Argentina is one of the largest economies in South America, so it makes sense that companies are looking to recruit Argentine talent. To make the hiring process seamless, it’s important to understand the distinction between independent contractors and employees. If the working relationship is blurred, organizations are at risk of misclassification, resulting in hefty financial penalties.
Here’s a guide to know the difference between independent contractors and employees in Argentina.
Independent Contractors in Argentina
Hiring independent contractors is an excellent route for organizations looking to recruit talent in Argentina. They provide a service to the hiring organization, have flexible hours, and can work on a project-by-project basis. Hiring independent contractors in Argentina is quick, efficient, and cost-effective compared to hiring employees.
Argentina defines a contractor as the following:
- Someone who does not have a continuous working relationship with an employer.
- Chooses their own hours and location for when they complete their work.
- Holds accountability if something is wrong with their work.
- Has their own office and equipment.
- Doesn’t provide a service that couldn’t be achieved by someone else.
Essentially, independent contractors in Argentina are not involved in a subordinate relationship with an employer under the control of a superior. They’re able to complete their work when they have the time to do so and do not have to work within the standard working hours of the country.
Contracts
Similar to other countries, written contracts for independent contractors are not required when entering a new working relationship. However, a written agreement is recommended to ensure clear communication and minimize any risk of misclassification. The hiring party and independent contractor can decide on a contract of work or a contract for services.
A contract of work is a one-time, freelance contract, in which the contractor provides services for a defined project for a specific period of time and a specific amount of money.
A contract for services is used for long-term engagements with independent contractors.
Salary
Independent contractors do not have a minimum set compensation; rather, wages are mutually agreed upon by the contractor and hiring party. When it comes to payment, independent contractors are not to be on the employer’s payroll platform. Contractors submit invoices, generally every month and are paid soon after by the hiring party. However, there is no legal requirement for invoices to be submitted monthly; it can be as frequent as the contractor wants and is mutually agreed upon by both parties.
Benefits
The hiring party or state is not entitled to provide benefits to independent contractors.
Taxes
Independent contractors are responsible for filing their own taxes, known as formularios fiscales, by June each year. They must register the employer's Documento Nacional de Identidad (DNI) with the Registro Nacional de las Personas.
Independent contractors are required to pay taxes on commercial transactions, such as gross income tax, withholdings of income tax, and Value-Added Tax (VAT (21-27%), on the compensation they receive. Money paid to independent contractors is exempt from Social Security contribution requirements.
Termination and Severance
Argentine independent contractors do not have any benefits or protection regarding termination. They are also not entitled to notice before termination and are consequently at risk of sudden termination.
Employees in Argentina
Hiring employees in Argentina is more complex than hiring independent contractors. To start, the company must have a legal entity in Argentina or the company must work with a global employment platform, like Borderless, to put an Employer of Record in place. Unlike independent contractors, employees are protected under Argentine labor law and are entitled to benefits.
An individual is considered an employee in Argentina if they satisfy the following criteria:
- Has a predetermined schedule of work that they must complete for a specific amount of time every day.
- Receives payment on a monthly basis for their work
- Is required to coordinate with an employer to take time off work
- Is under the control and direction of an employer and subject to their disciplinary measures
According to Argentinian employment law, the conditions surrounding a working relationship determine whether an individual is an employee, regardless of how they’ve been classified in a contract.
Contracts
Argentina has several types of employment contracts, all suited for the different needs of the employer. These range from full-time employees, part-time employees, fixed-term contracts, temporary contracts, or seasonal contracts.
- Full-time employees: Those who work full-time for an indefinite period.
- Part-time employees: Those who work part-time under a long-term contract. Their salary is proportional to full-time employees.
- Fixed-term contracts: Those on a fixed-term contract work for a specific period, and the contract has a definitive end date. Fixed-term contracts cannot exceed five years. Employers must justify hiring employees on fixed-term contracts rather than on full-time contracts.
- Temporary contracts: Those on temporary work contracts cannot work for longer than six months. These contracts are primarily meant for hiring individuals to cover absent employees, such as those on maternity leave.
- Seasonal contracts: Those who work during certain periods of the year.
Subordination
Employees in Argentina operate in a subordinate relationship, under the control and direction of an employer. When starting a new role, employees in Argentina are subjected to a three-month probationary period.
