Labor reform: the Government analyzes allowing SMEs to “share” the same fund for layoffs

The regulation of this segment of the law has not yet been published. Next month, according to the provisions of the regulation, the financing scheme for layoff funds should begin to operate. It was one of the main novelties of the labor reform. Is mandatory for all companies that have employees, regardless of the size of the company or number of workers hired.

The Government recognizes that for smaller companies, with few registered employees, the formation of a special fund with brokerage companies or financial entities can be a complex procedureand imagine that It would be difficult for the capital market to have a separate fund for each employer that exists in the Argentine economy.

There would be thousands of new funds that emerge at any moment to operate in the local market, and they believe that it could imply a “operational” problem. According to PwC data, 2.7 million people are employed in SME firms, a 45% of the total of formal employees in the private sector.

Official sources assure that a diagonal to solve this problem is to allow there to be some financial vehicle that allows “grouping” micro and small businesses in the same FAL. The specific form it will take is not clear because it will be part of the small print that regulates the law, something that has not yet been dated.

In practical terms, it would mean that a brokerage company or bank can offer a “FAL SME” so that many companies with these characteristics can join and comply with that part of the law. The idea was also discussed in the market itself in recent weeks.

In that sense, a market source estimates that, for that segment of “retail employers”, they could have greater prominence of traditional banks over stockbroking companies. The reason is very practical: they are banks with which they probably already have agreements for the accreditation of their employees’ salaries.

It would only be enough for the entity to offer, as an additional service, the formation of that FAL. Meanwhile, the banking sector described the FAL as “an interesting product” for their client portfolio, although they indicated that they will wait for the regulations before issuing a formal position.

In general terms, the system will operate in such a way that all employers, regardless of their size or number of workers, must establish a FAL to which they will allocate a percentage of social security contributions. It will be 1% for large companies and 2.5% for SMEs. For PwC, it will imply an annual contribution to the capital market of almost 2 billion pesos, They will have to look for some profitable investment to maintain their purchasing power.

These funds, then, instead of being channeled to Anses as contributions for social security, will accumulate monthly in that vehicle, which will invest in the financial market. This money can only be used, if necessary, to cover the costs of severance pay or labor litigation.

The law establishes that the system should begin to take effect on June 1. For that to happen, the economic team still needs to move forward with a regulatory decree—led by the Ministry of Economy—and, subsequently, with the specific regulations of the National Securities Commission (CNV). There a point will be defined that the market considers key: what type of investments will be enabled within this new financial instrument.

In the event that—due to judicial issues or delays in regulations—it is not reached within the expected times, the Government has an alternative: The law itself contemplates the possibility of postponing its entry into force for up to six months.

In general terms, the market views the implementation of a scheme like the FAL favorably. A report by Adcap Grupo Financiero assured that “the development of these funds could even enable longer issuances by the Treasury, both in pesos and eventually in dollars. Given the link between salaries and inflation, it is expected that instruments adjusted by CER are the main beneficiaries in a first stage,” they said.