Employees in Argentina
It has been remarked to me by many a businessman/entrepreneur/executive, that employing good workers is both one of the biggest keys to the success of a business and one of the hardest things to achieve. Obviously, some unique conditions exist in Argentina that make employing people here different than in the U.S. and in general, harder. The difficulties in having employees come from costly benefits and retirement, disloyalty, and greater degree of mis/distrust in Argentina as compared to the U.S.
Two basic types of employment exist in Argentina: “en blanco” or “in the white (legal)” and “en negro” or “in the black (not so legal)”. The difference between these two lies in the benefits paid to the employee which can break the bank of even a well backed business. To be in full compliance with the law, employers must pay around 45% above and beyond an employee’s salary for benefits, retirement and tax. This means that if you want to pay an employee 2000 pesos per month (a decent but not high salary here), then you must add 900 additional pesos to this that will be put into this employee’s retirement and benefits. Of course, this is an outrageous number. So outrageous, that somewhere between 30% and 60% of all persons employed in Argentina are employed en negro. This means that the employer pays no benefits whatsoever to the employee. The reason that so much “trabajo en negro” exists is that unemployment is high, jobs are scarce, and the government does not enforce labor law (until after the fact), so companies can get away with not paying benefits. But at the same time, whoever creates these policies should seriously take a look at the incentive that employers have to pay their employees so far above and beyond their actual salaries. Economics tells us that we must find the balance between lowering the cost to the employer and the number of employers who would be willing to pay this extra cost of having employees to find the greatest number of employers willing to pay a certain level of benefits. As the percentage paid toward benefits goes down, the incentive for employers to pay those benefits should go up, driving up the number of employees enjoying benefits. But this type of thinking seems to fall outside of the realm of what is possible here…
The irony of all of this, is that most Argentine employees, because they have worked en negro, will sue their former employers for having employed them as such… and win! Nearly all former employees employed en negro either win their lawsuit against their former employer or settle out of court before going to trial (the statistics are quite meaningless because of the latter number). So be warned all foreigners who wish to pay their employees this way: it may cost you in the long run.
Another costly part of employees in Argentina is the disloyalty, and general lack of motivation coupled with a high degree of mis/distrust. One would think that because of the scarcity of jobs here that people would be quite loyal to their employer and show a lot of incentive to do right by their company so that they do not get fired. In reality, most employers are afraid to fire their employees because of the aforementioned law suits that can come from termination. The incentive for employees to work hard to keep their jobs is very low because they know that their employer is afraid to fire them. Moreover, owners and employers, being afraid to fire their employees and thus knowing that they will probably be stuck with poor workplace relationships and unmotivated workers, will not be inclined to give bonuses, raises, commissions, or other types of compensation based on incentive. I have been called “completamente loco” for having suggested the idea of very high commissions for sales based employees. It only seems logical to me that if an employee can be motivated through cash incentives tied to work done that a win-win situation will be created. The lack, however, of such incentives in the workplace in Argentina create many disloyal employees. If they don’t see a way to gain from working hard for their company, and they see no long term benefits being paid toward their retirement, what incentive do they have to stay with a particular job?
In addition to these problems and as discussed in the previous blog, a very common practice, especially for family run businesses (which make up the vast majority here), is to put only family members in positions of management and money handling to prevent theft, fraud, and laziness. This quite often takes the form of a single person who manages the cash register at an ice cream shop or bar or clothing shop where that person will be responsible for all the money handling and all other employees take care of operations. This in and of itself does not represent a direct problem with employment but it does limit the choices as to who business owners select to run their tills. The limit that they place on who they trust (the famed “gente de confianza”) will by default limit the number of choices that they have to run a key aspect of their business.
Labels: employment, Living In Argentina, salary
