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Argentina
Increased severance
obligations
Under Law No. 25.323 which took
effect on 12 October 2000, legislation
has been passed by Congress which
doubles the mandatory severance
payment that has to be made when
employees, not registered as 'regular'
employees, (for instance employees
who are registered by the employer
with the labour ministry and certain
other government agencies) are
dismissed. About 4.5 million people
are employed in this way and so fall
outside the full protection of
Argentina's labour laws. This means
that the employer does not make
contributions to social security and
welfare programs and does not
withhold income taxes or payroll
contributions for these employees.
This practice that the new law
addresses, reduces labour costs for the
employer but puts at risk the future
financial security of the employee who
will not be covered for social security healthcare or pension income.
Companies with employees who
are not appropriately registered have
30 days to regularise this and so avoid
the sanction of a doubling of
severance payment amounts. A
further provision of the law that
applies to registered employees is that
when they are dismissed, the severance indemnity must be paid on
the employee's last day of work. If
not, the former employee can sue to
collect the severance payment plus a
penalty of up to 50% of the amount
owed.
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