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ALERT / OCTOBER 7, 2026
Argentina introduces new mandatory employer contributions to Labor Assistance Fund
4 MIN READ
Argentina is introducing the Labor Assistance Fund (Fondo de Asistencia Laboral or FAL), a new mechanism designed to help employers pre-fund severance pay, rather than relying solely on direct payment when an employment relationship ends. Employers will be required to make new mandatory contributions of 1% or 2.5% based on employer size. The regime is scheduled to take effect on 1 November 2026.
Background
Established under the Labor Modernization Law enacted on 6 March 2026 and regulated by Decree No. 408/2026 published in the Official Gazette on 1 June 2026, the FAL regime is scheduled to take effect on 1 November 2026.
The FAL introduces a pre-funded approach to financing eligible statutory severance pay under the Employment Contract Law. Covered employers will be required to make monthly contributions to a fund to cover severance pay that would otherwise be paid directly when employment ends.
Key details
Mandatory contributions to the FAL
From 1 November 2026, employers must make mandatory monthly contributions to a FAL. Contribution rates are as follows:
For micro, small, and medium-sized enterprises (MSMEs): 2.5% of total pensionable salaries.
For large employers that do not qualify as MSMEs: 1% of total pensionable salaries.
MSME status is determined under the MiPyME classification framework (opens a new window), which considers annual revenues and other criteria established by the Secretariat for Small and Medium-Sized Enterprises (SEPyME).
The new mandatory contributions must be paid monthly alongside employer social security contributions through the Unified Social Security Contribution (CUSS) system. The Customs Revenue and Control Agency (ARCA) will process the contributions and deposit them into the individual employer account.
The FAL regime applies to private-sector employers, except in certain industries such as the construction industry and domestic service. Covered employers must establish an individual employer account with an investment vehicle, such as a mutual fund or financial trust, authorized by the National Securities Commission (CNV) prior to the payment of the first monthly contribution. Further guidance from the CNV is expected regarding authorized investment vehicles. The employer must report the account identification number to ARCA.
Corresponding reductions in employer social security contributions
Under the legislation, employers that make mandatory FAL contributions are entitled to corresponding reductions in their existing employer social security contributions. In practical terms, the government intends the FAL to be financed through a reduction in existing employer mandatory social security contribution, rather than through an additional contribution on top of employers' current social security costs. For example, a large employer required to contribute 1% of payroll to the FAL would receive an equivalent reduction in employer social security contributions.
Payment of severance pay through the FAL
To qualify for FAL coverage, eligible employees must be registered in accordance with labor and social security requirements for at least 12 months prior to termination. In addition, employers must complete a six-month waiting period following their first contribution before FAL assets can be used to pay covered obligations.
Employers may use available FAL assets to fund covered severance pay, in whole or in part, or pay severance pay directly.
Employer action: ACT
The FAL represents a significant change in how employers in Argentina will finance severance pay. Although the regime is designed to be largely cost-neutral through corresponding reductions in certain social security contributions, it introduces new administrative requirements that employers should address before the 1 November 2026 expected effective date. Employers will need to establish a FAL account with an authorized investment vehicle, review payroll, budgeting, and reporting processes, and monitor further guidance from ARCA, the CNV, and other relevant authorities to ensure they are prepared for compliance with the new requirements.
Further Information
Executive Branch - Decree 408/2026 | Official Gazette of the Argentine Republic (opens a new window)
For more info
Flavia Kuiava
Account Executive, People Solutions, Lockton Argentina