What global businesses need to know about payroll in Argentina
Think of Argentina and you’ll probably first think of Lionel Messi and the 2022 World Cup, Diego Maradona, Evita, or even its reputation for beef production and top-quality steak. And while Argentina has given so much to the world in cultural, sporting, and agricultural terms, as the second-biggest economy in South America (after Brazil), it’s just as exciting a place to do business.
There are many positives to Argentina from a business perspective: a highly literate and educated workforce, and as Spanish speakers, strong links with the rest of the Americas and with Spain. However, it has never been the most stable of economies, and the election of Javier Milei as president in late 2023 has created more uncertainty, as he plans sweeping economic and administrative reforms that will shake things up even more. Foreign exchange rates have fluctuated wildly recently, making it critical to keep track of changes and how they might impact costs over time.
This makes it all the more important that you understand all the ins and outs before starting your expansion into the Argentinian market. This guide covers all the basics from payroll and employment perspectives.
Getting Started
The first step of the somewhat complex process of starting a business in Argentina is to decide which type of corporate entity to establish. There are four options: corporations (S.A.), limited-liability partnerships (S.R.L.), foreign branches, and general partnerships, although the latter rarely applies to foreign businesses. The required start-up capital varies between each of these: foreign branches and S.R.Ls don’t need any start-up capital, while an S.A. requires a minimum of ARS 100,000.
The multitude of procedures that must be completed as part of the set-up process include:
- Company name verification with the Office of Corporation
- Certification of partner signatures
- Deposit of at least 25% of initial capital with National Bank of Argentina
- Publish company notice in Boletin Oficial
- Have company books ‘rubricated’ by General Inspection of Justice
- Obtain a Fiscal Code and a Tax Identification Number from the National Tax Office
- Register for local ‘turnover tax’ and with the Social Security System (SUSS)
- Take out employee insurance
- Rubricate wage books with the Ministry of Labor
While this is a complex process that can take a number of months, the good news is that the fees involved at each step are very small (and in some cases free). Overall, the process is therefore inexpensive as a whole.
Employment Considerations
Argentina is one of the few countries that gives a full scope of employee rights to all employees regardless of contract type. It also limits the tenure of fixed-term contract workers, who can be hired for a maximum of five years. Temporary workers have a six-month maximum stay. Companies are often rewarded for hiring previously unemployed or disabled people.
Because the labor laws are so comprehensive, written contracts are not actually a legal requirement for full-time employees. To comply with the laws, employers should register employees in their labor books and for taxation, and conduct all salary, tax and social security requirements. Collective bargaining is common in Argentina and can even be applied to individual companies as well as whole industries.
Most salaried employees are paid at the end of each calendar month, but those who earn on a per-hour, per-day, or per-project basis should be paid either every week or every other week.
Working hours are typically limited to eight hours per day (the afternoon ‘siesta’ is still generally observed outside Buenos Aires) and 48 hours a week, and the typical working week runs from Monday to Friday. A number of exceptions apply to these rules, and reductions are in place for work deemed unhealthy or that takes place at night. Overtime is limited to three hours per day, 30 hours per month and 200 hours per year; overtime pay is 150% of normal rate, rising to 200% for work after 1pm on Saturdays or at any time on Sundays or public holidays.
Compensation, Bonuses and Severance
The economic turbulence in Argentina is reflected in the fact that its national minimum wage rate was increased in every single month of 2023. By December 1, it had reached ARS 156,000 per month, around two and a half times what it had been at the beginning of the year. It’s therefore especially important to keep a close eye out for further changes throughout 2024 and beyond, many of which may be at relatively short notice.
Full-time employees are also entitled to the ‘Aguinaldo’, a 13th-month payment that is split into two halves: the first must be paid by the end of June, the second no later than December 18. Each payment should be exactly half of the highest monthly wage an employee earned in the previous six-month period, and so the amounts will be heavily influenced by Argentina’s inflation, and the rises in the minimum wage levels.
Bonuses are common in the tech and finance sectors of Argentina. Bonuses are initially given at the discretion of the employer; however, once established, they can become a mandate by law. Companies should be sure to detail exactly what bonus policy will be in employee contracts, as bonus payouts have been the basis for many legal claims in Argentina. It is also common to provide a range of employee benefits, including compensation for commuting and transportation, meal vouchers, gym memberships, internet and phone subscriptions, and private health insurance cover.
Argentinian companies can terminate employment for any reason at any time, but are required to remit severance pay to anyone with at least three months of service. Severance should be paid at one month’s salary per year of employment, at the highest rate they earned during the course of their tenure, up to a maximum of three months’ salary. Any partial year where more than three months have been worked is considered a full year for the purposes of this calculation.
Tax and Social Security
Income tax in Argentina is applied progressively across nine bands. The lowest of 5% applies to the first ARS 173,834.61 of annual earnings. The highest of 35% applies to earnings in excess of ARS 2,781,353.85. Non-residents are charged on their income sourced in Argentina at the same rates.
Corporation tax is now applied across three bands, depending on the amount of taxable income a business generates. The initial rate is 25%, rising to 30% for taxable income above ARS 14,301,209.21, and then 35% on taxable income above ARS 143,012,092.08. VAT, applicable on the sales or imports of most products and services, is currently 21%.
Social security contributions are made by both employers and employees in the following areas:
Pension fund: 18-21% employer, 11% employee
Health insurance: 6% employer, 3% employee
Labor risk insurance: 2.41% employer
Life insurance: 0.5% employer
Health insurance: 3% employee
Occupational trust fund: ARS 100 employer
Holidays and Leave
Argentina has around 17 days of public holidays each year. When some of these holidays fall in midweek in a particular year, it’s common for the authorities to move the day off to the nearest Friday or Monday, so that the public can enjoy long weekends off.
Paid leave entitlement starts at two weeks after six months of service, increasing to three weeks after five years, four weeks after ten years and five weeks after 20 years. Employees are also entitled to receive ten days of continuous leave after getting married. The death of an immediate family member entitles an employee to three days’ continuous leave, and one day for a sibling. If an employee has a school exam, employers are required to give two continuous days’ leave with a maximum of 10 days per year.
Maternity leave is 90 days for female employees. This is normally 45 days either side of the birth, although employees can choose to take 30 days pre-birth and 60 days post-birth if they wish. Maternity leave is paid by the Argentine social security system. Paternity leave is two days after birth; while an extension to this has been mooted for a number of years, no further provision has been agreed as of the start of 2024.
Sick leave entitlement in Argentina is relatively generous compared to other countries. A maximum of three months’ paid sick leave is available to employees, extending to a maximum of six months once they have at least five years’ service. While employers have to cover sick pay, Employment Risk Insurance takes over if the illness or injury is work-related.
The employer must also keep the position open exclusively for that employee for up to 12 months, and that employee has the right of first refusal for the position. Severance pay rules apply if employers are unable to do this.
Argentina Payroll: A Summary
The current economic turmoil doesn’t have to be a deterrent to doing business in Argentina; in fact, the low value of the peso at present means the outlay to foreign organizations has been vastly reduced. However, this has to be balanced with a clear focus on complying with all the rules and regulations around Argentinian payroll, including any future changes – especially around the minimum wage. If you feel you need help staying abreast of everything, then partnering with a global payroll provider can give you access to all the Argentina-specific expertise you need.
This article is for informational purposes only and not intended to convey or constitute legal or any other advice. It is not a substitute for advice from a qualified professional.