How to hire and pay independent contractors in Argentina

Argentina is one of the largest economies in South America and is home to a highly skilled workforce who are proficient in English, in addition to Spanish and Portuguese. The country's time zone alignment with the US makes it relatively easier to do business in the Americas. If you're looking to tap into Argentina's talent pool, but unsure where to begin, you're in the right place.

Hiring independent contractors in Argentina can be a cost-effective move, but it's not without challenges. When you're unfamiliar with local laws and practices, hiring abroad can seem daunting. You'll have to navigate complicated labor requirements, handle tax and compliance issues, and pay your contractors quickly, in their local currency.

But there's no need to stress. This article covers important insights to help you understand how to hire and pay independent contractors in Argentina. Plus, you'll learn about the country's labor laws, taxation, compliance practices, and why you have to classify your contractors correctly.  

Ready to learn more? Let’s get straight to it.

Unique considerations of managing contractors in Argentina

Here are key things to be aware of before hiring a contractor in Argentina:

• Legal framework: Familiarize yourself with local labor laws, such as Employment Contract Law and the Civil and Commercial Code.

• Invoicing and taxes: Argentinian contractors are generally required to issue invoices for their services, which should include their tax ID. You should also have a good understanding of local tax regulations, including VAT, income tax, and social security contributions.

• Currency and exchange rates: Payment to Argentinian contractors is often subject to currency restrictions and exchange rate fluctuations. Evaluate appropriate methods of payments and account for any potential financial risks associated with currency conversion.

• Employment status: You must accurately distinguish between an independent contractor and an employee. Ensure your contracts and working arrangements reflect the proper status. Misclassification can lead to severe penalties and legal issues.

• Intellectual property rights: Establish clear intellectual property (IP) ownership agreements. It can help protect your business from potential legal disputes and ensure you retain control over your valuable IP.

Keep in mind that while hiring contractors globally, and especially, in Latin America, it’s important to have a deep understanding of local employment preferences.

“While companies can make substantial tax savings when hiring contractors in Argentina, they also have to address contractors’ expectations of perks typically linked with conventional employment,” says Diego Sternberg, CEO of Nexton, a recruitment agency that has offices in Buenos Aires, Argentina.

Companies need to integrate the advantages of the contractor model with employee-like benefits. This approach helps them remain competitive in the global talent marketplace and fosters a satisfied, driven workforce.

— Diego Sternberg, CEO of Nexton.

How do I pay an independent contractor in Argentina?

Argentina has strict currency controls and high inflation, which makes cross-border payments challenging. However, here's a list of the most common and effective payment methods:

Bank transfers

A direct bank transfer is one of the most straightforward methods of paying an independent contractor in Argentina. To make the transfer, you must gather your contractor's banking information, including their account number, bank name, and branch code. Keep in mind that international transfers usually involve fees and currency conversion costs.

Online payment platforms

Several online payment platforms also facilitate cross-border transactions. Some popular options include PayPal, Payoneer, and Wise. These platforms typically charge fees for their services, so factor these costs into your budget.

Remote’s global payroll services

Remote offers a comprehensive solution for managing and paying contractors in Argentina and worldwide. With Remote's global payroll solutions, you can streamline the payment process, ensure compliance, and avoid the nuisance of dealing with currency conversion or international transfers. And it all comes with Remote's Fair Price Guarantee, which means you’ll only pay for the contractors you work with every month.

What are the risks of misclassifying Argentinian independent contractors as employees?

If you are hiring an individual in Argentina, you need to be careful about how you classify them. It's a crucial legal distinction that can significantly affect your business.

As per Argentine labor law, an employee is a person who renders services to an employer in return for regular wages. The employer dictates controls over the performance, working hours, and work location of the employee, and gives the contractor the equipment and tools necessary to do the job.

On the other hand, an independent contractor is an individual who delivers services to a client or employer under a contractual agreement that does not constitute an employment relationship. The contractor has the freedom to choose their schedule and working location and rely on their own tools or equipment to do the job.

You must register your employees within the social security system and contribute to various funds, such as pension, health, and unemployment insurance. Furthermore, employees are entitled to a range of statutory benefits, including:

• Minimum wage

• Annual leave (vacation time)

• Sick leave

• Maternity leave

• Public holidays

• Notice periods and severance pay

• Social Security contributions (which encompass health insurance and additional benefits)

Contractors are not protected by Argentine labor laws and are not entitled to the above statutory benefits.

If you misclassify your employees as contractors, it can lead to significant risks and consequences for your business. In such a case, you may have to pay all outstanding social security contributions to the worker over their duration of service. You may also be liable for other additional fines for non-compliance. 

Moreover, misclassification can also seriously affect your company's IP rights. In some circumstances, you may not legally own the IP produced, which could lead to costly legal disputes and further damage your business reputation.

Correct classification of workers is crucial to ensure compliance with local labor laws and regulations, minimize the risk of disputes, and avoid penalties. Proper classification also helps your business maintain a transparent relationship with your workers and fosters a healthy work environment.

The best way to ensure the correct classification of workers and avoid risks is to use a global employment solution like Remote. Remote can help you hire international contractors by employing foreign workers on your behalf, and handling payroll, benefits, taxes, and compliance for your international team members. 

Use Remote's free employee misclassification calculator to find out your risk level, and what you can do to fix it.

What are the labor laws in Argentina?

