Termination and Severance in Argentina After the 2026 Reform

Termination cost is the number foreign boards ask about first, and until recently the honest answer involved a wide range. The severance calculation was contested, the base was litigated, and a dismissal could generate claims well beyond the statutory figure.

The Labour Modernisation Act, in force since 6 March 2026, rewrote Article 245 of the Employment Contract Act. The result is a materially lower and — more importantly for planning — a materially more predictable number.

The basic formula has not changed

Dismissal without cause, after the probation period, entitles the employee to one month’s salary per year of service or fraction greater than three months, calculated on the best monthly, normal and habitual remuneration accrued during the last year, or during the period of service if shorter.

What changed is everything that goes into “best monthly, normal and habitual”.

What is now excluded from the base

The reform defines remuneration for these purposes as that accrued and paid in each calendar month, and states expressly that non-monthly concepts have no effect on the calculation. Specifically excluded:

• The statutory annual bonus
• Holiday pay
• Premiums that are not paid monthly

Under prior practice the annual bonus was widely included, following the majority interpretation. Its express exclusion reduces the base by a meaningful percentage in most cases.

The reform also defines two terms that had been litigated for decades:

“Habitual” means concepts accrued for a minimum of six months in the last calendar year. A concept paid fewer than six times is not habitual and does not enter the base.

“Normal”, for variable items such as monthly premiums, overtime and commissions, means the average of the last six months — not the annual average as previously applied.

Finally, where a collective agreement sets a cap on the base, that cap may not be lower than 67% of the monthly, normal and habitual remuneration.

The change that matters most: sole remedy

This is the provision a foreign employer should understand before any other.

The reformed Article 245 states that the severance it provides constitutes the sole remedy available on termination without cause. Receiving it extinguishes definitively any judicial or extrajudicial claim connected to the dismissal, including claims of a civil nature, contractual or non-contractual, and actions may not be brought outside the special regime. The only exception is action based on criminal offences, which is governed by ordinary rules.

In practical terms, the statutory severance can no longer be stacked with a civil claim for moral damages, loss of profits or consequential loss. That stacking was the principal source of Argentine termination claims exceeding the statutory calculation, and it is the reason the number was previously so hard to forecast.

Discriminatory dismissal

A separate regime, introduced in 2024, addresses dismissal motivated by discrimination on grounds of race or ethnicity, religion, nationality, ideology, political or union opinion, sex or gender, sexual orientation, economic position, physical characteristics or disability.

Two features distinguish it from what preceded it. The burden of proof lies with the party invoking the ground — the employee. And where a court confirms the discriminatory origin, the remedy is an aggravated indemnity of 50% of the Article 245 amount, which judges may increase to 100% according to the gravity of the facts. Reinstatement is not the remedy.

Note that pregnancy and maternity are not in that list; they remain governed by their own protective provision.

Other termination routes worth knowing

Notice. One month where service does not exceed five years, two months where it does. No notice is required during probation.

Resignation may now be formalised by telegram in physical or digital format.

Mutual agreement requires a public deed or appearance before the judicial or labour administrative authority, with the employee personally present. The reform added something new: the relationship is also deemed terminated by concurrent will where the conduct of both parties unequivocally indicates abandonment — and in a contract of continuous and permanent performance, this is deemed to occur after two calendar months during which neither party expresses a will to continue.

That last provision is genuinely novel and its edges are untested. Treat it as a rule that will be litigated, not as a management tool.

Concrete legal risks ⚠️

Dismissing on a miscalculated base. The exclusions are specific. Including or excluding the wrong concept produces either an overpayment or a claim for the difference plus interest.

Assuming the sole-remedy clause is settled. It is in force and being applied, but constitutional challenges to the reform are live, and the interaction between the sole-remedy clause and Argentina’s general anti-discrimination statute is actively debated. The prudent posture is to plan on the current text while recognising the debate is not closed.

Relying on tacit mutual termination. Two months of silence during a long illness or a period of conflict is not a safe basis for treating a contract as ended.

Dismissing without documented cause where cause exists. Cause properly documented and notified changes the outcome entirely; cause asserted after the fact rarely survives.

Applying the old rules to old dismissals. Terminations before 6 March 2026 are governed by the prior regime, including concepts since repealed.

What to do 📌

• Factor in the Labour Assistance Fund, which now finances part of this obligation — see our note on how the Fund works.
• Rebuild your severance model on the current definitions. Models built before March 2026 overstate the liability, sometimes considerably.
• Track the six-month test for each variable pay concept so the base can be calculated without reconstruction.
• Check the collective agreement cap against the 67% floor.
• Use probation deliberately, with a documented decision before it expires.
• Document performance contemporaneously. Cause is proved by a file built over time.
• Take advice before any termination involving a protected characteristic, a pregnancy, a union role or a recent complaint.

The strategic view

Argentine termination cost has fallen and, more usefully, has become forecastable. A company can now model its exposure with a degree of confidence that was not available two years ago, and the elimination of stacked civil claims removes the tail risk that made the previous system so difficult to price.

The residual risk is legal rather than financial: this framework is new, its central provisions are being challenged, and the case law that will define its edges has not been written. Plan on the current text, and revisit the plan.

If you need your Argentine severance exposure modelled on the current rules, or are contemplating a termination, our employment team can help. Get in touch.