The Bonus of Discord In the Worst of Economic Times

The National Government has promoted payment of a non-salary bonus when the economy is at its worst, and the Workers’ General Confederation [CGT] is seeking a pay rise and the business sector demands that it could be offset against taxes or any raises that have been already granted. Nobody gets what they want, and the bonus is a hybrid that will spark off dispute before the elections.

Published in El Cronista on October 01, 2019
It is clear to me that the Executive has no authority to impose the mandatory payment of a bonus because there is no substantive law in support of such power. The Executive Order itself makes a general reference to that lack of authority, and highlights that based on the principle of collective bargaining autonomy the signatory parties to collective agreements should decide on this matter.

Whether controversial or not, Executive Order 665/2019 establishes a non-salary benefit for all workers under employment relationship at the private sector, including workers covered under collective bargaining agreements and exempt employees, in the amount of ARS5,000 (five thousand Argentine pesos), which in principle will be paid with October wages, i.e. within the first four business days of November, or in such terms, installments and conditions set forth by the signatory parties to collective bargaining agreements in accordance with the principle of collective bargaining autonomy. In fact, there are agreements that include this bonus; others that will pay it in installments; others that offset it against other payments; and in most cases the parties will seek to restructure wages under each collective agreement.

According to this Executive Order partial payment is allowed when workers do fewer hours than the workday set forth in the law or collective bargaining agreement, and workers will be entitled to a proportional benefit based on the calculation method provided in the applicable collective bargaining agreement, or alternatively, in accordance with the general rules under Act No. 20744 (consolidated text 1976), as amended.

In addition, employers may have the option of automatically offsetting this bonus against any other pay rise they have unilaterally or extraordinarily granted as from August 12, 2019 until reaching the total amount of ARS5,000.

The Executive Order does not contain any other offset provisions, for example in those cases where for a variety of reasons there is a pay rise scheme according to inflation rate that absorbs any other benefits, whichever their source, and this silence may lead to double imposition. In fact, the aim of the bonus is to mitigate the effects of inflation and devaluation caused on last August 12, and in the case of those wages that are increased according to inflation this bonus will mean an extra or additional payment.

Nobody believes that this new imposition is intended to deal with the emergency; most people think the government is clutching at straws at election times, and 80% of employers are SMEs that cannot afford it and try to offset it. In a context of mass lays-off, any kind of suspensions, wages in installments, delayed payment of social security contributions, for most employers this bonus payment is unviable economically and financially.

The Workers’ General Confederation in its attempt to get wages reformulated is trying to play a central role through labor-management meetings, and not for the current period, for which there is no palliative, but especially for the next administration.

Now this Executive Order applies to all workers under collective bargaining agreements and exempt employees, with restrictions for those under collective agreement, and a broader discretionary use for senior staff and top-level executives. Exempt employees must abide by the rules set at each company where more often than not there are offset or absorption clauses.

There are also the initiatives from different unions, like the Union of Commerce Employees [Sindicato de Empleados de Comercio] who agreed on splitting the bonus in five installments, or those who seek a higher bonus including that under Executive Order 665 to push their claims.

As a corollary to that, and in order to assess the trend and the seriousness of the situation, this bonus comes at a time when the last installments of the pay rises granted under different collective bargaining agreements have not been paid yet, and when the revision clauses have not been enforced yet, either, with the aim of readjusting wages based on the final inflation rate for 2019. In such terms as set forth in each collective agreement, the parties will reanalyze wages according to inflation rate, which will reach 60% in 2019. In addition, forecasts for 2020 show that inflation will be between 50% and 100% on the verge of hyperinflation.

By Julian A. de Diego
Director of the postgraduate course on Human Resources at the School of Business at UCA.