Termination of the employment contract due to retirement of the employee: expiration of the ongoing terms

Decree 110/2018 of the Argentine Executive regulates the new regime applicable to termination of employment contracts due to retirement of the employee, established by the Social Security Reform Law N° 27,426.

Remember that the Social Security Reform Law N° 27,426 introduced, in this regard, the following changes:

(i) It modified section 252 of the Labor Contract Law N° 20,744 and increased to 70 the age the employee must reach so that the employer is able to request him/her to initiate the pension procedure, provided that the employee meets the requirements established to obtain the Basic Universal Benefit under section 17 a) of Law N° 24,241 (the “BUB”).

(ii) It reduced the employer’s contributions to the social security system after the employee meets the requirements established to obtain the BUB. In that respect, the employer must only pay the contributions to the Health Insurance National Regime under Law N° 23,660 and the installments to the Labor Risks Insurance under Law N° 24,557.

(iii) It added a last paragraph to section 253 of the Labor Contract Law N° 20,744, by virtue of which the severance for dismissal for the employee that continues rendering services for the same employer after being granted the pension benefit, must be calculated considering as commencement date to determine the employee´s tenure, the date when the benefit was granted.

By means of Decree 110/2018 the Argentine Executive establishes to following:

(i) Expiration of ongoing terms provided under section 252 of the Labor Contract Law N° 20,744 that have started before the Social Security Reform Law N° 27,426 came into force (December 29, 2017).

(ii) The authority of the employer to request from the National Administration of Social Services (the “ANSES”)  the information needed to verify if the employee meets the requirements to ask for the BUB, and on the other hand, ANSES’ obligation to establish a speedy mechanism to deliver such information to employers, regarding each of the employees on its payroll.

(iii) The Argentine Tax Authority (the “AFIP”) and the ANSES, in each of their jurisdictions, must establish the operational rules to make possible the employers’ access to the social security contribution benefit. At the same time, it grants power to the Social Security Secretariat of the Ministry of Labor to establish the necessary rules to assure such benefit is accomplished.

(iv) The ANSES’ obligation to deliver to employers a copy of the resolution that grants the pension benefit to its employee. Such delivery may be done by electronic means.

(v) The application of the paragraph added to section 253 of the Labor Contract Law N° 20,744 regarding the tenure of the employee that continues to work for the same employer after being granted with the BUB, that means considering only the tenure after the benefit was granted, to employees that are granted with the Universal Pension for Older Adults, under law N° 27,260.