DOING BUSINESS IN BRAZIL
VI – EMPLOYMENT LAW IN BRAZIL
EMPLOYMENT CONTRACT
EMPLOYMENT AT WILL (Art. 444 of the Labor Code - CLT)
The law does not require a written employment contract so that its terms can also be implied or oral. Most terms and conditions of employment are subject to statutory requirements, e.g. mandatory benefits, working hours and holidays, notice of termination of employment and final payment.
Wages are paid on a monthly basis; payment is to be made not later than the fifth day of the following month (i.e., the employee’s monthly salary will be earned for each monthly period - “monthly earning period” - and paid not later than the fifth of the next month – “monthly pay period”).
Termination: either party may terminate the employment contract upon notice. The statutory minimum notice period (aviso prévio) is thirty (30) days, payment in lieu of notice being possible. Final payment to the employee must include: (i) normal pay up to the date of termination (pro rata when applicable); (ii) untaken vacation pay (pro rata when applicable; see “Mandated Benefits”, pag.18); (iii) thirteenth salary (pro rata when applicable); (iv) all bonuses, overtime or benefits calculated up to the date of termination (pro rata when applicable).
Termination by the employer triggers the payment of a penalty premium to the worker´s individual account in the Unemployment Compensation Fund (FGTS; see pages 18) equivalent to forty per cent (40%) of the grand total of deposits made by the employer to the worker´s individual account. This penalty premium does not apply if termination is for good cause (demissão por justa causa).
FIXED TERM TEMPORARY EMPLOYMENT CONTRACT: (Art. 443 of the CLT)
The rule being employment at will, fixed term contracts are allowed only for specific situations as established by the CLT:
a) Services that are temporary or essentially transient
example: the company purchases an elaborate equipment the installation of which as well as training the workers to use
it demand a certain time. Here the company hires a technician for a period of twelve months to supervise the handling
thereof and training the operators.
b) Transient business
example: the company receives an unusually large order; to service it requires the admission of new employees for a
period of eighteen months. After the order is serviced there will be no further need of extra personnel.
c) Trial period
example: the employment contract can specify a probation period which can extended.
Statutory Maximum Terms:
a) Fixed term contract: up to two (2) years;
b) Trial period: up to ninety (90) days. It is possible to renew a trial period as long as the ninety day limit is observed (ex: a 45-day trial period, extended for another forty-five days)
Termination: temporary/probation contract terminates automatically at the end of its term. Final payment to the employee is limited to: (i) normal pay up to the date of termination (pro rata when applicable); (ii) untaken vacation pay (pro rata); (iii) thirteenth salary (pro rata).
PAYROLL TAXES see graphics
PAYROLL TAXES AT-A-GLANCE
Wage: R$ 1,000.00PAYMENTS TO SOCIAL SECURITY (INSS)
Social Security tax (employer): 20% x R$1,000 = R$200.00
Social Security tax (employee): 8.65% x R$1,000 = R$86.5 (deduction from employee’s pay)
Work accident insurance: 3% x R$1,000 = R$30.00
Grand total payment to the INSS: R$316.50
UNEMPLOYMENT COMPENSATION FUND (FGTS – FUNDO DE GARANTIA DE TEMPO DE SERVIÇO)
8% x R$1,000 = R$80.00
OBS: monthly deposit made by the employer in the employee´s individual FGTS account.
UNION SUBSCRIPTION CHECK OFF PAYMENT
R$1,000 ÷ 30 days = R$ 33.33
Observation: all payroll taxes are paid using specific forms.
