Monday, February 1, 2010


Non-salary benefits under attack by the Supreme Court

By Juan Martín Dighero

The Supreme Court of Justice (SCJ) of Argentina ruled in a recent case that non-salary benefits, as regulated by Section 103bis of the Contracts of Employment Act (CEA), are unconstitutional, pursuant to Section 1 of the I.L.O. Convention 95. Obiter dictum, the SCJ said that all benefits granted to employees form part of their “salary”, and therefore are subject to social security contributions, among other effects. 

To support this conclusion, the SCJ declared that Section 103bis of the CEA (passed by Congress in 1974 and subsequently amended on many occasions) was unconstitutional because all forms of consideration paid in exchange for personal work are part of a salary, by nature, and not even Congress may rule against the nature of things; in essence, if it flies, it ought to be a bird.

In 1996, the CEA was amended to allow payment by employers of certain “non-salary benefits”, therein described as “welfare or social contributions”, and therefore, not part of an employee´s salary. Said “non-salary” status means that the employer does not have to pay social security contributions or make any withholding from the employee´s salary in connection with those benefits; likewise, these benefits are not computed either in calculating other salary-related benefits, such as the Christmas Bonus (an additional salary paid in two installments in June and December), or statutory indemnification for wrongful termination.
Although the SCJ´s decision referred to a case involving only luncheon checks or tickets, which in fact had been excluded by Congress as social benefits two years before, following I.L.O. pressures, the legal reasoning of the highest court extends to all social benefits currently allowed by the CEA and routinely granted mostly by international companies in Argentina.