Labor Assistance Fund: What Has Changed and How to Prepare for December 1

The Labor Assistance Fund (Fondo de Asistencia Laboral, or FAL) is a mechanism created by Labor Modernization Law No. 27,802 that allows employers to build up a fund each month to cover severance payments arising from the termination of employment relationships.
Following several postponements, the regime is scheduled to take effect on December 1, 2026, with a 12-month waiting period.
In this article, we review how it works, the regulations issued over the past few months, and what your company needs to do now.

Fondo de Asistencia Laboral

Why Does This Matter?

Severance payments are among the most difficult contingencies for any company to budget for. They often arise during restructuring, declining sales, or strategic changes—precisely when cash flow is under the greatest pressure.

The FAL seeks to anticipate this cost: a portion of the employer social security contributions currently allocated to the social security system will instead accumulate in an account held by the employer and invested in vehicles regulated by the Argentine Securities Commission (Comisión Nacional de Valores, or CNV).

For business owners, the impact is twofold. On the one hand, it introduces a new obligation with specific operational deadlines that should not be left until the last minute. On the other, it provides an opportunity to organize employee registration records and plan more predictably for the cost of future terminations.

With the effective date approaching, now is the time to assess whether your company is ready.

What Is the Labor Assistance Fund?

The FAL is an individual fund for each employer. It is mandatory for the private sector, funded through a monthly contribution, and implemented exclusively through open-end mutual funds or financial trusts issued and traded in Argentina under CNV supervision.

It is important to understand what the FAL is not: it does not create a new severance benefit, replace the severance framework established by the Employment Contract Law, or change the employer’s liability toward employees. Instead, it provides a way to finance all or part of those obligations using the contributions made to the fund and the returns generated by those investments.

When assessing how the FAL will affect your company, keep the following points in mind:

  • It generally applies to all private-sector employers, with exceptions such as the construction industry and domestic workers.
  • It only covers registered employees with at least 12 months of seniority as of the employment termination date.
  • The contribution is not added to existing payroll taxes and social security charges; it is deducted from existing employer contributions.
  • The fund cannot cover employment terminations until the waiting period has been completed.
  • Coverage is limited to the information actually recorded, including salary, hire date, and working hours.

For example, if an employee is registered with a salary lower than their actual earnings, the FAL will only cover the severance payment calculated using the declared salary. The difference remains the employer’s responsibility, along with any applicable penalties.

Regulatory Timeline of the Labor Assistance Fund

Since the initial regulations were issued, several additional provisions have completed the framework and changed the implementation schedule. The following is an updated overview of the regulatory framework:

  • Law No. 27,802 (March 2026): Establishes the FAL under Title II. It originally provided for the regime to take effect on June 1, 2026, with a six-month waiting period.

  • Decree No. 408/2026 (Official Gazette, June 1, 2026): Implements the regime, covering individual accounts, FAL IDs, fees, portability, and tax treatment. It postpones the start date to November 1, 2026.

  • Ministry of Economy Resolution No. 1276/2026 (Official Gazette, August 12, 2026): Establishes the investment policy. Assets must be denominated and payable in Argentine pesos. The resolution defines a closed list of eligible instruments and requires at least 10% of the fund’s assets to be held in highly liquid, low-risk investments.

  • CNV General Resolution No. 1167/2026 (September 2026): Following the public consultation opened under General Resolution No. 1161/2026, it approves the definitive framework for FAL Collective Investment Products (Productos de Inversión Colectiva FAL, or PIC FAL). These may take the form of open-end mutual funds or financial trusts, either individual or multi-employer. Ordinary fees and expenses may not exceed 1% of assets annually. Each investment vehicle must publish a monthly “FAL Fact Sheet,” and the CNV will automatically assign a PIC FAL to employers that fail to provide a valid FAL ID.

  • ARCA General Resolution No. 5907/2026 (Official Gazette, October 1, 2026): Regulates the procedures before ARCA. Before making the first contribution, employers must validate their FAL ID through the “Simplificación Registral” system. Form F.931 automatically calculates the contribution according to whether the employer is an SME, a nonprofit organization, or another type of employer. Payment is made using a specific payment code. If no valid FAL ID is available, the amounts remain unallocated until the situation is corrected or the CNV assigns an account automatically.

