28 June 2009

Hiring Argentine Employees

In Argentina, taking on an employee is serious commitment. You can't hire and fire employees from one day to the next as you can in the United States, Australia, New Zealand, and other countries that have freer employment markets. In addition to punishing social security taxes, Argentine employees have a series of government-mandated perks, benefits, and severance that raises the overall non-wage costs of employing them. Add that to the fact that all non-professional Argentine workers are automatically union members and covered by collective bargaining agreements and you will see why any prudent businessperson will think twice before hiring.

In fact, the World Bank ranks Argentina 130th out of 181 total economies worldwide for labor market flexibility. Entrepreneurs coming from the United States will be in for plenty of nasty surprises, given that the United States is the freest labor market in the world (ranked #1 by the World Bank). Investors from Europe and other socialist democracies will be more familiar with the kinds of restrictions that Argentina places on its businesses and the benefits that are provided for workers.

Argentina Employee Benefits
  • Mandatory paid vacation
  • Paid sick leave
  • Paid maternity leave plus unpaid leave after the paid maternity period
  • Days off with pay for "life events" such as the birth of a child, death in the family, etc.
  • Mandatory severance pay if an employee is downsized or fired without just cause
  • Overtime pay / double overtime pay
  • Thirty days advance notice before termination
Things Employers Can't Do In Argentina
  • Reduce an employee's wage, even in times of hardship for the company
  • Hire workers on fixed-term contracts, unless they can prove the work is not permanent (i.e. seasonal work)
  • Employ minors for night work
  • Suspend workers for more than 30 days in a year (75 days if the causes are due to force majeure)
  • Pay workers in cash or by check (except in special cases, all salaries must be deposited in an employee's bank account and it is the responsibility of the employer to open the account on the employee's behalf)
  • Fire the union delegate during or 12 months after his or her term (which of course leads to extreme abuses by the union delegate, including unjustified absences from work, extreme laziness and sloppiness in the performance of their duties, etc.)
Things To Expect
  • Random announcements from the government and labor unions, raising salaries unilaterally and without regard to your business' situation
  • Employees who expect constant raises based on seniority and cost of living adjustments, without regard to their individual performance
Larger Companies Should Also Expect
  • Union agitation
  • Annual audits by unions
  • Labor inspections by the government
Trial Period
After hiring an employee, the employer has a three month grace period to determine whether or not an employee will incorporated definitively. During this period, the employer may fire the employee without cause and without paying required severance pay. Employers must use this time effectively to determine not only whether the employee is performing adequately, but to verify that the position itself is actually needed. Due to the extreme costs of downsizing, in Argentina it is usually better to have a department or sector slightly overworked and with a slight worker shortage than to maintain a sector with more workers than needed.

Personal Thoughts
In my own personal experience and from what I have seen in most Argentine businesses, adding additional employees is typically a last resort after every other solution has been tried (i.e. reorganizing the workload, overtime, temporary staffing, etc).

Coming from a country with the world's most dynamic and flexible labor market, I can't help but make the observation that the Argentine system not only contributes to high unemployment, it also causes companies to grow slower and less aggressively. Nevertheless, most Argentine workers (like most Europeans) would not choose to give up their job protections and benefits for the sake of a more dynamic labor market. Workers guard their labor rights jealously and don't be surprised if you have Argentine workers telling you what they are entitled to.

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