Milei Unveils 68-Page Labor Reform Proposal to Cut Severance Pay and Curb Union Power

Argentina's government under President Javier Milei has released a 68-page labor reform framework it plans to send to Congress this week, with the goal of enacting changes by early 2026. The draft, presented in Buenos Aires by Cabinet Chief Manuel Adorni, compiles recommendations from the May Council, an advisory group that met for one and a half years and included representatives from national and provincial governments, employers and labor unions.

What the Proposal Would Do

The proposal targets three structural problems the report identifies as obstacles to formal job creation: a high tax and employment-cost burden, substantial hiring and firing costs, and rigid, nationally and sectorally determined wage negotiations. Key measures in the draft include reducing severance pay and employer payroll contributions, limiting the right to strike, and making collective bargaining and company‑level wage talks more flexible.

Rewriting Bargaining Rules and Benefits

One priority is a review of collective bargaining agreements, many of which the report notes date back to 1975, to better align sectoral rules with current economic realities. The draft also promotes the expansion of nonwage benefits — such as health care, child care, internet access, gym memberships, training and transportation — which would not be treated as salary and therefore would not trigger payroll charges, effectively reconfiguring labor costs.

Officials and Experts

José Gustavo Perego, director of consulting firm Abcef, said the reform is intended to boost competitiveness by giving employers clearer rules on organization and disciplinary authority, which he says would reduce operational friction and litigation risk. 'This re-engineering of labor costs significantly broadens the range of non-salary social benefits,' he told UPI.

Walter Mañko, a lawyer and partner at Deloitte Legal, said the overhaul aims to bring Argentina's labor rules closer to those of advanced economies by creating more predictable hiring and firing costs and greater flexibility in working hours and union financing. He noted that in Buenos Aires alone there are more than 300,000 open lawsuits over dismissals claimed to be without just cause.

Supporters' Case

Supporters argue the reforms would reduce nonwage labor costs and legal expenses tied to labor disputes, lower payroll charges, and encourage formal hiring by making labor rules more predictable. They say clearer rules on disciplinary procedures and broader use of nonwage benefits could reduce litigation and operational uncertainty for companies.

Critics' Concerns

Critics, including political scientist Agustín Pineau of the University of Buenos Aires, warn the changes risk weakening workers' bargaining power and could make employment more precarious. Pineau argues that sustained formal employment growth historically follows robust economic expansion, investment and real-wage increases rather than reforms that primarily reduce labor protections.

Although many details remain unresolved, the government intends to move the proposal to Congress soon. The draft is likely to provoke intense debate with Argentina's powerful unions and could become one of the country's most consequential labor policy fights in decades if enacted.