Andréa Novais

Andréa Novais


The Brazil Business

Updated

Unemployment Benefits in Brazil

Andréa Novais

Andréa Novais


The Brazil Business

Updated

Brazilian employees are granted with several benefits: health insurance, meal, transportation and others. Apart from the benefits while they are working, Brazilians still receive some benefits for being unemployed – and for some people, they are even better than being employed.

Understand the Brazilian logic

Most Brazilians do not have the habit of saving money. According to Ibope, only three out of ten Brazilians actually save part of their earnings. Also, a recent study made by Credit Suisse bank has shown that Brazilians tend to save only 10% of their monthly income. Just to give an idea, the Chinese, who are the ones who save the most amongst the emerging countries, save 31% of their monthly earnings. Brazil, however, has a particularity: the benefits employees receive once they are dismissed.

Brazilian employees who work under the CLT regime and are dismissed without justa causa, which is, without any reason that would prevent them from the rights granted by the CLT, will have access to the following benefits:

  • FGTS – Fundo de Garantia por Tempo de Serviço;
  • Aviso Prévio;
  • 13th Salary;
  • Paid Vacations (with or without justa causa);
  • Unemployment Insurance.

I will explain all of them in details, but what I would like to call attention to is that all these benefits work as a mandatory savings account: in theory, employees have no access to FGTS, aviso prévio and unemployment insurance until they are actually unemployed.

However, as most Brazilians do not have the habit of saving money, when they are in need of it they will try to have access to these benefits. When an employee is fired, he/she has access to FGTS plus a fine of 40% of the FGTS value that must be paid by the employer.

What some employers do is to fire the employee so that he/she can receive his/her FGTS and then hire him/her back again under the condition that the fee of 40% will be retrieved. Such practice is not considered to be legal, but there is no strong supervision, so it is often practiced without too much concern. The main reasons why the employee comes to the employer and ask for this agreement are:

As this kind of agreement is done under a confidence vote – the employer believes that the employee is going to retrieve the 40% correspondent to the fee –, it is not granted to all employees and this has caused problems in the relationship employer-employee: those who were not granted with this benefit would complain that such decision was partial and would directly benefit one employee and not the other without any established criteria.

"I want to be dismissed"

As an attempt to avoid issues related to employees who have more benefits than others, many employers have stopped giving the agreement option as they were under pressure to give an equal treatment to all employees, regardless on their performance.

Employees were then aware that an agreement was not something they could rely on (even good employees) and so they have started to adopt another practice in order to have access to their benefits. Such practice is known as “corpo mole” in Portuguese, which is an expression applied to those individuals who do their best to avoid doing anything and then be dismissed without justa causa.

By “avoid doing anything” I mean not only being lazy, but also being absent, being late, doing the work wrongly and so forth.

This is not as easy as it sounds as employees who choose this option have to be very careful about what they do as some actions can lead to “demissão por justa causa”, which is the justified dismissal of the employee and then the loss of several benefits.

For example, if the employee decides to go to work drunk in order to be fired, he/she will probably be, but with justa causa.

In many cases, the employer realizes what the employee is doing and decides not to fire him/her as an attempt to force him/her to quit the job. However, this can be very dangerous to the company as one never knows how long the employee is going to take, all the problems he/she can cause and the losses that can result from it.

What does the employee receives and who pays for it?

FGTS – Fundo de Garantia por Tempo de Serviço

The “Fundo de Garantia por Tempo de Serviço” is a set of resources collected from the private sector (mostly companies) and managed by Caixa Econômica Federal. The purpose of these resources is to support employees when they are dismissed from their jobs. Every month, the employer has to collect an amount correspondent to 8% of the employee’s salary and deposit in the employee’s account at Caixa Econômica Federal (every employee working under the CLT regime has this account).

Aviso Prévio

When an employee is notified of the dismissal, he/she has the right to stay in the company for one last month or to receive the equivalent to one month of work. Most employers would rather dismiss the employee and pay the equivalent salary as this would prevent the employee from harming the company somehow.

13th Salary

The 13th salary is a gratification that corresponds to one month salary. It is usually divided in two installments, one being paid in November and the other in December. When the employee is dismissed, he/she has the right to receive the 13th salary proportional to the amount of months he/she has worked. So basically the amount correspondent to one month salary is divided by 12 and the resulting amount is multiplied by the number of months the employee has worked.

INSS Contribution

In case the dismissed employee acquires any illness or situation that prevents him/her from working (such as a broken leg or severe tendinitis), he/she has the right to look for assistance from the INSS.

INSS or “Instituto Nacional do Seguro Social” is a branch of the Brazilian social security system and is responsible for guaranteeing that workers will be supported in case of retirement, illness, accident and pensions due to death. The contribution is divided between employer and employee, being the first one responsible for contributing with 20% over the payroll and the last one for a contribution that ranges from 8% to 11%, depending on the salary, as explained below:

  • Up to BRL 1.174,86 – the employee pays 8%;
  • From BRL 1.174,87 to 1.958,10 – the employee pays 9%;
  • From BRL 1.958,11 to 3.916,20 – the employee pays 11%.

Even though percentages are adopted, there is a contribution amount of BRL 430,78 that cannot be surpassed.

Paid Vacations

The right of paid vacations is granted to employees who were dismissed with or without justa causa. The amount is paid by the employer and corresponds to one month salary plus 1/3 of this amount.

Unemployment Insurance

In Brazil, employees who worked under the CLT regime and were dismissed without justa causa are supported by the unemployment insurance (seguro desemprego). The amount varies according to the salary (the maximum installment is of BRL 1.163,76) and is consisted of five installments at most:

  • Three installments for those who have worked from six to 11 months over the last three years;
  • Four installments for those who have worked from 12 to 23 months over the last three years;
  • Five installments for those who have worked at least 24 months over the last three years.