Argentina: New Executive Order establishes Gradual Reduction of the Double Severance Compensation
On 24 December 2021, Executive Order No. 886/2021 (hereinafter, “the Executive Order”) was published in the Official Gazette of the Argentine Republic, which, among its other provisions, established the gradual reduction of the double severance compensation stated at the end of year 2019.
The Executive Order provides for the gradual reduction of the double severance compensation in case of a dismissal without justified cause, from 1 January 2022 to 30 June 2022, in three stages:
- from 1 January 2022 to 28 February 2022: an increased severance compensation equal to the 75%
- from 1 March 2022 to 30 April 2022: an increased severance compensation equal to the 50%
- from 1 May 2022 to 30 June 2022: an increased severance compensation equal to the 25%
The abovementioned percentages will be applicable to the total amount of the severance compensation items arising from the termination, without cause, of the employment contract, with a ceiling of ARS 500,000 (approx. USD $5,000).
Finally, the Executive Order provides that the benefit of the increased severance compensation will not be applicable to employment contracts entered into force after 13 December 2019.
Key Action Points for Human Resources and In-house Counsel
It should be considered that, unlike previous Executive Orders, Executive Order No. 886/2021 did not extend the prohibition to carry out dismissals without justified cause, due to a lack or reduction of work and force majeure.