On 28 April 2021, the Brazilian government announced Provisional Measure 1045/2020, aimed at adjusting federal labour laws to protect jobs during the pandemic emergency period.

The changes in effect during the pandemic emergency period are as follows:

Reduction of hours and salaries

Employers can reduce salaries / work hours up to 120 days from the date of the Provisional Measure (MP), preserving the hourly salary, and the agreement must be sent to the employee at least 2 days in advance. The employee must agree to the reduction.

For individual agreements, percentages will be fixed: 25%, 50% or 70%, with equal compensation from the government on unemployment insurance to which the worker would be entitled.

For collective agreements, the reduction percentage is flexible, but compensation is fixed, according to the ranges below:

  • Up to 25%: without compensation from the federal government.
  • From 25% to 49.99%: compensation of 25% of the unemployment insurance share to which the worker would be entitled.
  • From 50% to 69.99%: compensation of 50% of the unemployment insurance share to which the worker would be entitled.
  • 70% or above: compensation of 70% of the unemployment insurance share to which the worker would be entitled.

The employer will have a period of 2 calendar days, counted from either the date of the end of the emergency period, the date established in the agreement as the end of the reduction, or the date of communication of the employer informing the anticipation of the end of the reduction.

Suspension of labor contract

The employer may suspend an employment contract for a maximum period of 120 days from the publication of the MP. The agreement to suspend must be sent to the employee at least 2 days in advance. The employee must agree to the suspension.

By Union agreement, it can be extended to all employees.

Under this agreement, the employment contract is temporarily interrupted, and the employee cannot work, either part time or by telecommuting.

During the suspension period all benefits granted to the employee must be maintained (Medical Assistance, Meal Voucher, etc.).

For Simples Nacional companies (with annual gross revenue of up to R$ 4.8 million), compensation paid to employees is optional per company. The government, on the other hand, will cover 100% of the unemployment insurance to which the worker would be entitled.

For companies with annual gross revenue above R$ 4.8 million, compensation must be paid to employees by the company – this is mandatory – in an amount equivalent to 30% of the salary. The government will be covering 70% of the unemployment insurance to which the employee would be entitled.

The employer will have a period of 2 calendar days, counted from the date of the end of the emergency period, the date established in the agreement as the end of the suspension, or the date of communication from the employer informing of the anticipated end of the suspension.

Temporary stability

Employees who sign agreements to reduce work hours and salary or agree to a labour contract suspension will have temporary stability, i.e. they cannot be dismissed for the duration of the emergency period.

Other rules

In the case of a temporary suspension of the labour contract, the employee cannot work, even in a “home office”.

The compensation paid by the company as an incentive to adhere to the agreements will not be defined as salary, and will be exempt from IRPF and social security contributions. These payments will also be deducted from the tax calculation base paid by companies and the FGTS.

The union agreements entered into before the emergency period may be renegotiated to adjust terms within 10 days of the publication of the MP.

If, even with these measures in place, the employee is dismissed after the crisis, there are no changes in the amount of unemployment insurance to which he will be entitled.

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Regine Torrezani Rodrigues

Regine Torrezani Rodrigues Madeiros
Payroll Brazil

All information contained in this publication is up to date on 2021. This content has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this chart without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this content, and, to the extent permitted by law, AUXADI does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this chart or for any decision based on it.