Wrongful dismissal severance in Argentina: how it is calculated

The general rule: one month's salary per year

The starting point is article 245 of the Employment Contract Law. In cases of dismissal by the employer without just cause, whether or not prior notice was given and after the probation period has elapsed, the worker must be paid severance equivalent to one month's salary for each year of service or fraction greater than three months. The calculation base is the best monthly, normal and habitual remuneration accrued during the last year or during the time of service if that was shorter.^[R1]

That month's salary does not necessarily match the last salary deposited. The norm requires taking as reference the best monthly, normal and habitual remuneration, known as MRMNH, corresponding to the last year worked. The basic formula can be expressed as severance for seniority equal to the calculation base multiplied by indemnifiable years. The problem lies in correctly determining those two variables.^[R1]

Step 1: how many years are compensated

First, seniority must be determined. Each full year corresponds to one salary base. If after the last full year there is a fraction greater than three months, that fraction counts as another year. For example, five years and two months count as five years; five years and eight months count as six. The article 245 severance can never be less than one month's salary calculated under the norm's own system.^[R1]

The law also specifies what is understood as remuneration for these purposes: the amount accrued and paid in each calendar month. Concepts that are not paid monthly are excluded, such as the annual complementary salary, vacations and bonuses that are not paid monthly. That is why receiving an exceptionally high amount in a given month does not automatically turn that entire amount into the calculation base.^[R1]

Step 2: what habitual and normal remuneration means

The 2026 reform incorporated an express definition into article 245: a concept is habitual, for these purposes, when it accrued for at least six months in the last calendar year. An exceptional bonus paid only once should not automatically become part of the MRMNH. By contrast, a salary concept that appears recurrently for at least six months may meet the legal requirement of habituality.^[R1]

For variable concepts, such as monthly bonuses, overtime or commissions, the law defines as normal the average of the last six months or the average of the last year if the latter is more favorable to the worker. If a person earns a fixed salary of 1,600,000 and the average commissions of the last six months are 350,000, while the annual average is 300,000, the 350,000 figure is used for the variable component because the six-month average is more favorable. The preliminary base would then be 1,950,000.^[R1]

Step 3: the collective agreement cap and the 67% floor

The salary base cannot exceed the equivalent of three times the average monthly salary of the remunerations provided in the collective labor agreement applicable to the worker at the time of dismissal, for the legal or conventional working day and excluding seniority. For workers excluded from any collective agreement, the cap is that of the agreement applicable to the establishment where they work or the most favorable one if there is more than one.^[R1]

In no case may the application of that cap result in a base lower than 67% of the monthly, normal and habitual remuneration calculated under the law. If the MRMNH is 3,000,000 and the agreement cap is 1,500,000, applying the cap without a limit would reduce the base by 50%. But 67% of 3,000,000 is 2,010,000, so the severance base must respect that floor. The logic is that of the Vizzoti ruling by the Supreme Court in 2004, now expressly incorporated into the legal text.^[R1]

A full example and what else the settlement includes

Take a worker dismissed without cause after six years and four months. Since there is a fraction greater than three months, seven indemnifiable periods are counted. With a fixed salary of 1,600,000 and normal and habitual computable commissions of 350,000, the MRMNH is 1,950,000. The 67% of that figure is 1,306,500. If the applicable agreement cap is 1,700,000, that cap is higher than the floor and can be applied. The severance base would then be 1,700,000 and, multiplied by seven periods, the article 245 seniority severance would be 11,900,000.^[R1]

That does not necessarily mean 11,900,000 is all the worker should receive. Article 245 specifically calculates seniority or dismissal severance. A termination may also generate other concepts. If the employer did not give proper prior notice, there may be substitute severance: notice must be given one month in advance when seniority does not exceed five years and two months when it is higher. If the dismissal without notice occurs before the last day of the month, integration of the dismissal month may also apply.^[R1][R3][R5]

To this may be added the proportional annual complementary salary and severance for proportional unused vacations upon termination. The annual complementary salary does not form part of the article 245 base because it is not a monthly payment concept, but the worker retains the right to collect the proportional part. Using only the salary times seniority formula can considerably underestimate a settlement.^[R1]

Probation period, out-of-agreement workers and frequent errors

Article 245 applies after the probation period has elapsed. As a general rule, the indefinite-term contract currently has a six-month probation period. Collective agreements may extend it to eight months in companies with between six and one hundred workers and to one year in companies with up to five workers. During that period the relationship may be terminated without generating the article 245 seniority severance. That is why the start date, company size and applicable agreement can be decisive.^[R1]

Being out of agreement does not mean the cap automatically disappears. For those excluded from a collective agreement, the law establishes that the agreement applicable to the establishment where they work must be considered and, if there are several, the most favorable one. This point can be especially relevant for managerial employees and high-salary workers.^[R1]

Errors usually appear when taking the last salary simply as the base, including annual complementary salary or extraordinary bonuses, ignoring how variable remunerations are averaged, applying a collective agreement cap without checking the 67% floor or incorrectly counting a seniority fraction. It is also common to confuse the article 245 severance with the entire final settlement. A relatively small difference in the base remuneration can turn into a significant sum: if a disputed concept changes the base by 200,000 and the worker has ten indemnifiable years, the difference can reach 2 million in article 245 alone.^[R1]

To make a serious estimate it is advisable to have the payslips from the last year, the exact start and end dates, the collective agreement and job category, the detail of commissions, overtime and bonuses, the dismissal notice and the background on eventual prior notice. This article offers general information on Argentine labor legislation and does not replace the analysis of a specific case by a professional.