Argentina – Labor rights

This post aims at giving an overview of some key issues about labor rights in Argentina, which foreign investors should know before entering in the Argentinian market.

Minimum Salary: ARS 8,060 (ARS 40.40 per hour) or the amount established for the employee’s category in the collective bargaining agreement, whichever is higher.

Salary Reduction: No.

Profit Sharing: It is mandatory according to a constitutional clause, though it is not regulated by the labor law.

Stock Options: Not mandatory.

Integration of Benefits as part of the Salary: Unless specifically regulated by the labor law as a non- remunerative fringe benefit, its economic value is part of the remuneration and cannot be withdrawn.

13^th Salary: Yes, but there is no 14^th Salary.

Seniority Payment Fund: No.

Employment Contract: It is not required for indefinite-term contracts, but it is mandatory for special hiring alternatives (e.g.: fixed term, seasonal, internship, etc.).

Internal Labor Regulations: Yes.

Trial Period when the Employment Relationship begins: 90 days.

Employment Contract for a Stated Term: The minimum duration is of one month and the maximum of five years. It requires the existence of a just cause.

Types of Contract:

1. Indefinite-Term Contracts:
   • Are the general rule in Argentinian Labor law.
   • No need to be drafted in written form, however it is normally used and convenient.
   • Subject to a trial period of three months.
2. Fixed-Term Contracts
   • The end of the term is fixed
   • Requires existence of a just cause.
   • Minimum duration: One month.
   • Maximum duration: Five years, severance payment upon termination when term exceeds one year.
   • No trial period is applicable and must be executed in writing.
3. Contingent Work
   • For contingent work and the end of the term is uncertain
   • Requires existence of a just cause
   • When an employee is hired due to a production peak or market requirements, the maximum hiring period is six months per year and 12 months every three years.

Work Day and Work Week: Eight hours and 48 hours.

Overtime Surcharge: 50% weekly days and 100% on weekends (Saturdays after 1:00 p.m.) and holidays.

Paid Weekly Rest Days and Holidays: Yes.

Annual Paid Vacations: 14, 21, 28, and 35 calendar days after one, five, 10, and 20 years of accrued seniority.

Annual Vacation Bonus: Yes. Annual paid leave: salary during vacation days is increased by 20% of its regular value.

Maternity Leave: 90 days of paid leave.

Statute of Limitations: Two years with possible extension up to three years and six months, when causes of suspension of statute of limitation term applies.

Special bars against dismissal: Employers cannot discharge workers’ council’s representatives.

Pregnant women, new mothers and newlyweds receive special severance in case of termination without just cause.

Termination: No prior authorization is required to dismiss without just cause. Execution of termination agreement and approval (“homologación”) by a labor judicial or administrative authority is advisable.

Severance:

• Seniority: one month of salary per year of work or fraction exceeding three months, with limitations.
• Lack of prior notice: one-half, one or two months of salary, if seniority is less than three months, more than three months and less than five years, or more than five years.
• Accrued salary, proportional vacations, and proportional 13th salary.

Prior Notice of Dismissal:

15 days: during the trial period.

30 days: up to five worked years.

60 days: above five worked years.

Restrictions on hiring foreign employees: There are no limitations.

Unions: Membership in labor unions is voluntary and there may be different types of unions representing the same activity. Organization of unions requires compliance with several formalities.

Strike:

• Only recognized trade unions can call for strikes.
• Employees are not obliged to adhere to a strike, but if they do, they are not entitled to their wages. Employers cannot suspend employees on grounds of the strike but they can ordinarily dismiss without just cause.

Legal Strike: It is indispensable that a settlement period of no more than 15 days is observed, during which a settlement must be tried before the Labor Ministry. The settlement period may be extended for five additional days, after which – if no agreement is reached – the parties are free to start the action or agree on the voluntary extension of the settlement stage.

Illegal Strike: This occurs when:

• the trade union fails to comply with the settlement procedures, or
• the strike does not respond to a labor cause, or
• there is strike-related violence either on or off the employer’s property.

Illegal strikes entitle employers to request employees to withdraw the strike, and eventually dismiss them with just cause. In addition, the union that called the illegal strike could be suspended or lose their official recognition.

Provision of Food: It is not mandatory: if paid, the economic value may be considered part of the remuneration.

Company Car: It is not mandatory: if the car is provided to the employee as a working tool, the economic value does not integrate the remuneration. If not, the economic value integrates the remuneration.

Housing Benefit: It is not mandatory, but if provided to the employee, the economic value integrates the remuneration.

Health Plan: It is not mandatory, as it is granted by Social Security System. Anyway, if it is provided to the employee, the economic value does not integrate the remuneration.

Life Insurance: It is not mandatory. If the employer provides additional coverage, the economic value could be deemed as part of the remuneration.

Performance Bonus/Commission: not mandatory; if granted at the employers’ sole discretion (i.e. without objective basis) it will generate an acquired right in favor of the employee. Thus, the bonus would be part of the remuneration and the average value would integrate the base to calculate severances.

Social Security Contributions / Income Tax:

The employers’ contributions are calculated over the employee’s total salary, depending on their activity and turnover amount:

• 27% if the employer is engaged in the provision of services or in commercial activities and the invoiced amount exceeds ARS 111,900,000.
• 23% for the rest of the employers.
• Employees’ contributions: 17%. These contributions have a cap. No social security contributions would be due on employee’s monthly salary exceeding ARS 72.289,62.
• Net salary after deducting employees’ social security contributions would be subject to income tax withholdings up to 35%.

Labor agreements: Although labor agreements are not mandatory, and employees are not obligated to visit the labor authority to sign agreements, the execution of these kinds of agreements is convenient. Such waivers and/or releases executed between employees and their employers shall be valid and enforceable only if signed before the government officials of the labor authority (i.e. Ministry of Labor) and approved by such authority.

The author of this post is Tomás García Navarro.