The Labor reform The measure promoted by the government of Javier Milei includes one of the structural measures that have been called for by various economic chambers for years and are summarized in the Reduction in employer contributions. The project achieves both the taxes to finance the pension system as well as contributions to social security and welfare.
It’s long-awaited news for the business world. For unions, this is a direct blow to the financing of formal work. This will also have a direct impact on the collection of the pension system.
Initial estimates from specialists assume up to one point of the gross product.
According to the last unofficially distributed draft, the entire employer contribution would remain the same 17.40% for large trading and service companies and in 15% for the rest of the private sector. According to ARCA, these values are currently 20.40 and 18 points respectively. The reduction would take effect the month following the announcement.
Aside from that, The project reduces the mandatory contribution for social works: Subsection “a” of Act 23.660 is replaced by an aliquot thereof 5% on the remunerationan adjustment that reduces the resources of providers, especially union social services.
If approved, this would be the most profound change to the contribution and contributions system since convertibility.
Reduction in employer contributions: what impact does this have?
Reducing burdens is a point that economic chambers have been advocating for decades. They argue that Argentina maintains one of these highest non-wage labor costs in the regionwhich makes it difficult to hire employees and promotes informality.
A few days ago the Minister of Economic Affairs, Luis CaputoIn a message addressed to the productive sector, he said labor and tax reforms would be sought “Reduce the burden on employers and create the conditions for sustainable growth”.
For many leaders, the current system “punishes” those who create formal jobs, as each worker brings with them an additional burden that is difficult to maintain in times of recession or declining consumption.
On the other hand, the unions warn that the cut will have an immediate impact on pension funds and, above all, pension funds social workwhose sustainability was already burdened by inflation and increased medical costs.
The Co-Secretary General of the CGT, Jorge Solaquestioned the initiative, pointing out that the government “did not even convene headquarters” to discuss the reform. In addition, he called for a comprehensive tax regulation to be discussed before a contribution reduction: “SMEs already have to declare between 30 and 40% of their turnover taxable”.
As far as CGT is concerned, the cut will impact future pensions, health insurance and social protection, which are funded by current contributions. They fear that “cost competitiveness” will lead to a… structural defunding of the system.
Other labor reform changes: labor laundering and debt relief
In parallel, the project includes a regime of Promoting Registered Employment (PER) This makes it possible to regulate undeclared or poorly recorded relationships.
The proposal provides for the following:
- Minimum forgiveness of 70% of debts for contributions and contributions.
- Abolition of fines and sanctions.
- Dismissal from REPSAL for companies that regularize all workers involved.
- Payment plans up to 72 installmentswith a maximum rate of 12% annually.
This point is seen by business as an opportunity to “clean up” the accumulated labor liabilities. For the unions, it is a large-scale tax break that goes to those who have broken the law.
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