Employment Contracts and Labor Law in Argentina

Information on definite, temporary and full- or part-time contracts for workers employed in Argentina...

Employer-employee relations in Argentina are mainly governed by Labor Contract Law No. 20,744, as subsequently amended (the “LCL”), collective bargaining agreements and the individual terms of labor contracts between employers and their employees.

Salaries

Salaries may be paid upon a monthly, daily or hourly basis, depending on the type of work performed by the employee. There is a mandatory minimum wage per month. By law, employees are entitled to an annual bonus (aguinaldo) paid in two installments, in June and December each year, equivalent to 50% of the highest monthly wage received during the previous six month period. Typically, the standard working week is from 40 to 48 hours, with an average of 8 hours per day. Workers earn overtime pay for work performed in excess of the standard working week. The rates of overtime pay are 150% of the base rate on normal work days and 200% of the base rate on Saturday afternoons, Sundays and official holidays.

Contributions and Withholdings

Pursuant to Argentine law, employers and employees have certain obligations to make social security contributions for family allowances, medical services and pension and unemployment benefits. In addition, pursuant to many collective bargaining agreements, union dues of 1% to 2.5% may be withheld from employees’ salaries. In certain circumstances, foreign employees working in Argentina may be exempt from making pension fund contributions.

Vacations and other Leaves of Absence

Employees are entitled to annual paid holidays, which vary from 14 to 35 calendar days each year depending on length of service. In addition, employees are entitled to short leaves of absence in the event of marriage, birth, death of a close relative and high school or university examinations.

Female employees enjoy certain additional rights, the most notable of which are special leaves of absence for maternity of 45 days before and 45 days after childbirth. Furthermore, during maternity leaves, employees are entitled to certain family allowances and other fringe benefits. In the event of an inability to work due to illness or accidents which are not related to work, employees are entitled to their full salaries for a period which may vary from 3 to 12 months, depending on length of service and the existence of a dependent family.

Trial-Period Hiring

Employment contracts may be for an indefinite period or for a fixed term. In indefinite period contracts, the first three months are a trial period. During the trial period, either party may terminate the labor relationship at any time without the employer having an obligation to make a severance payment. However, the terminating party is obliged to give a fifteen day’s prior notice.

Termination of Labor Contracts

An employee may resign at any time and must give the employer fifteen days’ prior notice. In indefinite term employment contracts, the employer may dismiss an employee at any time upon giving the employee prior notice of fifteen days (if the employment contract is terminated during the trial period), one month (if the period of service is greater than the trial period but less than five years) or two months (if the period of service is greater than five years). This notice can be substituted with a salary payment equivalent to the period of prior notice. In case no prior notice is given and the dismissal takes place on a day different to the last day of the month, the employee will also collect an amount equal to the salary corresponding to the remaining days of the month of dismissal.

Furthermore, the employer is required to make severance payments to the employee based on the employee’s highest ordinary monthly salary earned during the previous year of employment or full term of service, if shorter than one year. With certain limits the employer must pay to the employee one month’s salary for each year of employment or period worked in excess of three months for which the employee worked for such employer. In any event, the severance payment cannot be lower than once the ordinary highest monthly salary.

If an employee is dismissed for gross misconduct, no severance payment or prior notice is required; however, the burden of proof lies with the employer to show that gross misconduct occurred.

Work Risk Insurers ("ART")

In 1996, Argentine law established a system to reduce workplace risks and to indemnify employees who become ill or injured at work. Pursuant to Law No. 24,557 (LRT), all workers employed in the private sector (as well as certain other employees) are generally protected by its provisions. Employers of workers included within the scope of the LRT must either self insure against the obligations imposed by the LRT or must be insured by a Work Risk Insurer (Aseguradora de Riesgos del Trabajo or "ART”). At present, very few companies provide self-insurance for their workers. When an ART provides coverage, it must compensate the injured worker in accordance with the requirements of the LRT, and must also provide medical and pharmaceutical attention, prosthesis and orthopedics, rehabilitation, occupational re-classification, and funeral service benefits.

The ART is financed by monthly payments made by the employers of insured persons.

Notwithstanding the limitations of liability provided for in the LRT, court decisions have upheld that such limitations of liability are unconstitutional in certain cases.

Information supplied by Marval, O'Farrell & Mairal Av. Leandro N. Alem 928 piso 7, (C1001AAR) Buenos Aires, Argentina Tel: (011) 4310-0100, Fax: (011) 4310-0200 www.marval.com.ar