As previously noted, employees in Argentina work within a specific schedule of work. For full-time employees, standard Argentine working hours are eight hours a day over the span of six days.
Salary, Overtime, and Bonuses
In Argentina, the federal minimum wage is ARS 67,743.00 per month. Collective bargaining agreements (CBAs) also set minimum wages for specific industry sectors, however, they can’t fall below the national minimum wage. In these cases, employers are required to provide the minimum wage established by CBAs.
Unless detailed in the employment contract, overtime pay for Argentine employees is 150% of their pay, or, if they work on a public holiday or rest period, they’re entitled to 200% of extra pay. Employees are not allowed to work more than 30 hours of overtime a month.
Argentine employees are entitled to an aguinaldo, commonly referred to as the 13th-month salary or Christmas bonus. Aguinaldos are paid in two installments: the first of which is due by June 30th and the second by December 18th. Each payment must be equal to half of the monthly wage the employee has received in the last six months.
Benefits and Protections
Whereas independent contractors do not receive benefits or statutory protections under employment and social security laws, employees in Argentina do. These include the following:
- Paid vacation
- Maternity and paternity leave
- Sick leave
- Protection against discrimination and harassment
- Retirement and pensions funds
- Unemployment assistance
- Social security funds
- Insurance for occupational accidents and illnesses
Vacation
An employee’s vacation entitlement is based on their length of employment. In general, though, employees are entitled to five weeks of annual paid time off. During their time off, their salary is calculated by dividing the employee’s salary by 25 and then multiplying it by the number of days off the employee has used.
Maternity Leave
Female employees are entitled to 90 days of maternity leave; 45 days before their expected due date, and 45 days after. They are also entitled to request additional unpaid time off for three to six months after. New fathers are entitled to take two days of paid paternity leave.
Sick Leave
Argentine employment law allows employees paid sick leave for up to three months each year. This is only valid if they have been employed by the same employer for five years or less. If the employment relationship has exceeded five years, the employee is entitled to six months of paid sick leave. In the instance that an employee becomes injured or sick due to an incident at work, their rehabilitation and sick pay are covered by employment risk insurance for up to a year.
Holidays
Employees in Argentina are entitled to take the following public holidays off, with full pay. If employees choose to work on a holiday, they’re entitled to receive overtime pay, which amounts to a 100% premium over the employee's standard daily wage.
Taxes
The employer is responsible for managing employees’ income taxes. If an employee’s gross monthly salary is more than ARS 150,000, income tax is collected at rates ranging from 5% to 35%. In Argentina, the employer costs and taxes include:
- 16% to the Argentine Integrated Pension System.
- 2% towards public health insurance.
- 5% for the social health fund.
- 1.5% for the National Employment Fund.
- 7.5% for family assignments.
Employee costs and taxes in Argentina include, but are not limited to, the following:
- 11% for pension
- 3% for public health insurance
- 3% toward the social health fund.
Termination and Severance
If an employee is terminated from their position, they are protected and entitled to certain rights. If the employee has been working for the employer for less than five years, they are entitled to a month’s notice. If employment exceeds five years, the employee is entitled to two months’ notice.
When it comes to severance pay, the amount varies based on the employee’s salary, seniority, and reason for termination. For termination without just cause, employers are required to pay the former employee a month’s salary for every year that they were employed. If they were employed for under a year, they are entitled to a fraction of a month’s pay. If an employee’s position was made redundant, the severance owed to the employee is 50% of the normal severance rate. If an employee was terminated with just cause, they are not entitled to severance pay, but they are entitled to any unused annual leave and bonuses.
The Risk of Misclassification
If the Argentine Tax Authority (Administración Federal de Ingresos Públicos) (AFIP) or the Argentinian Labour Authority (Ministerio de Trabajo, Empleo y Seguridad Social) (MTEySS) determines that an employer has misclassified an employee as an independent contractor, the employee is required to:
- Pay the AFIP outstanding social security contributions and accumulated interest
- Pay any financial penalties the AFIP/MTEySS imposes
To avoid the risk of misclassification, fines, and penalties, it’s essential to understand these fundamental differences when hiring Argentine talent. Borderless can help you along your way — book a demo today.
Disclaimer
Borderless does not provide legal services or legal advice to anyone. This includes customers, contractors, employees, partners, and the general public. We are not lawyers or paralegals. Please read our full disclaimer here.
