Argentina: Are fringe benefits part of the employee´s salary?
The Labor Courts of the city of Buenos Aires, in the case ‘‘Sanchez Ávalos, Julio Arturo y otros vs/ Cisco systems inc.’’ ruled that the parking space and mobile phone granted to an employee are part of his salary and must pay taxes and social security contributions. The Court also decided that those fringe benefits, plus the bonus paid to the employee, should also be taken into account for purposes of calculating severance pay.
The Labor Court based its decision on the following facts and arguments, among others:
First, the Labor Court construed that the parking space and mobile phone granted to the employee represented an economic advantage/earning to him, due to the fact that he does not have to bear the costs related to those benefits.
Additionally, in connection with the mobile phone, the Labor Court stated that the employee could use it not only for labor purposes but also for personal purposes, since there were no restrictions in that respect. Therefore, the Labor Court ruled that the portion related to the personal use of the mobile phone must be considered salary.
Thirdly, the Labor Court ruled that even though the bonus was not paid on a monthly basis, it should also be taken into account for purposes of calculating severance pay, because it was paid every three months, and defendant did not produce any evidence to justify this particular timing for payment.
These facts and arguments led the Labor Court to conclude that the parking space and mobile phone granted to the employee are part of the employee´s salary and therefore, the employee´s salary was not duly registered, triggering the imposition of certain labor fines on the company and in favor of the employee, as well as tax and social security contingencies. The Labor Court also ruled that those two fringe benefits and the bonus paid to him have to be considered for purposes of calculating severance compensation, increasing significantly the amounts payable to the employee due to his termination.
This case law ratifies that the Labor Courts in Argentina have a broad understanding of what represents salary and shows the importance of analyzing the consequences of granting fringe benefits and bonus to employees in Argentina.