Argentina's Labor Assistance Fund faces repeal proposal

Argentina's Labor Modernization Law has introduced the Labor Assistance Fund (FAL), a mechanism designed to help companies, particularly small and medium-sized enterprises (SMEs), manage the financial impact of severance payments. Under this system, employers can make periodic contributions into collective investment vehicles to accumulate resources for future labor contingencies. While the fund provides financial predictability for businesses, the employer retains full legal responsibility for the worker's compensation.

However, deputies from the Unión por la Patria party have proposed a bill to repeal the FAL. The legislators argue that the fund threatens the social security system by diverting resources that should belong to ANSeS into private investment schemes. They claim the mechanism could reduce the deterrent effect against dismissals and characterize the fund as a way to move social security resources into financial markets, comparing it to the former private pension system (AFJP). The implementation of these funds is expected to begin in November following recent resolutions by the National Securities Commission.