  • Decree No. 1228/2026 (Official Gazette, October 20, 2026): Postpones the effective date to December 1, 2026, and extends the waiting period from six to 12 full, consecutive monthly periods, counted from the month in which ARCA records the first actual contribution.

  • ARCA General Resolution No. 5915/2026 (Official Gazette, October 26, 2026): Amends General Resolution No. 5907 to reflect the postponement. The regime applies to tax returns for the December 2026 accrual period and subsequent periods.

In practice, the first contribution will correspond to the December 2026 accrual period, which must be reported and paid in January 2027.

Under the new 12-month waiting period, the fund could only begin to be used in early 2028. Until the regime takes effect, the reduction in employer social security contributions will not apply, and the full contribution rates will remain in force.

How Much Must Employers Contribute and How Does It Affect Payroll Taxes?

The monthly contribution is calculated using the same taxable base as each employee’s contributions to the Integrated Pension System (Sistema Integrado Previsional Argentino, or SIPA):

  • Large companies: 1% of employee compensation.
  • SMEs and nonprofit organizations: 2.5% of employee compensation.

This percentage is deducted from the employer contributions allocated to social security. As a result, total labor costs do not increase. What changes is where the money goes: part of the contributions is redirected from the social security system to an account held by the employer.

Some important clarifications:

  • The reduction cannot be carried forward between periods and does not generate tax credit balances.
  • It does not affect additional contribution rates applicable to special pension regimes.
  • It does not apply while the obligation to contribute is suspended.
  • It does not apply to employees hired under the Labor Formalization Incentive Regime (Régimen de Incentivo a la Formalización Laboral, or RIFL).

For this reason, ensuring that the company is correctly classified as an SME or large company in ARCA’s records is essential: that classification determines the contribution rate automatically calculated through Form F.931.

What Does the FAL Cover—and What Does It Not Cover?

The fund may be used to cover most severance payments arising from the termination of an employment relationship, including:

  • Severance based on length of service or dismissal, including constructive dismissal.
  • Payment in lieu of notice and the proportional salary due for the remainder of the month in which dismissal occurs.
  • Dismissal due to force majeure or a lack of work or reduction in work.
  • Termination by mutual agreement between the parties.
  • Compensation due in the event of an employee’s death or disability.
  • Compensation due upon the expiration of fixed-term employment contracts.

The fund cannot be used in cases of employee resignation or retirement. In addition, it does not cover differences arising from inaccurate or incomplete employee registration.

Other operational aspects to consider include:

  • Employers may transfer their funds to another authorized investment vehicle (portability), provided there are no outstanding payments.
  • In the event of cessation of activities, dissolution, or bankruptcy, the account is terminated and any remaining balance is returned to the employer.
  • In the event of a transfer of business premises or a corporate reorganization, the funds are transferred in proportion to the employees being transferred.

Tax Treatment of the FAL

Decree No. 408/2026 established specific tax treatment for the fund:

  • Income Tax: Contributions to the fund are deductible for the employer. Contributions, investment returns, and amounts credited to the employer through the use of the fund are tax-exempt. Severance payments made using FAL resources do not generate an additional deduction.

  • VAT: Contributions, investment returns, and amounts received by employees are not subject to VAT.

  • Fees: Fees charged by authorized entities are subject to Income Tax and VAT.

  • Tax on Bank Credits and Debits: Accounts used exclusively by FAL investment vehicles, as well as transactions involving subscriptions and redemptions, are exempt.

For employees, amounts received retain the Income Tax treatment applicable to their specific nature.

What Should Your Company Do Before December 1?

Although the first contribution will be made in January 2027, preparation should begin now. These are the steps we recommend reviewing:

  • Verify your classification with ARCA: Confirm your sector (private) and your classification as an SME or large company through “Simplificación Registral,” as these determine the applicable contribution rate.

  • Choose the authorized entity and investment vehicle: Compare the available PIC FAL options based on fees, investment policies, liquidity, and the entity’s track record. Each vehicle’s FAL Fact Sheet is a useful comparison tool.

  • Obtain and validate your FAL ID: Open the Employer’s Individual Account and validate the FAL ID with ARCA before the December 2026 filing deadline. This helps prevent funds from remaining unallocated or an investment vehicle being assigned automatically.

