If there is a critical issue in labor relations in Argentina, it is severance pay. The reality is like this There is no uniform criterion in judicial matters and this leads to numerous complaints. For this reason, the government has reformulated the labor law.
The Labor Contract Law 20,744 stipulates that remuneration must be paid to the employee in the event of termination ordered by the employer without just cause Remuneration equal to one month’s salary for each year of service or a fraction of more than three monthsThe calculation is based on the best monthly, usual and customary wages from the last year.
This regulation leads to a variety of interpretations that promote “the experimental industry”. “Concerning dismissal compensation, DNU 70/23, this Government, amended Article 245 of the LCT (Law on Employment Contracts) The bonus and the concepts of semi-annual or annual payments are excluded from the calculation basis. This DNU was declared unconstitutional by Chamber IX of the National Labor Appeal Chamber in January 2024. The new draft law returns to the wording of Article 245 under the DNU,” explained labor lawyer Ricardo Foglia.
What do you want to achieve? For Gabriel Rodríguez, partner at BLC Legal, “they are noticeable in the new project Further details that limit judicial interpretation. “The idea is to set a limit, especially for the province of Buenos Aires and other jurisdictions,” he explained.
“For example, the bonuses, the bonus and the non-monthly payments were already decided in a plenary session in the capital and were excluded from the calculation of the compensation. On the other hand, the court of the province of Buenos Aires has always said that the bonus is included in the calculation basis. Now it is pointed out that there is no scope for the interpretation of the law, that there is a uniform criterion,” said the lawyer.
In this regard, a renowned labor law consultant assured that this would definitely be the case with the new project There is a loophole that allows the bonus and other concepts to continue to be recognized as part of compensationand there is talk of the “best, normal and usual monthly remuneration of the last year”.
The word “accrued” means “to acquire the right to a certain exercise or remuneration based on work, service or other title”, therefore the bonus can be interpreted as an acquired right and can be included in the calculation of remuneration.
The government proposal, in turn, stipulates that non-monthly payment concepts such as bonuses have no impact, but also mentions vacation and bonuses that are not paid out monthly. It is used for employees with commission or variable monthly remuneration the average of the last six months or the last year if this is more favorable for the employee.
They are not included in the calculations
Article 31 of the bill addresses this social benefits, to further limit interpretations of which concepts are included in the compensation calculation and which are not. Moderately amends Article 103bis of the LCT. When defining social benefits, the new regulations specify in black and white that they are non-remunerative, non-monetary, non-cumulative or non-replaceable benefits that the employer voluntarily grants to the employee “It’s not a matter of material salaries.” List:
The project also talks about the integration of dynamic compensation componentstemporary, fixed or variable (based on merit, productivity), including by unilateral decision of the employer that does not give rise to tacit continuity, ultraactivity or habit. “If they are normal and habitual, they will be included in the calculation basis for seniority pay,” explained Gabriel Rodríguez, partner at BCL Legal.
Sources close to the project recommended that in this framework of freedom of contract proposed by the government Every plus comes with conditionsThis means that the basis for the payment must be set out in writing and it must be proven that it is of a temporary nature or, for example, depends on business developments. With monthly, unconditional payment, it becomes an acquired entitlement and part of the remuneration.
Vizotti is still standing
There have been and are currently limits to compensation. This is three times the monthly amount, which results from the average of all remuneration, excluding length of service, provided for in the collective agreement applicable to the employee.
However, a Supreme Court ruling in 2004 changed the way compensation is calculated under Article 245 of the Labor Contract Law. The plaintiff, who was the medical director of a facility for 26 years, received compensation reduced by 90.55% due to the application of the cap.
At that time, a change in the way compensation was calculated was established, which is still in force today and remains in the official proposal already before the Senate. In no case may the calculation basis be less than 67% of the amount corresponding to one month’s salary. On the other hand, the project produces inflation update calculations.
Where should the compensation money come from?
Title III of the Constitution, which came into force in 2024, includes an option to replace long-service compensation with a work termination fund, an idea that comes from the activity of the construction sector. It was regulated on September 20, 2024, but There was no bonding as this meant higher costs for the employer.
The new project, supported by the government, maintains the cessation fund but adds a new instrument mandatory but not exclusively in relation to the previous one, and also There are no costs for the employer: the Labor Assistance Fund (FAL). According to labor lawyer Gabriel Rodríguez, it would be considered “Unemployment insurance“.
According to the government, “This approach helps reduce the risk associated with layoffs, prevent litigation and eliminate one of the main barriers to hiring in employment-intensive sectors.”
To finance this fund, the government waives 3% of employers’ contributions to Argentina’s Integrated Pension System (SIPA). Sources close to the government pointed this out in the dialogue THE NATION, that this change has no impact on retirement.
Each employer must establish, at the employer’s option, an account as a separate asset “with specific, independent, inalienable and non-attributable allocation” in one of the funds managed by an entity approved by the National Securities Commission.
The interest would inflate the fund and according to Article 72, “the individual account shall be canceled in the event of discontinuation, dissolution, liquidation or insolvency of the employer and.” The funds must be transferred to an employer’s bank account in the country, unless the bankruptcy judge determines otherwise.”
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