Rebeca Duran

Rebeca Duran

Staff Writer
The Brazil Business

Updated

Introduction to FGTS

Rebeca Duran

Rebeca Duran

Staff Writer
The Brazil Business

Updated

In Brazil there is a special fund designated for workers called FGTS. It is a benefit that creats resources for the government and an assistance fund for workers exposure to some specific situations. In this article you will find out what FGTS is, who is benefited by it and how it is funded.

The Fundo de Garantia do Tempo e Serviço, also known as FGTS, which is the Severance Indemnity Fund for employees. It was created in 1967 by the Federal Government to protect the worker fired without just cause with the objective of forming a capital resource to the help the following workers:

  • Workers ruled by the Consolidação das Leis de Trabalho, known as CLT, which is a legislative decree that establishes work rules in Brazil
  • Rural workers.
  • Temporary workers.
  • Freelance workers.
  • Diretor não empregado: in Brazil the employee designated to become the company director has his work agreement suspended, because he cannot occupy the position of an employee and an employer at the same time. The worker is deemed as diretor não empregado. In order to guarantee workers’ rights, he will be still subject legally to the company.
  • Professional athletes.
  • Domestic maids: are not mandatory included in the FGTS, the fund should be paid if the employer desires to.

How FGTS is collected?

FGTS is collected by an account opened in the Brazilian Bank Caixa Econômica Federal, also known as CEF, in the name of each worker. The sum of all these accounts is comprised in a single account used by the government to finance sewage services and infrastructure works.

Since 2008, the FGTS extends its domain to other infrastructure segments, such as the construction of railways, ports, waterways and highways. The importance of this fund is not only used for government purposes, but also to finance property acquisitions benefiting Brazilian citizens especially those with the lowest income.

Employer payment of FGTS

The account balance of FGTS is formed by monthly deposits made by the employer equivalent to 8% of the employee’s salary. The deposits are mandatory and must enter into each worker’s account by the 7th day of the month. The fund must be deposited in any branch of the bank Caixa Econômica Federal, or in financial institutions accredited by the government, such as Lotéricas and internet banking services.

According to the law, all companies have an application distributed by the CEF: the Sistema Empresa de Recolhimento do FGTS e informações à Presidência Social, known as Sefip which is a company system for FGTS collectionand information of the Social Security system. In the program the employer must file worker's data and send them monthly to the CEF via the internet through the Conectividade Social program.

In the CEF, the employer must register the Conectividade Social to have access to the web page. Through the Sefip, the employer can issue and print the Guia de Recolhimento do FGTS e de Informações à Previdência Social, known as GFIP, which is a document that must be presented in every CEF Agency to make the FGTS mothly payment. The employers can download the Sefip and the Conectividade Social Program through the CEF web page.

Receiving the FGTS: different cases and documentation

With FGTS the worker has the opportunity to compile financial assets that can be withdrawn in special moments, such as:

  • dismissed without due cause
  • end of employment agreement for determined period
  • retirement
  • cases of serious diseases
  • construction of properties, acquisition of properties, settlement or amortization of a debt related to mortgage contracts

The FGTS can be withdrawn at any CEF Agencies. The rules and documentation required for the withdrawal vary depending on the worker’s situation. In cases of dismissal without due cause, the worker must present themself at the bank their identity card, work and social security register documents and the Termo de Rescisão do Contrato de Trabalho, also known as TRCT, which is a document of the EmploymentAgreement Termination.

The requirements to withdraw the FGTS in all situations can be found on the CEF web page and any question regarding FGTS will be answered on business days from 7 am to 8 pm via the following telephone: 0800 - 726 0101, can be searched in the CEF.