Milei’s administration argues the reform, which passed with 42 votes in favor, 28 against, and two abstentions, will spur investment and create formal jobs, while labour unions contend it weakens worker protections, including the right to strike.

The reform is expected to bolster investor confidence in Milei’s market-driven reforms.

Passage of the bill is seen by analysts as a signal that Milei has the political backing to advance his broader free‑market agenda.

Since taking office, Milei has stabilised the exchange rate and sharply cooled inflation, bringing monthly price increases down from double digits to 2.9% in January, gaining accolades from the International Monetary Fund.

One of the bill’s most contentious provisions establishes an employer-financed severance fund consisting of contributions currently earmarked for the national pension system. The change could make it easier for companies to lay off workers and opposition lawmakers say the fund would impact the pension system’s resources.

The reform also relaxes hiring rules, changes the vacation system, allows the standard workday to be extended from eight to 12 hours, and permits salaries to be paid in foreign currency.

Unions, which have mounted protests including a nationwide strike, object to new limits on the right to strike that require essential services to maintain minimum operations during work stoppages.

The labour reform is one of several legislative priorities for Milei’s administration. Lawmakers are also advancing changes to the law protecting Andean glaciers, a move the government says will unlock mining investment and which environmental groups strongly oppose.