Argentina is set to implement a new Fund for Labor Assistance (FAL) in June as part of its labor reform, fundamentally changing the severance pay system for dismissals. Unlike the original proposal which had a uniform application, the FAL will differentiate contributions based on the size of the company, making it mandatory for all businesses. The fund’s structure aims to ease the financial burden on businesses while maintaining worker protection.

The fund will be financed by a portion of the existing contributions that companies make to the pension system, meaning that it will not raise costs for employers; instead, it will redirect funds that would have gone to Anses. These funds will be managed and invested by brokerage firms selected by each company, although the specifics regarding the types of acceptable financial assets remain to be clarified. This system could potentially alter the landscape of labor litigation by also allowing the fund to cover legal judgments related to employment issues.

As the FAL is designed to support both severance payments and labor lawsuits, its introduction may have significant implications for the relationship between workers and employers in Argentina. It is a pivotal reform that reflects the government's commitment to modernize labor laws while addressing concerns of both job security for workers and financial feasibility for companies, marking a decisive shift in the management of labor costs in the country.