President Javier Milei’s government will look to capitalise on its victory in last weekend’s legislative elections by pushing ahead with plans to make sweeping changes to Argentina’s labour laws.
The Milei administration intends to drive through huge changes to make hiring and firing easier for employers. It hopes to tempt companies to formalise as many as eight million workers who are employed off the books in Argentina through the reforms.
Mili confirmed in an interview Monday that he would seek labour reform, saying his party would have to "sit down with the new Congress to search for agreements."
Labour, Employment & Social Security Secretary Julio Cordero said last week to the Congressional Budget Office that a bill would be forthcoming to "ensure Argentina can produce and work."
La Libertad Avanza national deputy Romina Diez has been promoting a bill with a number of key changes, including rules that would allow for working days to stretch to 12 hours. Extra pay for overtime would also be removed, with employees banking their extra hours for time in lieu in the same month.
While the Milei administration has said it will not press ahead without the support of provincial governors, officials have begun revealing details of the reform bill, which is based on Diez’s proposals.
A tentative timeline has the bill being presented in mid-December, after the new lawmakers and senators elected last weekend are sworn-in.
Draft bill
The draft ‘Ley de Promoción de Inversiones y Empleo’ ("Investment and Employment Promotion Act”) bill will seek consensus between trade unions and employers, according to government sources. Milei said Monday that the reform will “modernise a contractual framework over 70 years old and not designed for today’s world.”
The proposals include an extension of the working day, allowing for extensions of up to 12 hours per day, which may be agreed through collective bargaining talks and union contracts.
It would also introduce changes to holiday entitlements, which may be taken at any time of the year and divided into periods of no less than one week. Under the new scheme, each worker would be guaranteed at least one summer holiday every two years, unless they choose otherwise. Couples who work in the same company would retain the right to vacation together.
Severance payments for firms may be paid in up to 12 monthly instalments, except for big firms, with limits proportional to court rulings, while procedures for approving settlements will be simplified to reduce employment disputes.
Many of these changes have long been demanded by private-sector employers, who see the current rules as obstacles to growth.
It is unclear if the government’s proposal to allow “dynamic” wages and salary increases related to performance will be included.
Elsewhere, the labour reform promotes the digitalisation of administrative procedures, granting legal validity to electronic payslips and documentation, while broadening payment methods to include bank transfers, cheques or authorised digital platforms.
It also promotes more flexible collective-bargaining agreements, prioritising company-level agreements over industry-wide deals that take into account productivity, merit and economic sustainability over automatic index-linked pay rises, according to sources.
Among the tax incentives, a fiscal credit bond will be created for employers who generate new jobs during the first 18 months of the reform’s implementation. The benefit will cover 100 percent of employer contributions for microenterprises (typically firms with less than 10 employees), 75 percent for small businesses, 50 percent for medium-sized companies, and 25 percent for large corporations.
The proposal also redefines social benefits, excluding from salary calculations items such as meals, school supplies, mobile phones or medical reimbursements, and introduces a centralised medical verification system within Argentina’s Labour Secretariat to oversee sick leave and workplace injury claims.
In addition, it updates the rules on joint employer liability in subcontracting cases and establishes fines and penalties of up to 100 percent of the benefit obtained for those who breach the regulations or commit fraud in accessing tax incentives.
Anticipating criticism for the proposals, Casa Rosada sources maintain that the reform “does not go against anyone’s rights,” but rather seeks to “generate formal, competitive employment adapted to the new economy.”
‘Greater flexibilisation’
Speaking on Tuesday, Lower House Speaker Martín Menem said that labour reform is on the government's agenda, though he said the text of its bill was not yet complete.
In conversation with Radio Mire, Menem said the “second generation” reforms were focused on “greater flexibilisation” for workers and employers.
He said the cost of lay-offs and redundancy packages were the central motivation for the changes. Arguing that when the “exit door” to dismissals is closed, the “entry door to employment” is also shuttered, Menem said employers faced a “phenomenal labour burden.”
There is “too much state” and “too much trade unionism,” he argued, highlighting the stagnation of Argentina’s employment rate over the past two decades.
Menem, who owns a small business employing around 70 people, said reducing severance costs would increase agility for firms.
"Two labour lawsuits today can bring a company down," he argued, saying this prevented firms from expanding.
Initial criticism has already begun of the Milei government’s proposals. Córdoba-based labour lawyer Jorge Sappia described the proposal to potentially extend the working day from eight hours to 12 hours as “utter nonsense.”
"That's utter nonsense. When I hear that, it drives me crazy," said the lawyer.
"In 1919, as a result of the armistice ending World War I, the International Labour Organisation (ILO) was created. It met for the first time and issued Convention No. 1, which states that the working day worldwide should be eight hours a day and 48 hours a week," recalled Sappia.
"Who would even think of talking about 12 hours? Some things just don't make sense," he added in statements to Radio Mitre Córdoba.
"German labour doctrine maintains that it is advisable to reduce the working day from eight hours because it has been proven, especially in industry, that a worker performs excellently for the first five or six hours, and then ends the day with lower performance," argued Sappia.
‘Reduce informality’
The lawyer highlighted that he is in favour of a labour reform, saying it is “necessary to reduce informality in employment relationships. In other words, employers must register their workers so that they have access to social security and all the benefits derived from the current labour law," said Sappia.
"The key point is that this would generate income for social security, which would allow for a reduction in employer contributions, which are the most significant labour cost for businesses," he explained.
Sappia emphasised: "What needs to be reduced are employer contributions, which are effectively labour taxes."
"If everyone contributed to the maintenance of social security, employer contributions could be halved, which would significantly reduce costs," he explained.
He said the focus on severance pay was incorrect, noting that most employers reach agreements with employers before resorting to the letter of the law.
– TIMES/NA/PERFIL
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