Increase in basic wages

Decree No 392/2003 (the “Decree”) established that, on a staggered and progressive basis, the non-remunerative allowance awarded by Decrees No 1273/2002, No 2641/2002 and finally fixed in Argentine Pesos 200 by Decree No 905/2003, shall acquire a permanent and remunerative nature, being included to all legal and conventional effects in workers' wages.

By means of Resolution No 64/2003 of the Ministry of Labor and Social Security (the “Resolution”), the provisions of the Decree were regulated, thereby clarifying certain terms and setting the standard for the application thereof.

Follows a comparative analysis of the most relevant provisions of both legal devices.

Section 1 of the Decree establishes that as of July 1, 2003, basic wages, to all legal and conventional effects, of all private sector workers covered by collective wage bargaining, will be increased by the sum of Argentine Pesos 28 per month, over a period of 8 months, until the full amount of Argentine Pesos 224 is included in their remuneration as of June 30, 2003.

At the same time, each monthly increase received by the workers in accordance with the provisions of the previous paragraph, shall be deducted from the full amount of the allowance set by section 1 of Decrees No 2641/02 and No 905/03, until extinction thereof. The remaining amount of said allowance shall continue to be paid provisionally conserving its non-remunerative and alimony nature.

In addition, the Resolution clarifies, to the extent applicable, that the increase established in section 1 of the Decree shall be incorporated (i) to the basic wage applicable as of June 30, 2003 for the categories considered in the respective collective agreements or (ii) should liquidation failed to be performed in accordance with any collective agreement, to the wage of each worker as of June 30, 2003.

Section 2 of the Decree established that each increase received by the workers pursuant to section 1 of the Decree shall be deducted from the allowance fixed by Decree No 905/2003 (or the remaining thereof as applicable from time to time). In such regard, section 2 of the Resolution clarifies that the amount to be deducted from the allowance shall be equal to the increase received by the worker (i.e., Argentine Pesos 28).

Section 3 of the Decree establishes that the remunerative and permanent nature of the increases established in section 1 thereof, shall rule as a matter of law, even in the cases in which employers had resorted to the mechanism established in section 5 of Decrees No 1273/2002 and No 2641/2002, setting off the amounts set by said provisions and by Decree No 905/2003, with other increases of a non-remunerative nature awarded by them.

In section 3, the Resolution ratifies the set off regime in force, establishing that those areas, activities or companies that granted, between January 1, 2002 and the date on which the Decree came into force, other increases of a remunerative or non-remunerative nature over the income of their workers, regardless of that granted by the Decree, may set off such increases up to the sum established in the above-referred section 1.

Such section deals in its second paragraph with the definition of the term “increase” so as to accurately differentiate the concepts that may be set off from those that may not. In such regard, it is established that any raise, remunerative or not, granted unilaterally by the employer or agreed with one, more workers or collectively, provided it implies an increase in the sum actually received by the worker shall be considered an increase that may be set off. Nevertheless, the resolution excludes from the set off system those raises included in the applicable collective bargaining agreements derived from the modification of the status of the worker (promotions, recategorizations, seniority, etc.).

Moreover, Section 5 of the Decree establishes that, notwithstanding the new amount fixed for the minimum wage, employers shall pay workers entering employment after July 1, 2003, a remuneration equivalent to that received by a worker having entered employment prior to the date on which Decree No 905/2003 came into force, and performing the same task under the orders of said employer.

Section 5 of the Resolution clarifies in its second paragraph that such employees that were incorporated following July 1, 2003 shall receive a remuneration of not less than the sum established as minimum wage for the applicable category under each collective bargaining agreement and that such remuneration shall be subject to the increase established by section 1 of the Decree, in the same proportion applicable as of that date to the basic wage of the relevant collective agreement.

Likewise, the Resolution deals with certain issues related to the performance and application of the Decree, although not expressly included therein.

Section 6 of the Resolution sets forth that the amounts of the remuneration and the basic amounts for the categories regulated by the collective bargaining agreements that are to be increased in accordance with section 1 of the Decree, shall be those utilized for the liquidation of those legal or conventional concepts that are determined taking any of both amounts as an arithmetic calculation basis.

Regarding workers with a working day shorter than the legal or conventional working day, section 7 of the Resolution confirms the criterion established previously pursuant to which such workers shall receive the increase in proportion to their working day.

Lastly, section 8 of the Resolution deals with those workers subject to commissions, variable remuneration or remuneration subject to a result and with traveling salespersons and establishes that the increase shall be added to the basic remuneration, basic collective bargaining agreement salary or minimum guaranteed remuneration, as the case may be.