On February 27, following the House of Representatives’ vote last week, the Argentine Senate passed a new labor reform bill promoted by Javier Milei’s administration. In a country where labor costs exceed the OECD average by over 50 percent, and informality affects over 40 percent of workers, the new law is intended to lower the cost of formal employment.
To that end, Milei’s labor reform slashes taxes by 85 percent for employers who hire new workers formally, as long as the latter were previously unemployed or former public sector employees. This applies if the employer does the hiring within a year of the law’s effective date and for a maximum of four years. Until now, employers paid an extra 16.1 percent on top of an employee’s salary to social security and entitlement programs. From now on, that figure will fall to 2 percent.
Besides lowering the cost of hiring, the labor reform bill also reduces the cost of firing. Argentine law requires mandatory severance payments equal to one month’s salary for each year of service. The new law keeps this system in place but restricts calculations for these payments to include only the employee’s base salary, thus excluding unused time off and any bonuses, including the aguinaldo, a legally required extra month’s salary paid each year in two installments.
The new labor law also provides more certainty in the event of a court dispute over a severance payment, a phenomenon so widespread in Argentina that it is known as a “lawsuit...
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