In depth

On 26 September 2024, Decree No. 847/2024 was published in the official gazette and came into force, approving the regulation ("Regulation") made on the Bases Law in relation to labor reform and the promotion of registered employment. For more information on the provisions of the Bases Law regarding the mentioned topics, please access our previous news alert here.

Below are the main points of the Regulation:

Labor reform

1. What is employment?

1. According to the Bases Law, employment regulations shall not apply to individuals engaged through services agreements, agency contracts and other types of commercial contracts, provided that payments are made through banking systems and individuals issue invoices.
2. The Regulation clarifies that the number of invoices or receipts issued and/or the number of clients billed is not relevant to define this matter.

2. Subcontracting of personnel: It was clarified that: (a) the employment relationship is considered registered upon recording the employee with the tax authority (AFIP); (b) with this registration, the requirements of the special book of section 52 of the Employment Contract Law No. 20.744 ("ECL") are also considered fulfilled; and (iii) either the employer or third-party user companies can register the employee with AFIP.

3. Probation period: The new probation period (six months or as determined by the collective bargaining agreement (CBA)) will only apply to employment relationships initiated on or after 9 July 2024.

4. Severance Pay System ("System"):

1. Framework: The System is an alternative regime that can only be established by the CBA and applied by employers and workers by mutual agreement. It applies to existing relationships before the creation of the corresponding System as well as new relationships. Also, involved parties may change the option at any time.
2. Substitution of severance: The System provides the possibility for employers and employees to agree on the substitution of seniority severance (Article 245 of the ECL) by the System, as well as any other severance item that takes seniority compensation as a parameter (such as constructive dismissal, compensation for termination in case of maternity (at the employee's option), termination of the employment contract due to force majeure or lack or reduction of work, and severance for death, among others).
3. Parameters and principles: The System must: (i) specify the causes, facts and/or conditions under which the benefit will be paid; (ii) define the amount of payments to be made and the payment modalities; and (iii) establish a differential treatment in favor of the employee terminated without cause.
4. Mutual agreement termination: In this case, if the employer decides to pay a gratification to the employee, this payment can also be made under the procedure established in the System.
5. Modalities: The System can be established under three modalities: (a) individual cancellation system – direct payment from the employer to the employee; (b) individual or collective termination fund – cumulative monthly contributions, with percentages and amounts to be agreed upon in advance; and (c) individual or collective insurance system – with insurers authorized by the National Insurance Superintendency. The CBA can establish multiple modalities, and they can coexist simultaneously.
6. Effects of payment: The payment to the employee of the amounts resulting from the System will absolutely extinguish the severance to be substituted.
7. Termination of the employment relationship: The System must specify its operation in case the employment relationship ends due to the following causes: (a) mutual agreement; (b) termination without cause; (c) dismissal with cause; (d) death; (e) compensation option by the employee who had a child; (f) resignation; (g) constructive dismissal; (h) retirement, etc.

5. Independent insurance: Regardless of the existence or non-existence of a severance pay System, employers can hire an insurance to fully or partially cover the amount of seniority compensation (Article 245 ECL) as well as any other severance item that takes this compensation as a parameter.

6. Social security debt: In the case of a final judgment on an unregistered employment relationship that determines a social security debt, the contributions already paid by the employee under this relationship must be deducted.

Promotion of registered employment

The Bases Law establishes the possibility for employers to enter a moratorium regime with reduced sanctions to regularize labor relationships that were deficiently registered ("Regime"). The Regulation establishes the following:

1. Scope of application and additional clarifications

1. The Regime applies to private sector employers and only for labor relationships initiated before 9 July 2024 and in force at the date of adherence to the Regime.
2. The Regime includes both unregistered labor relationships (non-recorded employees) and deficiently registered labor relationships (incorrect start dates or salaries).
3. Service Time: The regularized period is considered as service time for applicable benefits (retirement, disability and unemployment).

2. Benefits of the Regime

1. Debt forgiveness (contributions and social security contributions to the health insurance system and the work risk regime): Percentages of debt forgiveness are established according to the type of employer: (a) micro and small enterprises – 90%; (b) medium enterprises – 80%; and (c) other employers – 70%. Additionally, 100% of debts related to the national health insurance system and work risk regime are forgiven.
2. Extinction of criminal action: Proceeds if there is no final judgment at the date of adherence to the Regime
3. Removal from the Register of Employers with Labor Sanctions (REPSAL)

3. Payment modalities:

1. Cash payment: 50% reduction of the capital and interest debt
2. Payment plan: Established by AFIP, with specific installments and interest rates

Spanish version