MANDATED BENEFITS see graphics
EXTRA WAGES see graphics
TOTAL LABOR COST AT-A-GLANCE
WORKING DAY see graphics
WORKING DAY FOR OFFSHORE WORKERS see graphics
WORKING DAY FOR OFFSHORE WORKERS AT-A-GLANCE
Working hours: 07:00 thru 19:00 – 12-hour shift = 1 hour lunch break; at the end of the shift = 24 hours rest period;
On Call Shift: 24 hours on call = 12 hours call-out work; 20% surcharge on base wage
LEAVE RIGHTS see graphics
MANDATORY RECORDS AND DOCUMENTS
BY THE EMPLOYER:
- Labor Inspection Book (Livro de Inspeção do Trabalho)- Employee Registration Book or file (Livro ou ficha de Registro dos Empregados)
- Occupational Safety and Health Program (Programa de Controle Médico Ocupacional e Risco da Atividade)
- Working hours board (quadro de horário)
- Time record (controle de horário) – only for companies with more than ten employees
- Documentation evidencing payment of wages and taxes.
BY THE EMPLOYEE:
- Worker record booklet (Carteira de Trabalho)- Medical health statements (atestado médico admissional e demissional) – including mandatory physician statements at the time of employee’s hiring and termination.
- Taxpayer Registration Card (CPF)
- PIS Program Registration Card (PIS is a program administered by the Social Security)
EMPLOYMENT LAW - FAQ
WHO DECIDES WHAT IS FOR GOOD CAUSES OR NOT? WHAT IS A GOOD CAUSE? EXAMPLES?
Termination for good cause is due to a serious fault committed by the employee. Art.482 of the Labor Code (CLT) lists the situations that allow termination for good cause: deceit, misconduct, obscene acts, conducting personal business without employer’s permission if it implies in a conflict of interests or neglect of duty, conviction of a crime (except if sentence is suspended), habitual drunkeness or drunkeness while working , neglect of duty, gross insubordination, violation of trade secrets, performance of acts that damage the reputation of the employer or third parties.
In the case of dismissal for good cause, in principle, it is up to the employer to verify and keep evidence of any of the above situations. The terminated employee may sue the employer for wrongful termination. Here, the court will determine whether good cause did exist.
ARE PUBLIC HOLIDAYS PAID AS REGULAR 8 HR WORKING DAYS?
Pursuant to Law 605/49, employees have the right to paid leave on holidays. A paid leave means that while the employee does not work on holidays, such non-working days are not deductible from his/her's montlhy wage.
If an employee has to work during a holiday, then the employer must grant one other day off within the same month. If not a 100% surcharge on the regular hourly rate applies, and the employer shall pay these hours under a specific separate title, on the salary receipt.
A TRIAL PERIOD CAN BE EXTENDED ONCE OR MORE THAN ONCE?
The law permits one single extension, provided that probation period does not exceed 90 days. E.g.: trial period of 45 days can be extended for more 45 days; trial period of 60 days can be extended for more 30 days; trial period of 30 days can be extended for more 60 days; trial period of 35 days can be extended for more 35 days; etc.
HOW ABOUT HEALTH INSURANCE? WHO COVERS WHAT?
Employers are free to contract health insurance for employees. The cost of the health insurance is deductible from corporate income tax.
WHAT IS INSALUBRIOUS WORKING ENVIRONMENT? EXAMPLE?
Art. 149 of the CL: insalubrious work refers to employment that because of its nature or working environment exposes employee to levels of hazard superior to thos established on Rule (Portaria) 3.214/78. E.g.: handling toxic products, working at noisy places (above legally permitted noise levels), exposure to illnesses, etc.
THE SMP PAID BY EMPLOYER OFFSETS SOCIAL SECURITY TAX. WHAT DOES THIS MEAN?
The employer deducts from the social security tax to be paid (on a monthly basis) the amount of the SMP paid to the pregnant employee on the previous month.
PATERNITY LEAVE: IS IT REIMBURSED BY SOCIAL SECURITY, TOO?
No.
MANDATORY RECORDS AND DOCUMENTS. WHO PROVIDES ALL THOSE BOOKS?
To be bought by the company (readily available in office supplies stores). The books Labor Inspection Book (Livro de Inspeção do Trabalho) and Employee Registration Book or file (Livro ou ficha de Registro dos Empregados), must be stamped by the local inspection office of the Ministry of Labor (DRT – Delegacia Regional do Trabalho). Small companies that do not have personnel/HR department outsource the above tasks to their accountant.