Argentina’s Senate has given general approval to a sweeping labor reform package proposed by President Javier Milei, a key component of his administration’s economic overhaul. The move, approved in the early hours of February 12, 2026, comes amid widespread protests and signals a significant shift towards a more free-market approach to labor regulations.
The reform, intended to attract investment and stimulate economic growth, has drawn sharp criticism from labor unions who fear it will erode worker protections. The Senate’s approval is just the first step in a legislative process that will continue in the Chamber of Deputies, with a projected final vote by March 1, 2026.
Business leaders have largely welcomed the Senate’s decision, viewing it as a necessary step to modernize Argentina’s heavily regulated labor market. “The activity of private companies in Argentina has been limited for a long time by a series of factors, including the need to update labor regulations,” a representative from the Argentine Business Association (AEA) said. “Providing predictability and reducing litigation in this area is undoubtedly necessary to increase formal employment in our country.”
The Union of Industrialists of Argentina (UIA) also highlighted several aspects of the bill favorable to industry, noting that the fiscal cost is estimated at 0.1% of GDP in 2026, rising to 0.2% when fully implemented. The approval was also backed by banking associations, the Buenos Aires Stock Exchange, the Rural Society and the Chamber of Commerce and Services.
Specifically, the UIA pointed to provisions that clarify rules regarding union governance within small and medium-sized enterprises (SMEs), limiting union management to 10 hours per month and streamlining assembly procedures. “This reduces the constant conflict within plants, especially in SMEs,” according to a statement from the organization.
The reform also establishes specific criteria for calculating severance pay, excluding previously included items like vacation time, bonuses, and commissions, and sets a wage cap for calculations. This move, the UIA argues, will create greater predictability in labor costs and allow businesses to plan more effectively.
The Labor Cessation Fund (FAL) is another key element, with contributions set at 2.5% for SMEs and 1% for larger companies – a reduction from the previous 3%. “These percentages reflect what companies annually spend on severance payments,” UIA specialists calculated.
“The law introduces unified criteria for updating (legal proceedings), eliminates distortions and establishes changes in the labor judicial process to improve its functioning,” the UIA stated, also celebrating provisions designed to prevent work stoppages and facility takeovers. The end of “ultra-activity” – the continuation of expired collective bargaining agreements – is expected to encourage renegotiations of labor conditions.
The legislation also strengthens employer authority in organizing work, assigning tasks, and structuring companies, which is seen as crucial in a challenging economic climate. Guarantees are also included for essential services and continuous-process activities, protecting sectors where interruptions could lead to irreversible production losses.
“More transparent mechanisms are introduced for controlling certificates and licenses, reducing abuse and unjustified absenteeism,” the UIA added. “The elimination of economic incentives for unjustified absences ensures that workers are compensated only for time worked.” Provisions regarding flexible work schedules and banked hours are also expected to help businesses adapt to changing production needs.
The reform also addresses third-party contracting and provides incentives for formalizing employment and reducing non-wage costs. “Incentives are incorporated to formalize labor, reduce contributions for recent contracts and other instruments aimed at stimulating the creation of formal employment and reducing informality,” the UIA said.
Regarding vacations, the legislation maintains the standard period of October 1st to April 30th but allows for agreements to take vacations outside of this timeframe and permits the mutual agreement between employer and employee to split vacations into segments of at least seven days each.
“The previous labor system failed,” UIA President Martín Rappalini told reporters. “Formal employment has not grown in more than 15 years, even as informality has reached record levels. We had more than 600,000 labor lawsuits, equivalent to about 10% of the total payroll in litigation. To that we add record levels of absenteeism, between 8% and 10% depending on the sector, largely due to a tricky-to-control illness system. This new labor framework comes to correct those distortions that, for years, only generated conflict and job destruction.” Rappalini also acknowledged the work of the G6 and the May Council.
The UIA, concerned about the process of economic opening and the pace of recovery, is scheduled to meet with Economy Minister Luis Caputo on Friday. “This law creates a new regulatory framework that provides predictability for future labor relations. We see a structural change forward. We hope that the economy will reactivate and we can generate employment, but without a predictable labor system it was very difficult for that to happen. In fact, we have been with the same level of registered formal employment for more than 15 years,” Rappalini said.
“The approved project by the Senate generates the conditions to create employment and facilitates labor formalization. in a framework of stability and economic growth,” said Javier Bolzico, president of Adeba. “it ensures that the salaries received by workers are banked, guaranteed and that they contribute to financing the growth of credit, as has happened in the last two years. The project ensures the free of charge of salary accounts,” he added regarding the controversy generated in the debate with virtual wallets.
“The approval in the Senate of the Labor Modernization project is a positive thing in the face of the urgent need to incorporate more workers into the formal labor market,” said Claudio Cesario, president of ABA. “Regarding the modifications, we appreciate that they took into account our technical arguments that aim to guarantee the protection of deposit funds from employee salaries, sustain the development of credit to families and businesses, which is the fundamental pillar of a country’s growth, and the freedom to dispose of the funds that all workers already have,” he concluded.
“It is a very important step forward,” said Adelmo Gabbi, president of the Buenos Aires Stock Exchange. “I would have liked it to be even broader, but what came out is very great.” The initial draft included an exemption from income tax on financial gains. That article was lost in negotiations.
“The project that obtained half sanction by the Senate will favor both the formalization of unregistered labor relations and the generation of new jobs,” said Mario Grinman, president of the CAC. “It is a very important step in the right direction that Argentines should have had a long time ago. Now, we must bear in mind that, to achieve a significant and sustained increase in registered private employment over time, a normative modernization like the one being discussed in Congress is certainly indispensable and more than welcome, but it must be complemented with an adequate economic environment,” he added.
“Fortunately, in recent years Argentina has made great progress in monetary and fiscal matters. I trust that the conjunction between a healthy macroeconomy and this update of the legislation will allow for important progress in the labor market, with its consequent economic and social benefits,” the president of the Chamber of Commerce concluded.
“The half sanction of the Labor Modernization Law is a positive signal on the path towards a more competitive Argentina and with greater generation of formal employment. From the Argentine Rural Society we believe that updating the labor regulatory framework is a pending debt that the country owes to its productive sector and, above all, to millions of workers who are currently in informality,” said Nicolás Pino, president of the SRA, who recalled that they have been working on a proposal to modify the Agricultural Labor Law No. 26.727 and on modernization in the May Council. The SRA suggested several points that, they explained, were not in the original version and that were eventually included.
“The countryside and regional economies need clear, predictable rules adapted to the productive reality of the interior,” he completed.
The US Chamber of Commerce in Argentina (AmCham) posted a thread on X hours before the debate. “The proposal moves in the right direction: incentives to review the employer-collaborator relationship, less litigation and more predictability. Employing in Argentina today involves high costs and judicial decisions that discourage new hires. The discussion is not an ideological debate: it is a reality that makes it impossible for us to overcome our historical vulnerabilities,” they estimated at AmCham.
“Modernizing is not taking away rights. It is providing predictability, generating incentives to hire and opening new opportunities for new generations. The challenge is clear: an Argentina that returns to develop, generates formal employment, more investment and opportunities according to the different local realities. That is the path to a developing federal Argentina,” they concluded.
