By Eduardo Viñales, Firm: Funes de Rioja & Asociados
The new Argentinian President, Alberto Fernandez, took office on 10 December 2019. This article examines the trend emerging from the new administration’s first employment law measures.
Argentina is a country that is predictable in its cycles. Crises occur with a regular pattern and the measures and policies that are applied to solve problems that arise are often those that proved unsuccessful in the past. This also applies to employment-related acts and decisions that are made in times of crisis.
A new government took office in December 2019. Although it is not wholly accurate to label it a Peronist-based alliance, it can be defined as a centre-left government strongly backed by the unions. Consequently, strong intervention in the labour market is what was expected from the new administration and this is what is in fact happening. Two recent decisions taken by decree serve as an example of how the government is acting.
Increased cost of dismissals: DNU 34/2019
The elected president has passed a decree doubling the amount of severance payments for a dismissal without cause for a period of 180 days. The stated aim of this decision is to fight unemployment and induce employers to abstain from restructuring. A similar decision was taken during 2002 crisis. This return to a hurdle to dismissal does not guarantee that employers will not dismiss employees, but does make the process more expensive. It may also discourage new hirings.
Salary increase: DNU 14/2020
The government has decided to increase the salary of all employees in Argentina by ARS 4.000 in two instalments: ARS 3,000 in January and an extra ARS 1,000 in February. For an employee working in an average industrial activity, this will constitute a 12% increase in the base salary of the lower pay bands. A similar measure was taken during 2002 crisis.
This predictable trend of more intervention in the labour market may continue, but commentators hope the government will learn from past experience and invest in long-term solutions in addressing Argentina’s current economic difficulties.