Argentina to implement Labor Assistance Fund for severance payments

Argentina is set to implement the Labor Assistance Fund (FAL) starting in November as part of a broader labor reform. The mandatory scheme requires employers to deposit a portion of their payroll taxes into a fund to be used for severance payments starting in May 2027.

Contribution rates vary by business size: large companies must contribute 1% of their monthly payroll, while Small and Medium-sized Enterprises (PyMEs) are required to contribute 2.5%.

Employers can choose to manage these funds through either a Mutual Fund (FCI) or a Financial Trust (FF), both of which must be authorized by the National Securities Commission (CNV). Market trends suggest that large corporations may opt for Financial Trusts, while PyMEs may prefer Mutual Funds. The Dutch multinational TMF Group has expressed interest in acting as a trustee to manage these funds for companies.