Employee vs. contractor: how to classify workers in Argentina (quiz included) [2024]
When hiring workers in Argentina, one of the first things you need to do is classify them: Are they employees or independent contractors?
Independent contractors are a great way for global employers to take advantage of Argentina's diverse, talented workforce—with less investment and risk than when hiring full-time employees. But it's important to stay on the right side of employment laws because misclassifying employees as contractors could result in hefty fines, back taxes, and other penalties.
Learn about how to classify your workers correctly—and stay compliant with Argentine labor and employment laws—in this guide.
Classifying workers in Argentina
As in many countries, Argentina categorizes employees and contractors differently—and classifying them correctly can be the difference between smoothly running your global team and racking up huge fines and penalties (more on those below).
What is an employee in Argentina?
In Argentina, an employee is defined as an individual who provides services to an employer in exchange for remuneration.
The employment relationship is regulated by the Argentine Labor Law, which sets out the rights and obligations of both the employer and the employee. According to this law, an employment contract can be written or oral, and it may be for a fixed term or an indefinite period.
Employers in Argentina are required to register their employees with the social security system and to contribute to a number of different funds, including pension, health, and unemployment insurance. Additionally, employees are entitled to certain statutory benefits, which include:
- Minimum wage
- Annual leave (vacation time)
- Sick leave
- Maternity leave
- Public holidays
- Risk insurance
- Notice periods and severance pay
- Social security contributions (which cover health insurance and other benefits)
What is a contractor in Argentina?
In Argentina, an independent contractor, also known as a "contratista independiente" or "trabajador independiente," is defined as an individual who provides services to a client or employer under a contract that does not establish an employment relationship.
Argentinian law distinguishes between employees and independent contractors based on several criteria, including the degree of control exercised by the employer over the worker, the level of economic dependence of the worker on the employer, and the nature of the services provided.
Unlike employees, independent contractors are not entitled to employee benefits such as paid vacation time or social security contributions by their clients or employers. Instead, independent contractors are responsible for paying their own social security and income taxes, and they may negotiate their own rates and conditions for their services.
Worker classification overview: Employees vs contractors in Argentina
Contractors
Employees
High degree of worker control. Contractors should not be given orders, instructions, or disciplinary sanctions. They should also have autonomy over when and how they work.
More employer control. Employers can dictate working hours and instructions and use disciplinary proceedings in the event of employee misconduct.
Payment upon receipt of invoice.
Fixed payments. Salary payments should occur at regular intervals, typically monthly.
No benefits or oversight. Contractors are not entitled to paid leave, but they may still take leave, which their employers cannot approve, deny, or monitor.
Benefits administered by the employer. Employees receive statutory benefits, which are overseen by the employer.
Collective bargaining agreements (CBAs) do not apply. Independent contractors are responsible for negotiating their own work agreements and are not covered by CBAs.
Collective bargaining agreements (CBAs) apply. Employees can work with their labor unions to negotiate added rights and benefits in their employment contracts.
Equipment provided by the contractor. Contractors should not be given company email addresses or business cards that match those used by the company's employees. They should also not wear uniforms or working clothes that match those worn by employees.
Equipment provided by the employer, including uniforms, work clothes, business cards, and a company email address, when applicable.
Training must be specific. Contractors should only receive training on subjects specific to their contract.
General training is allowed. When hiring employees, Argentine companies can train them in general skills and procedures.
How to classify workers in Argentina
If you choose to classify your Argentinian workers yourself, you can look to court precedent to help you determine what sets an employee and an independent contractor apart in Argentina.
Factors determined by labor courts
In past rulings, Argentine labor courts have determined that an employer-employee relationship exists when someone provides a personal service habitually or continuously for someone who provides direction for the service and assumes the risk. Other evidence of an employer-employee relationship, according to past court cases, includes:
- When an independent contractor has business cards with the employer's letterhead
- When the independent contractor uses a company email address provided by the employer
- When the employer supplies tools and equipment, including (but not limited to) a computer, a car, or a cell phone
- When an independent contractor doesn't have any other clients
- When the independent contractor is guaranteed a minimum, fixed payment amount
- If the independent contractor regularly works from the employer's offices
Note that the courts don't require all of the above to be true for there to be an employer-employee relationship—even just one of the above can be sufficient evidence for a misclassification claim.
Other classification factors to consider
Some other factors to consider when classifying workers in Argentina include:
- Degree of control and integration. Contractors in Argentina should have full control over when and how they work, free from oversight and subordination.
- Oversight of leave. Contractors in Argentina can take leave (unpaid), but their clients are not allowed to monitor, approve, or deny their time off.
- Training. Contractors in Argentina may receive training related to specific duties they perform for a client. But if their training is general, or relates to company policies and procedures, they may be misclassified.
Types of contractors in Argentina
When hiring contractors, it’s important to remember that there are different types of contractors in Argentina:
- Individual independent contractor
- Legal entity
Learn about each type in more detail below.
Individual independent contractor
An individual independent contractor may also be called a sole proprietor, self-employed worker, or freelancer. These types of contractors can engage directly with employers (clients) to provide services, then receive direct payments from their employers.
Legal entity
The other type of independent contractor has established a separate legal entity in Argentina. A legal entity can still be a single contractor, but one who has established a company through which to provide their services to employers.
A common arrangement in Argentina is for employers to hire contractors via an umbrella company. In this case, the employer engages with the umbrella company as an independent contractor. Any individual workers are employees of the umbrella company and entitled to benefits and protections under Argentine labor laws.
Penalties for misclassification of workers in Argentina
The penalties for misclassifying workers in Argentina can vary depending on the specific circumstances of the case and the severity of the violation. However, in general, employers who misclassify employees as independent contractors may be subject to the following penalties:
- Fines: Argentine labor law provides for fines for noncompliance with labor regulations, including misclassification of workers. The amount of the fine can vary depending on the severity of the violation but can reach thousands of Argentine pesos (ARS) per affected worker.
- Back payments: If an employer misclassifies a worker as an independent contractor, the worker may be entitled to back payments for any unpaid wages, benefits, and social security contributions that they should have received as an employee. The number of back payments can be substantial and can include interest and penalties. They may also be entitled to severance payments if their employment was terminated incorrectly.
- Lawsuits and legal fees: Employers who are found to have misclassified workers may be required to pay legal fees and other costs associated with legal action taken by the affected workers or the government, in addition to any settlements or court-ordered remuneration.
Disclaimer: Rippling and its affiliates do not provide tax, accounting, or legal advice. This material has been prepared for informational purposes only, and is not intended to provide or be relied on for tax, accounting, or legal advice. You should consult your own tax, accounting, and legal advisors before engaging in any related activities or transactions.