  • Review employee registration records: Check that salaries, hire dates, and working hours are accurately reported, since FAL coverage is limited to the information on record.

  • Update your payroll system: Make sure your payroll provider and Form F.931 account for the new contribution and the reduction in employer contribution rates.

Before selecting an investment vehicle, it is advisable to assess the options together with your accounting, labor, and finance teams.

How to Incorporate the FAL Into Your Financial Planning

The FAL should not be viewed merely as a compliance requirement. When properly managed, it functions as a reserve that reduces cash flow pressure when future employment terminations occur.

A financial planning approach helps answer key questions:

  • What is the potential severance liability associated with the company’s current workforce?
  • What percentage of that liability could the fund cover in one, two, or three years?
  • Which investment vehicle offers the best balance between returns, liquidity, and cost?
  • How should the contributions and the FAL account be reflected in the financial statements?

For example, an SME with high employee turnover in certain positions can estimate how much it will accumulate in the fund during the waiting period and compare that amount with the historical cost of employee terminations. This exercise helps determine how much of the risk will remain the company’s responsibility.

Our recommendation is to project different scenarios before making a decision: a conservative scenario, an expected scenario, and a higher-turnover scenario.

What You Need to Know in 30 Seconds

  • The FAL takes effect on December 1, 2026 (Decree No. 1228/2026 and ARCA General Resolution No. 5915/2026).
  • The first contribution corresponds to the December 2026 accrual period and will be paid in January 2027.
  • SMEs contribute 2.5% and large companies contribute 1%, deducted from existing employer social security contributions. There is no additional labor cost.
  • The waiting period is now 12 months. The fund cannot cover dismissals until this period has been completed.
  • Before making the first contribution, employers must choose an investment vehicle, obtain a FAL ID, and validate it with ARCA.

Common Mistakes Companies Make Regarding the FAL

  1. Assuming the FAL Replaces Severance Payments
    The fund only finances the payment. The employer remains legally responsible, and any amount not covered by the FAL—due to the waiting period, length of service, or insufficient funds—must be paid using the company’s own resources.

  2. Leaving the Selection of an Investment Vehicle Until the Last Minute
    If a valid FAL ID is not reported, the funds remain unallocated, and the CNV may automatically assign an investment vehicle that may not be the most suitable option for the company.

  3. Failing to Review Employee Registration Records
    Coverage is limited to the information reported. Incorrectly registered salaries or seniority dates leave the resulting differences payable by the employer and may expose the company to claims and penalties.

  4. Assuming the Fund Will Be Available From Day One
    Under the new 12-month waiting period, severance payments throughout 2027 will continue to be funded with the company’s own resources. Cash flow planning must take this into account.

How Can Fidem Partners Help You?

Implementing the FAL involves labor, social security, tax, and financial considerations. That is why it is important to approach the process from an integrated perspective.

At Fidem Partners, we support companies in reviewing their employee registration records, updating payroll and social security contribution processes, assessing available investment vehicles, and projecting the fund’s financial impact.

If you would like to review how the FAL will affect your company or need assistance with the implementation process, we can help you evaluate the most suitable alternative.

Frequently Asked Questions About the Labor Assistance Fund

When Does the Labor Assistance Fund Take Effect?

On December 1, 2026, according to Decree No. 1228/2026. ARCA General Resolution No. 5915/2026 applies the regime to tax returns for the December 2026 accrual period onward, with payment due in January 2027.

Does the FAL Increase Labor Costs?

No. The contribution (2.5% for SMEs and nonprofit organizations, and 1% for other employers) is deducted from the employer social security contributions that companies already pay. The destination of the funds changes, but the total cost does not.

When Can the Fund Be Used to Pay Severance?

Once the 12 full, consecutive monthly waiting periods have been completed, counted from the month in which ARCA records the first contribution, and provided that the employee has at least 12 months of registered seniority.

What Happens If I Do Not Report a FAL ID?

The amounts remain without a specific allocation. If the situation is not corrected, ARCA notifies the CNV, which automatically assigns a FAL investment vehicle to the employer.

Can I Change Investment Vehicles?

Yes. The regime allows employers to transfer their funds to another investment vehicle authorized by the CNV, provided there are no outstanding payments, the CNV’s requirements are met, and the change is reported to ARCA.

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