How Is the Seniority Indemnity Calculated Under Article 245 LCT?

The seniority indemnity is the mandatory statutory severance under Article 245 of Argentina's Employment Contract Law (LCT), owed by the employer to an employee dismissed without cause. It equals one month of the employee's best normal and habitual monthly compensation ("MRMNH") for every year of service, or fraction greater than three months.

1. Formula and Requirements

The calculation has two variables only: the years of service (rounded up for any fraction over three months) and the base salary. There is no discretion in the formula itself — disputes almost always turn on which items actually belong in the base salary, not on the multiplier.

2. Determining the Base Salary (MRMNH)

The base is the single highest normal and habitual monthly gross salary earned in the last year of employment — not an average. It must include recurring items such as commissions, habitual bonuses, and in-kind benefits, but excludes irregular or one-off payments. Employers frequently under-calculate this base by leaving out recurring but non-fixed pay.

3. Collective-Bargaining Caps and the Vizzoti Doctrine

Collective bargaining agreements sometimes set a lower salary ceiling for calculating severance. The Vizzoti ruling limits how far that ceiling can reduce the real base: it cannot cut the severance base by more than 33% of the employee's actual gross salary, or the reduction is unconstitutional as confiscatory.