Expanding in Argentina
Global expansion always entails inevitable risks. Issues such as language barriers, gaps in time zones, and disparity in etiquette will always arise among employers from different countries. Now that work is entirely done remotely, these issues are even amplified.
Expanding your business also requires a huge deal of effort and finances. As an entrepreneur, you do not want to throw anything. Every business decision ought to be calculated and executed perfectly. Luckily, Rivermate has compiled everything you need to know when planning to expand to Argentina. Here are the reasons why you should invest and expand your business in Argentina:
1. Argentina is home to highly qualified employees.
Argentina has a population of 43 million people. Majority of these people have obtained at least a high school diploma. Argentinian workers are said to have a good command of the English language, which is more than helpful in maintaining good communication in the workplace.
Please add statistics and sources to this. What is the exact population of Argentinians who have obtained secondary education? Tertiary education? What is Argentina’s ranking for statistics on literacy and other metrics?
In 2018, the OECD reported that 40% of 25-34 year-olds obtained a tertiary degree in Argentina. Additionally, its literacy rate jumped from 95.1 to 98.1 percent since the 80s.
2. Argentina enjoys Free Trade Access.
Argentina, alongside Brazil, Paraguay, Uruguay, and Venezuela, comprises Mercosur, a politico-economic bloc created to improve trading relationships between these countries.
Mercosur entitles Argentina to enjoy a set of commercial benefits such as free trade access to the markets of the other members. In fact, the Argentinian government is set to expand its international trade agreements for the succeeding years.
If you do decide to expand to Argentina, you will also have the ability to freely explore the markets of Brazil, Paraguay, Uruguay, and Venezuela.
3. Argentina has its logistic benefits.
Aside from its 23 international airports, numerous rail and air links, and efficient shipping and road operations, Argentina is also a gateway to South and Central America which makes it a convenient country to expand to.
Argentina also has an unwavering high ranking on the Logistics Performance Index.
According to European Business Review, the ability to utilize the delivery of goods from manufacturer to consumer is a major ingredient to a successful business. Argentina’s logistic benefits allow a business to move its products or services from the starting point to the endpoint smoothly.
4. Argentina offers a good number of business opportunities and economic benefits.
Argentina is home to one of the largest domestic economies according to Gross Domestic Product (GDP) rating. In 1993, the country recorded a 0.64% growth rate. This has since ballooned to an impressive 2.7% rate in the year of 2017. This improvement may be attributed to its industrial diversity where Argentina excels in offering a wide range of business opportunities in its industries and sectors. Some notable sectors in the country that perform well in recent history include agriculture, technology, and the energy sectors.
Payroll in Argentina
One requirement in global expansion that is always overlooked is the payroll process. Among many other countries, Argentinian payroll is framed in a more complex system than others. Here are the things that you need to take note of:
In Argentina, employers are not required to provide written employment contracts to their employees as long as they are classified as permanent and full-time workers. All the employment relationship terms stipulated in labor laws are also always mandatory.
In lieu of the written employment contracts, employers are mandated to register their employees in the company labor books, provide correspondent salary slips monthly, and pay social security and taxes.
In the case of fixed-term workers and employees who have open-ended contracts, their employers are required to provide a written employment contract. The maximum term is five years and once the contract ends, the employer should pay a severance compensation equivalent to half of the regular pay. It is also worth noting that a fixed-term contract has no trial periods.
Salary and Compensation
According to Minimum-Wage, the government-mandated monthly minimum wage in Argentina is 8,060 Argentine pesos or 83.26 USD. This was last changed on January 1, 2017. The monthly minimum salary covers the maximum working hours of 192 a month, which is paid 13 times every year. Full-time employees should also receive the Annual Extra Pay (SAC) at the end of June and December.
Employees working in the tech and finance sectors commonly receive bonuses from their employers. However, additional benefits and compensations are offered at the discretion of the employer. There are, however, existing foreign companies in Argentina that provide bonuses and compensation as mandated by the labor law.
If you want to boost the productivity of your employees and encourage them to work to earn their paycheck, it would be helpful to offer additional benefits through bonus policies, of course, without compromising your company’s revenue.
It is required for Argentinian companies to provide severance pay to any employee who has rendered at least three months of service once their employment is terminated. By definition, severance pay can be in the form of health insurance or outplacement assistance to aid the terminated employee in finding new employers. Learn more about the termination details in Argentina from Rivermate’s Country Explorer.
Income tax in Argentina is divided into nine categories of employees. The lowest category solicits a 5% tax to employees with at most 64,532.64 Argentinian pesos ($700) of annual income. The highest category applies to employees with at least 1,032,522.30 Argentinian pesos ($11,300) of annual income. Employees in this category are solicited a 35% income tax.
The corporation tax rate in Argentina was also recently cut from 30 percent to 25 percent while value added tax (VAT) on sales and imports remains at 12%.
Argentina’s National Social Security Administration is responsible for the social security and other social benefits of every Argentinian, including unemployment insurance, family and childhood subsidies, and pensions.
Based on a report by Stanford in Government, Argentina’s national pension system is a pay-as-you-go system. It covers almost 95% of the country’s total population aged 65 and older. The system is funded by payroll taxes and certain tax revenues.
Employers and employees in Argentina are generally mandated to contribute to the social security fund. Employers are required to pay 19.5% of their salary to pension, family allowance, and social services contributions, and employees must allocate 14% of their salaries to these same funds. Regarding the social health contributions, employers are required to contribute 6% of their salary and employees 3%.
According to the World Travel Guide, Argentina has 11 public annual holidays. Keep in mind that when the holiday falls in midweek. The day off is commonly moved to the nearest Friday or Monday. It allows employees to enjoy longer weekends.
Here is the list of the public holidays in Argentina:
- New Year’s Day (January 01)
- Day of Remembrance for Truth and Justice (March 24)
- Day of the Veterans and Fallen of Malvinas War (April 02)
- Good Friday (April 02)
- Labor Day (May 01)
- National Day or Anniversary of the 1810 Revolution (May 25)
- National Flag Day (July 09)
- San Mart (August 16)
- Day of Respect for Cultural Diversity (October 11)
- Immaculate Conception (December 08)
- Christmas Day (December 25)
Expanding to Argentina is indeed one of the smartest decisions a company could make. It offers benefits in logistics, the quality of employees, and convenience in location. A global business expansion to Argentina may simply boil down to how a company sets up the necessary processes and maps out the strategic plan. Among the many challenges an Argentinian expansion is the sophisticated payroll processing, let alone adapting to the country’s labor laws and regulations.
Investing in a topnotch Employer of Record (EOR) like Rivermate, therefore will come in handy. Not only will Rivermate help you hire remote workers from Argentina, it will also take care of your requirements concerning payroll and compliance. Contact us and let us know how we can help you!