Understanding the labor laws in Argentina is essential for hiring, paying, and managing independent contractors in the country. Here are some of the most important considerations related to Argentinian labor laws and codes that you should be aware of when engaging with local professionals.

• Ley de Contrato de Trabajo (LCT): The LCT is the primary labor law in Argentina, regulating various aspects of employment relationships, including hiring, termination, and working conditions. While the LCT primarily focuses on employees, some provisions may also apply to independent contractors.

• Código Civil y Comercial: The Argentine Civil and Commercial Code regulates various aspects of contractual relationships, including the rights and obligations of independent contractors and their clients. Familiarize yourself with the code's provisions to ensure your agreements comply with local regulations.

• Working hours and overtime: Although independent contractors generally set their schedules, it's essential to respect any limits imposed by local regulations on working hours and overtime. The maximum working hours are 8 hours per day and 48 hours per week. Overtime cannot exceed 30 hours per month or 200 hours per year.

• Minimum wage: The government sets the minimum wage in Argentina. The current minimum wage is 84,512 Argentine pesos (ARS) per month.

Tax and compliance practices for hiring independent contractors from Argentina

When hiring independent contractors from Argentina, there are several tax and compliance practices that you should be aware of. These include:

• Income tax: Independent contractors in Argentina must register as taxpayers with the local tax authority, AFIP, and pay income tax at progressive rates ranging from 5% to 35%. The government sets the rates based on an individual's gross income.

• Value-added tax (VAT): Independent contractors in Argentina may be required to charge VAT on their services, depending on their professional category and annual revenue. The standard VAT rate in Argentina is 21%. Ensure your contractors comply with VAT requirements and include the correct tax rates on their invoices.

• Social security contributions: Independent contractors do not need to pay social security contributions in Argentina. However, they may be eligible for certain benefits, such as unemployment insurance, if they make voluntary contributions.

• Invoicing: Your contractors must issue proper service invoices, including their tax ID. Proper invoicing is essential for accurate tax reporting and compliance.

• Reporting requirements: You must report all payments made to independent contractors in Argentina to the tax authorities. You must do this reporting monthly or quarterly, depending on the number of payments made.

There are additional tax compliance requirements for US companies to consider:

1. Form W-8 BEN: Contractors in Argentina should provide you with a completed Form W-8 BEN to certify their foreign status. This form helps determine the appropriate tax withholding rate for payments made to contractors.

2. Form 1099-NEC: As a U.S.-based company, you must report payments made to your contractors who are U.S. citizens or residents, even if they are based in Argentina, on Form 1099-NEC. Fill out this form with the IRS and provide it to your contractor for their records.

3. Form 1096: You may also need to file Form 1096. This form is a physical cover sheet for certain information returns pertaining to contractors.

4. FATCA compliance: Also, you have to comply with the Foreign Account Tax Compliance Act (FATCA) requirements when working with your contractors in Argentina. It may involve gathering additional documentation to verify your contractor's tax residency and foreign financial account status.

Remote's contractor management platform has a handy tax compliance feature built in to ensure that US companies meet IRS rules, easing the work of your HR and finance departments.

How do I convert an independent contractor in Argentina to an employee?

There might be situations where it becomes necessary or beneficial to convert an independent contractor in Argentina to an employee. You should consider converting a contractor to an employee when:

• Your contractor's role becomes more permanent or long-term.

• You want the contractor to work exclusively or primarily for your company.

• Your contractor's tasks and responsibilities start to resemble those of an employee.

• You want to offer your contractor a more stable employment relationship.

• You want to offer benefits like social security coverage, paid leave, and health insurance.

• You want to protect your company's IP.

To convert an independent contractor to an employee, begin by reevaluating the working relationship to ensure compliance with local labor laws and classification criteria. Assess the contractor's control, supervision, and integration into your company's operations.

Next, draft and sign an employment contract that outlines the terms and conditions, including job responsibilities, working hours, remuneration, and benefits. Once complete, register the new employee with the local Argentinian tax authority (AFIP) and relevant social security agencies for proper pension, healthcare, and other allowance coverage.

You must withhold income tax and make social security contributions on behalf of your employee. Finally, you have to make sure you comply with all relevant tax and social security regulations to avoid disputes and penalties.

As you can see, the conversion process is not straightforward. But, with Remote’s contractor management services, it can be! Remote can seamlessly handle all the steps involved, and you can easily manage payroll and benefits for your new employees within the same platform.

The best way to hire international contractors in Argentina

To hire independent contractors in Argentina, you must understand the hiring and payroll procedures, tax and compliance practices, and local labor laws. However, fulfilling these requirements can be stressful, especially if you are new to hiring and managing contractors in the country.

Having the right partner can make all the difference and ease the entire process for you. Remote's global contractor management service aims to help businesses expand into new countries and tap into global talent. Key benefits of Remote's platform are:

• Manages the hiring process from start to finish

• Onboards workers in minutes with customizable contracts

• Processes payroll and automates payments globally

• Handles taxes and compliance requirements 

• Ensures compliance with Argentine labor laws.

All these benefits with just a simple four-step process:

1. Signup for free and onboard your contractors

2. Sign a contract (Use our template or customize your own contract)

3. The contractor submits an invoice or sets up recurring invoices

4. Approve and pay invoices in the local currency

It's that easy. Remote handles all the hassles of global hiring, allowing you to focus on the other important aspects of your business. Sign up with Remote today and start building your Argentine workforce in minutes.