Argentina: Labor Costs In Argentina

Last Updated: 18 October 2016
Article by Mario Eduardo Castro Sammartino

Labor costs in Argentina are one of the key issues foreign investors should carefully review when doing business in our country. Following, we will break down the current costs of holding and terminating a labor relationship in Argentina.

1. Salaries

Workers in Argentina must earn at least the minimum salaries set forth by the collective bargaining agreement applicable to their particular relationships. Irrespective of the above, under Argentina´s labor public policies, there is a minimum salary, mandatorily established by the Federal Government. As of September 2016, the minimum salary is AR$ 7,560 per month and AR$ 37.80 per hour (Resolution Number 2/2016 of the National Council of Employment, Productivity and Minimum Living Wage)

Workers are also entitled to an additional yearly bonus (aguinaldo), to be paid in two installments (June 30th  and December 18th). Every installment is equivalent to 50 percent of the highest monthly salary earned during the relevant six-month period (Contract of Employment Law Number 20,744, Articles 121 through 123).

Employees´ salaries are subject to income tax, with certain non-taxable minimum (varying according to the existence of family charges) and special deductions (Income Tax Law Number 20,628, text ordered by Decree Number 649/97 as amended by the Emergency Decree Number 394/2016).

Except for directors and managers, the maximum legal working week is 9 daily hours and 48 weekly hours (Law Number 11,544 of Working Hours, as amended by Law Number 26,597). Services rendered more than the maximum shift must be paid as overtime, with a 50 percent increase for hours performed on regular nosiness days and a 100 percent over rate on Saturdays after 1:00 pm, Sundays and official holidays.

2. Payroll taxes

Employers and employees have mandatory contributions to support social security regimes  (Law Number 24,241 of the Argentine Integrated Pension System; Law Number 19,032 of the National Institute of Social Services for Retirees and Pensioners; Law Number 24,714 of the National Regime of Family Allowances; Law Number 24,013 of the National Employment Fund; Law Number 23,661 of the National Regime of Healthcare Insurance; and Law Number 23,660 of the National Regime of Welfare Entities).

Employer's contributions have a general rate of 23%. However, if the employer's principal activity consists in the provision of services or commercial activities and its sales exceed certain amounts that are periodically adjusted (currently AR$ 48,000,000), a 27% rate will apply. Special promotion regimes may apply lowering certain contributions.

Fuel tax may be set off against employer´s contribution in certain activities. Depending on the local jurisdiction the employer does business in, the payment of the social security contribution may grant a percentage point tax credit to set off against the Value Added Tax.

Employees' contributions amount to 17%. Regarding employee's contribution, the base to calculate them has a cap of AR$ 63.995,73  (Resolution Number 298/2016 of the National Administration of Social Security).

Additionally and according to collective bargaining agreements, there may also be contributions for the relevant union, ranging from 1% to 2.5%

However, under Argentine law, it is possible to grant workers certain so-called social benefits exempted from social security contributions, such as food services, reimbursements of medical, dental and drug expenses for the employees and their families, supply of working apparel and elements, reimbursement of daycare expenses for children up to the age of six years, school supplies for children, granted at the beginning of the school year, payments of training and specialization courses or seminars and payment of burial expenses of family members in charge of the employees (Contract of Employment Law Number 20,744, Article 103 bis).

Foreign employees working in Argentina might be exempt from making social security contributions under certain international treaties in force.

3. Collective life insurance

Employers must pay a collective life insurance policy for the benefit of their employees. As from May 2016, the insurance premium amounts to AR$ 6.83 per employee per month (Decree Number 1567/74 and Resolution Number 39,766/2016 of the National Superintendence of Insurance). Collective bargaining agreements may establish mandatory additional coverage.

4. Vacations and other leaves of absence

Employees are entitled to annual paid holidays, ranging from 14 to 35 calendar days each year depending on their seniority (Contract of Employment Law Number 20,744, Article 150 and following). Employers must pay employees, at the beginning of the relevant period, the "holiday plus," which represents between a 10 and a 20 percent monthly overpay depending on the extension of the holiday period.

In addition, employees are entitled to get paid leaves of absence in cases of marriage, birth, death of a close relative and high school or university examinations (Contract of Employment Law Number 20,744, Article 158) and other circumstances also established by the applicable collective bargaining agreement.

Female employees enjoy a maternity leave of 45 days before and 45 days after childbirth (Contract of Employment Law Number 20,744, Article 150 and following). During maternity leave, employees are entitled to certain family allowances supported by the social security system.

5. Illnesses and accidents

In cases of inability to work due to illness or accidents which are non-work related (Contract of Employment Law Number 20,744, Articles 208 through 213), employees have the right to get their salaries for a period which may vary from 3 to 12 months, depending on the number of years they have worked for and the existence of a dependent family.

When it comes to accidents related to work (including those suffered while commuting) and professional diseases, under Law Number 24,557 of Work Risks, the employer must pay a work risks insurance, whose monthly premium depends on the risk of each activity but is usually around 3% of the payroll,

6. Termination of the contract of employment

All labor contracts entered into for an indefinite period have an initial trial period of three months (Contract of Employment Law Number 20,744, Article 92 bis), during which any party may terminate the relationship at any time without any compensation due. However, the terminating party is obliged to give a fifteen-day prior notice.

After the trial period has expired, dismissals without just cause hold employers liable for a severance payment based on the employee' s seniority and equivalent to one monthly salary for each year of employment or fraction higher than three months (Contract of Employment Law Number 20,744, Article 245). The salary to be used for the calculation must be the highest ordinary monthly salary earned during the previous year of employment (or full term of service, if shorter than one year). Despite the fact that certain caps resulting from statute and case law may apply on the calculation basis, in any event, the severance payment cannot be lower than once the ordinary highest monthly salary. According to the Contract of Employment Law, the monthly salary to calculate severance payment may not be higher than three times the average of the total remuneration set in the applicable collective bargaining agreement (Article 245). However, pursuant to the Supreme Court of Justice of the Nation´s case law, the statutory ceiling may not reduce the employee's highest salary by more than 33%.

Employers must also give employees a prior notice of termination (Contract of Employment Law Number 20,744, Articles 231 through 239) equivalent to one monthly salary (if the period of service has been less than five years) or two monthly salaries (if the period of service has been more than five years). When employment is terminated without notice, payment in lieu of notice must be made to the employee amounting to the salary the employee would have been entitled to during the notice period. Further, if the dismissal is effective on a day other than the last day of the month, the employee will also collect an amount equal to the salary for the remaining days of such month.

The proportion of the yearly bonus and vacation days accrued during the relevant period must also be paid.

In case of death of the employee, certain relatives have right to a compensation amounting half the compensation based on seniority (Contract of Employment Law Number 20,744, Article 248 and following).

There are additional severance payments to be made in the case of dismissals without cause of pregnant women and newly married employees equal to one year of their salary, plus yearly bonus (Contract of Employment Law Number 20,744, Articles 177 through 182).

Union representatives have a special protection and may not be terminated at will, even if there are enough grounds for dismissal for just cause. In this latter case, a particular procedure before the labor court has to be previously followed to get a judicial authorization to perform the layoff. Failing to appear before a labor judge asking for the protection be lifted, the union representative wrongfully terminated may choose between being reinstated to the position or being paid with the mandatory severance payment according to seniority, an additional compensations equal to the total salary he would have received up to the end of the representation period, plus one additional year (Law Number 23,551 of Union Associations, Article Number 52).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Mario Eduardo Castro Sammartino
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