Labour Reform: What Applies to Current Employment
Dynamic Pay, Hours Bank and Holidays: Which Labour Reform Rules Apply to Current Employment Relationships.
Although there is controversy regarding the retroactive effect of the labour reform, experts warn that its main aspects also apply, from the date it enters into force, to those who are already employed today, except where the rule expressly states that implementation depends on regulation, such as the Labour Assistance Fund for severance payments.
What happens with dynamic pay
Under the labour reform chapter on "dynamic pay", employers may grant productivity-based supplements and withdraw them when conditions change.
"Dynamic pay does not currently exist. A company would have to grant a future increase in order for the dynamic pay rules to apply", says Paola Forchiassin, of Marval.
However, she also clarifies that "to the extent there is agreement between the parties (whether through a written agreement voluntarily signed by the employee or agreed with the union), and minimum rest periods are respected, it could be implemented".
"That agreement must be set out in writing, both in cases of individual negotiation (only with the employee) and collective negotiation (with the union)", warns Javier Sabin, of EY Argentina.
"Dynamic compensation may be applied provided it is granted above mandatory wages and payment items", says Fernando Bonofiglio, of PwC Argentina.
When holidays may be taken
The labour reform provides that holidays may be split into weekly periods and that companies are only required every three years to grant them during the summer period.
"With holidays, the law is reflecting a practice that already exists", notes Forchiassin. Sabin also considers that the labour reform rules on holidays apply to employment relationships currently in force.
"If an employee takes holidays while the law is in force, the new rule applies", says Luis Discenza, of AZDR y Asociados.
However, "the application of the labour reform to holidays depends on agreement between the parties", considers Federico Basile, of Tavarone, Rovelli, Salim & Miani.
"Once the labour reform is in force, holidays may be split into weekly periods and granted outside the summer season, but this will require mutual agreement between the employee and employer", Bonofiglio emphasises.
"The reduction of the notice period for granting holidays to 30 days will also apply", he adds.
Which severance rules will apply
"An employee currently in service does not have a right to severance yet; that right only arises if the employee is dismissed. The right to severance accrues upon dismissal, and the law in force at that time will apply. Without prejudice to the fact that in the City of Buenos Aires nothing changes, because the rule merely adopts the criteria of the Labour Court", explains Forchiassin.
"The central point is cost predictability. The law introduces the Labour Assistance Fund (FAL) as a forecasting tool: companies begin to contribute a monthly percentage to finance future severance payments for their current staff", says Sabin.
"This does not remove the right to collect severance under the Employment Contract Law, but ensures that the money is available", he underlines.
"In addition, a cap is placed on judicial interest (CPI + 3%) and the basis for calculating severance is redefined, excluding the annual bonus and annual awards, which reduces exit costs in the event of dismissals of employees with seniority", he recalls. "All of this applies to existing employment relationships", he stresses.
Separately, the "inapplicability of severance for clientele in the case of travelling sales representatives upon future terminations, as a result of the repeal of the statute governing that activity", also enters into force, says Bonofiglio.
What other changes come into force
"With respect to hires made under this new framework, the law moves away from rigidity and focuses on direct tax incentives to encourage employment", says Sabin, and specifies:
Exemption from employer social security contributions: a reduction in contributions is established for 48 months for new employees who are unemployed, monotributistas or public employees at the time of hiring, although regulation is still pending to clarify the details.
Bonofiglio also points to another new benefit: the extension of the deadline for delivery of employment certificates upon new terminations, with the new period being 45 business days.
This insight is a brief comment on legal news in Argentina; it does not purport to be an exhaustive analysis or to provide legal advice.