1,000, €1,250 and €1,400, depending on qualification level, while also changing payroll taxation and social contributions. Tobacco S Press said its €3.3 million calculation assumes that the company retains its current workforce and sales network.
The retailer recorded approximately €324,000 in net profit in the previous year. Its estimated additional annual labour expense would therefore be roughly ten times that amount. The calculation is a company estimate and is not an independent assessment of the final legislation, which has not yet been fully costed or published.
Employment and outlet reductions could follow
Tobacco S Press said maintaining its existing structure under the proposed model could become economically unsustainable. The company warned that approximately 150 locations and 350 jobs could consequently be affected. The estimate adds a company-level measure to a wider debate that has so far focused largely on broader concerns raised by employers.
The Montenegrin Employers Federation has called for the reform to be postponed and reduced in scope, arguing that businesses require detailed calculations of total labour costs before preparing staffing and investment plans for 2027. Employers have also advocated a phased introduction of the measures.
Government and businesses differ over total labour costs
The government has argued that changes to taxes and social contributions can offset part of the increase in net wages, allowing household incomes to rise without transferring the full additional cost to companies.
Businesses have maintained that the final gross labour cost remains unclear. The distinction is particularly relevant for lower-margin sectors such as retail. A retailer operating a large network of small outlets has many employees relative to revenue and limited scope for generating significant productivity improvements at each individual location.
Consequently, relatively modest increases in the cost of each employee can materially alter the economics of stores operating close to the margin.
Retail networks could be reorganised
The Tobacco S Press calculation indicates how the proposed reform could affect business structures in sectors with large numbers of outlets. Companies could respond to higher payroll costs by closing weaker locations, increasing automation or reorganising staffing rather than absorbing the full increase across existing networks. The effects would not necessarily be uniform across all stores.
Higher-turnover outlets could absorb additional labour costs more easily, while locations operating with thinner margins would face greater pressure. Increasing retail prices represents another possible response, although competition and household purchasing power constrain the extent to which companies can pass higher costs on to consumers.
Higher wages could affect wider salary structures
The proposed changes could also affect employees earning more than the statutory minimum. If lower-paid workers receive substantial mandated increases, companies may need to raise pay for supervisors and more experienced employees to maintain existing wage differences. That could increase the overall payroll impact beyond the number of employees directly receiving minimum-wage increases.
The government has said the broader Euro Model could affect more than 250,000 employees. Its fiscal and economic implications have not yet received a detailed public assessment from Montenegro’s major international economic partners. The European Commission has said it requires the formal proposal and government projections before assessing the measures, while the World Bank is reviewing their potential effect on Montenegro’s medium-term macro-fiscal framework.
Government faces pressure for detailed calculations
The pending assessments increase the importance of company-level and sector-level calculations before the reform is implemented. The Tobacco S Press estimate does not establish that other companies would face the same costs. It does, however, show the type of adjustments businesses could consider if changes to taxes and contributions do not sufficiently offset higher net wages, including fewer outlets, lower employment or higher prices.
The proposed reform therefore involves more than the headline increase in net salaries. Its effects will also depend on whether companies can finance higher wages without reducing employment or investment enough to offset the gains for workers who remain employed. Tobacco S Press has estimated €3.3 million in additional annual labour costs, compared with approximately €324,000 in recent net profit. The government’s final tax structure will determine how that calculation changes.
