In February 2026, the Senate passed a bill proposing several labor law reforms. The bill will now be reviewed by the Chamber of Deputies for its final approval.
The bill includes, among others, the following amendments:
1) Flexible Vacations. Employees and employers may agree to split the vacation period into segments of no less than one week, which may be taken at any time during the year. This differs from the current law, which requires vacations to be taken in a single period and only between October and May each year.
2) Restrictions on Payments Included in Severance Compensation Calculations. Payments not made monthly -such as the 13th salary, vacation pay- will be excluded from severance compensation calculations. For variable compensation, the average salary earned over the last 6 months will be considered to calculate severance. Only payments accrued for at least 6 months during the last year will be included.
3) Inclusion of New Non-Taxable/Non-Salary Benefits. Meal allowances, medical coverage, car allowances, mobile phone expenses, and internet expenses will not be considered salary. Therefore, they will not be subject to payroll taxes nor considered in the calculation of the 13th salary, vacations, or severance compensation.
4) Salary Payable in Foreign Currency. Employers may pay employees’ salaries in foreign currency.
5) Greater Flexibility for Part-Time Contracts. Employees and employers may agree to part-time contracts without time restrictions, unlike the current law, which limits part-time work to two-thirds of the regular working hours of a full-time employee.
6) Limits on Joint and Several Liability of Related Companies Within Economic Groups. Companies belonging to the same economic group will only be held jointly and severally liable in cases of fraud.
7) Limits to Joint and Several Liability in Subcontracting. If companies verify subcontractors’ compliance with labor and social security obligations, they will not be held jointly and severally liable with the subcontractors.
8) Elimination of Damages Awarded to Fixed-Term Employees. Fixed-term employees dismissed before the expiration of their contract will not be entitled to damages. Under the current law, they are entitled to damages equal to the monthly salaries remaining until the end of the agreed term, in addition to severance compensation.
9) Mandatory Severance Fund. Employers must contribute to a mandatory severance fund between 1% and 2.5% of salaries, which they may use at the time of termination of employment. This mechanism does not replace the severance obligation but may be used to cover part of the severance cost.
10) Gig Workers are not Considered Employees. Labor laws will not apply to gig workers. However, the company must provide training and parties must agree to the provision of accident insurance.
11) Limitation on the Right to Strike. Unions must comply with a mandatory procedure before going on strike. In essential industries, a minimum level of service -between 50% and 75% of the workforce- must be guaranteed.
12) Elimination of Remote Work Law. Obligations such as covering internet and electricity costs as well as providing work tools may be eliminated.
13) Elimination of prior notice of dismissal during probationary period. Employers will no longer have to give 15-day prior notice of dismissal to employees on probationary period.
14) Reduction of paid sick leave. The sick leave not related to work paid by employer is reduced to 50% or 75% of the monthly salary (depending on what caused the sickness or accident) and the paid sick leave term is reduced to 3 to 6 months (depending on whether the employee has or not people in his/her care).
