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Workforce Flexibility and Government Incentives in times of Covid-19 - Brazil

Short-Term Work State Aid

Covid-19 Questionnaire

Are there any regulations in place providing an employer with possibility for flexible workforce planning such as part-time work/temporary leave which are triggered in a situation similar to a pandemic outbreak as Covid-19?

Yes

If YES on question 1, please describe which type of regulation. Please confirm if and to what extent such leave can be supported by state aid and/or other extra-ordinary governmental support.

Companies are able to suspend the work contract during up to 60 days, due to Covid-19 situation. Companies which gross revenue was superior to R$4.8 mn in 2019 must keep a payment equivalent to 30% of the employees’ salary, as “compensatory support”. Such payment is not subject to payroll taxes and may be deducted from the profit for purpose of calculating corporate income tax and social contribution due on net profit.

Additionally, during the work contract suspension period, government will pay an additional to the affected employees, based on the unemployment aid that is in place in Brazil. For companies paying the compensatory aid mentioned above, government’s support will be equivalent to 70% of the unemployment aid the employee would be entitled to.

Companies are also able to reduce salaries and work shifts proportionally, up to 90 days, adopting, as a general rule, the rates of: 25%, 50%, and 70%. Companies can also provide compensatory aid in case of salary reduction and work shift proportionally.

if YES on question 1, please describe which contacts that may need to be initiated with trade unions and/or works councils. Must a special process be followed?

The suspension of work contract may be agreed between employer and employee, unless in the following situations, that demand negotiation with the Unions:

  • employee’s salary up to R$3,135;

graduated employees, whose salary is equal or superior to R$12,202.

Except in case the salary reduction is equivalent to 25%, situation in which it is possible to have an individual negotiation.

During the suspension period, all benefits regularly granted must be kept.In case of salary reduction and work shift proportionally, Companies also need to observe the situation mentioned above, regarding employees with salary up to R$ 3,135 and graduated employees, whose salary is equal or superior to R$12,202.

Are there any governmental programs if a company needs to close totally or partially for a certain time period?

Government has published some measures that aim to help companies that need to reduce or interrupt its activities. Such measures include, besides the work contract suspension: i) anticipation of vacation periods; ii) anticipation of holidays; iii) implementation of bank of hours to be compensated by employees in 18 months; iv) possibility to reduce salaries and work shifts proportionally; v) suspension of the payment of Employee’s Severance Fund and employer’s Social Security Contribution; vi) reduction of 50% in the rates of contributions due to social services, paid on payroll.

If state aid and/or other extra-ordinary governmental support is available, please describe the necessary prerequisites to qualify for such state aid.

In general, all companies could benefit from the measures, but there are some specific rules to be observed, regarding to formalization, deadlines and percentages applicable, for example.

If state aid and/or other extra-ordinary governmental support is available, please describe the application procedure for such state aid (e.g. how and when is the application filed with the government etcetera; what shall such application include).

Some of the measures require formalization with the employees, only. But the salary reduction and work contract suspension require the employers to formally communicate government and also Unions in up to 10 days after the agreement is signed. Government needs to receive the information in order to make the emergency additional payment to the employees. Payment will be made after 30 days after the communication is received.

To postpone of social security contribution and employee’s severance fund, companies need to inform the contributions due in the period in the applicable ancillary obligations, in order to avoid the application of penalty and interests.

Please note that the COVID-19 scenario is constantly changing and that this information is current as of 04 June 2020. This publication should not be regarded as offering a complete explanation of the legal matters referred to and is subject to changes in the law and other applicable rules.