The Executive has held discussions in its crisis committee with a clear involvement of the Head of the Department of Labor, Minister Claudio Moroni, about double severance pay under Executive Order No. 34/2019 (December 2019) and the ban on work suspension for economic reasons or due to force majeure and employment termination for economic reasons, due to force majeure or without cause.
Yesterday it was announced that double severance pay will be effective until the end of the year, and the ban on suspensions and layoffs will be extended. Remember that double severance pay does not apply to employees registered with a new job as from the effective date of Emergency Executive Order No. 34/2019 until mid-December 2019, and the ban on suspension or layoff does not apply to employees registered with a new job as from April 1, 2020 onwards.
Keeping the ban on layoffs is a looming menace that endangers the recovery of confidence amid the uncertainty that discourages investment, and forces many industries to freeze businesses in hope of more encouraging signals.
That is the reason why just like the announcement on this new term extension, it would be imperative to open up a discussion on the gradual process to leave the ban on layoffs and double severance pay behind.
A transition and counterfactual reasonable plan would be to reduce double severance payment to a 75% or 50% surcharge, and these reductions may boost job creation. It is advisable to eliminate, at least, employers’ contributions while keeping subsidies for those employees who have lost their jobs. These two compatible benefits help encourage employment. Employees who get a new job know that they will keep their subsidy from ANSeS, and employers may subtract the net amount of the subsidy from the wages under collective bargaining agreement and pay the difference.
As to the ban on suspensions and layoffs, considering that the gradual process to go back to normal should include double severance pay, the option would be to have a system where in case of termination, employees are paid the amount under Emergency Executive Order No. 34/2019, i.e. double severance pay, and the reductions proposed in the previous paragraph. And in order to leave suspensions for economic reasons or due to force majeure behind, suspensions should be agreed in accordance with Section 223 bis (Employment Contract Act) with a subsidy and some rotating shift schedules if it is OK with the company and business activity.
If we manage to move out of the ban on layoffs and adopt a transition process, markets will be encouraged to rebuild trust. In line with forecasts, such as the one given by Orlando J. Ferreres, predicting a 6.5% annual growth (2021) and in order to recover jobs, the State aid programs should be kept, including the Emergency Aid Program for Employment and Production (ATP), soft loans or loans with no interest and forgiveness of social security contributions to SIPA [Argentine Integrated Pension System] to engage in a recovery process with sustainable expectations to recover trust as well.
In other words, even though the arguments put forward by the business sector are more than reasonable, demanding the end of the ban on layoffs and double severance pay, if we keep these measures in place, the recovery process will be jeopardized. If there is no gradual plan to go back to normal while keeping the Emergency Aid Program, jobs will be necessarily lost, and the hard effort made so far to protect employment could well be in vain.