The Government forces companies to increase wages

1. Workers covered

Decree No. 1273/2002 of Necessity and Urgency sets forth that as from July 1, 2002, an unearned allowance of Pesos 100 per month will be paid to all private sector employees under collective bargaining agreements.

It also sets forth that this allowance will not be applicable to agricultural employees, household employees and public sector employees.

2. Part time employees

When the services rendered in the corresponding payment period have been for less than the regular workday or that established in the collective bargaining agreement, the employee will perceive the allowance on a pro rata basis. In this case, the contributions provided for in this Decree will be determined pro rata the amount actually received.

3. Social security contributions and charges

The Decree sets forth that employers shall deposit the amount of Pesos 5.40 and workers shall deposit the amount of Pesos 2.70 with the National Social Security System. Given their extraordinary nature, such contributions will be exempt from the discount for the Fondo Solidario de Redistribución (Common Redistribution Fund) established under Section 22 of Law No. 23,661.

In addition, the unearned allowance will be subject to the statutory withholdings for the Instituto Nacional de Servicios Sociales para Jubilados y Pensionados (pensioners’ social services entity).

4. Set off against increases granted

In those sectors, activities or companies that have granted wage increases -whether on an earned or unearned basis- during the period between January 1, 2002 and June 30, 2002, such increases may be set off against the allowance set forth in this Decree.

If the increase granted were lower than the amount set forth in this Decree, the employer shall pay the corresponding difference. All amounts granted as earned income, shall remain as such.

5. Incidence

The Decree sets forth that the allowance may in no event be considered as a ratio or basis for the quantitative determination of any legal or contractual right or any right derived from a collective bargaining agreement, nor for the circumstances contemplated in Section 3 of Decree No. 762/02 (Wage Variation Ratio) .

6. Workers with variable remunerations

Workers who earn on a commission, or a variable remuneration system or have performance-linked wages, will perceive the allowance set forth in Section 1, or their pro rata share, only when their average income during the first semester of 2002 has registered an increase of less than Pesos 100, as compared to the average for the last semester of 2001.

7. Effect

The unearned allowance will be in effect as from July 1, 2002 until December 31, 2002.