As international companies seek new markets and global talent, understanding local hiring practices becomes crucial. In this 17-part series, we explore how foreign businesses can navigate employment laws and hiring strategies across key jurisdictions. Our journey begins in Argentina—an important gateway to Latin America, known for its rich talent pool, evolving economic conditions, and a labor system that requires thoughtful consideration.
Authored by Enrique Schinelli Casares
Leonhardt & Dietl Abogados – Aliant+ Law Firm in Argentina
Are there alternatives to direct employment?
Yes, foreign companies may enter into Service Agreements directly with local individuals, usually setting forth a manner to pay invoices directly to a bank account out of Argentina or to an online platform (Wise, Paypal). This model is applied usually when the number of contracted individuals is limited (up to 5 individuals), and always provided the foreign entity does not have to participate in local bid processes or is otherwise required to obtain a local tax identification number to participate in a business venture. It should be noted, however, that if the “Service Agreement” provider is actually a full-time employee, in order to be compliant, a local entity should be established or contracted to act as employer. This type of contract was commonplace when the US $ was strong vis-a-vis the Argentine Peso. At the current, much weaker exchange rate, this type of contract is not so attractive for local employees who may now prefer to be formally registered as employees and therefore be able to obtain medical coverage and labor risk insurance.
Is it necessary to set up a local entity to hire an employee?
Yes, establishing a local legal entity is typically required to hire employees locally in Argentina. This, because employment is a permanent activity and therefore under Companies’ Law, it requires either to set up a local entity or to open a Branch of the foreign entity. A Branch is a flexible and inexpensive legal vehicle, able to enter into employment agreements once it obtains tax identification number. It is possible to hire employees through a local employment services provider.
Direct employment vs. independent contractor: what about costs?
Direct employment costs are significant and at a minimum, a direct employer is required to pay an amount equal to approximately 50% of the employee’s net salary as social security contributions, mandatory insurance, and health coverage. In contrast, costs for independent contractors or self-employed individuals are negotiated between the parties. However, if the “independent contractor” is actually a full or part-time employee, the relationship should be treated as an employment contract. The employee may file a legal claim in this regard, provided there is a local legal entity acting as contractor.
Stay tuned as we explore Bulgaria next.
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