End of employment and termination in Brazil
Want to onboard an employee in Latin America ?
As the major Latin American country, Brazil is usually a very attractive option for multinational companies looking to set foot in Latin America. When choosing to expand in Brazil or to hire Brazilian with local contracts, a business must have adequate knowledge of the laws but also local customs. This also applies to labor laws and, more precisely, to termination rules and regulations.
In theory, employment in Brazil can be terminated at any time, with or without cause, provided the employer follows rules for notice periods. But in practice, it’s somehow a little different!
Let’s have a look at terminations in Brazil and discover what are the local laws and customs ⬇️
End of employment and types of termination in Brazil
Termination with cause
Brazil follows at-will termination practices. It means that, once hired and under contract, any party may terminate the contract without cause upon the mandatory prior notice and payment of the severance. The article 482 of the Brazilian Labor Law (CLT) enable businesses to terminate their employee with cause for some reasons including :
- improbity (e.g., fraud);
- impropriety;
- business dealings by the employee for his/ her own or someone else’s benefit without permission of the employer;
- competition with the employer;
- criminal conviction (final decision);
- negligence in the performance of his/her duties;
- drunkenness, either habitual or at work;
- breach of confidentiality by the employee;
- insubordination or indiscipline;
- the employee abandons his work;
- libel, slander and any other defamation acts, exercised at worksite by the employee, against any person, or physical acts of offence under the same conditions, except in the case of self-defense or defense of third parties;
- libel, slander, any other defamation acts or physical acts of offence exercised by the employee against the employer and hierarchical superiors, except in the case of self-defense or defense third parties;
- frequent gambling;
- loss of qualification or of the requirements established in law for the exercise of the profession, as a result of willful misconduct of the employee.
In theory, a business has the possibility to terminate his employee with cause. However, in practice, it is hardly impossible to terminate an employee with cause in Brazil. Brazilian Labor laws is extremely employee-friendly and courts tend to favor employee.
As a matter of fact, most employee terminated with cause will choose to go to the court and, in most cases, they will win the case.
Termination without cause
Termination without cause is the most common type of termination employees face in Brazil. However, some employees are protected and can not be dismissed without cause:
- Pregnant employees on maternity leave and after birth are protected against dismissal without cause. She enjoys absolute protection from the date the pregnancy is confirmed until five months after giving birth to the child;
- Employees who had a work-related accident and prevented from attending work for at least 15 days are protected against termination without cause. They cannot be dismissed without cause for a period of one year, counted from the date the employee returns to work.
- Union leader from the date when his / her candidacy is registered until 12 months after the end of his / her term; and
- an employee elected president of the internal commission for accident prevention cannot be dismissed without cause from the date he / she registers to run for the position until one year after the end of his / her tenure.
- Employee who is one year away from retiring
Mutual agreement
Termination by mutual agreement is quite new in Brazil. Mutual agreement is used when there is mutual interest. It can not be imposed on any of the parties.
Resignation
Terminations by resignation are straight forward terms and do not pose complex issues under Brazilian Labor laws. Employees can resign at any time, without cause.
Termination during trial period
Employers and employee can terminate employment during the trial period however, the party deciding to end the employment contract will have to pay a fine to the other party.
The fine is equal to 50% of remuneration calculated on the days remaining until the end of the contract.
Termination processes
Termination with and without cause
Terminations process begins when one of the parties officially expresses it. If the employer is terminating employees, the formal letter of termination would be the first document to send.
Employers must fill out and get employees to sign the following documents upon termination:
- The letter of termination
- Aviso prévio – termination notice letter
- Termo de Rescisao de Contrato de Trabalho (TRCT) – termination of employment contract terms
- Guia de Recolhimento Rescisorio do FGTS (GRRF) – form that is utilized to withdraw funds from FGTS
- Seguro Desemprego – unemployment insurance benefit
The employer will also have to schedule a mandatory medical examination (*) with a certified doctor. This is to check any possible work-related disease that could prevent a termination without cause.
Interview with the employee is always recommended. However, this is not mandatory by law.
(*) If the termination occurs during the first three months, the exit medical exam is not mandatory.
Mutual agreement
When both parties decide to terminate the employment contract by mutual agreement, they must follow the following process:
The employer or employee must send the termination letter. The termination letter must be handwritten if the employee sends it. This letter must contain: the type of notice and specify that the employee and employer agree to the termination of the employment relationship by consensus, always following the rules set out in article 484-A.
Another important point is that, in order for this agreement to be properly formalized, witnesses must be present so that there is no manipulation or coercion on either side.
Resignation
Resignation process is quite simple in Brazil. The employee must send an handwritten resignation letter.
The employee must include the following data in the letter:
- Employee’s full name;
- Company name;
- Position held in the company;
- The length of the notice period (or the fact that the notice will not be served);
- The employee’s signature.
Notice period in Brazil
Minimum statutory notice period in Brazil is 30 days, capped at 90 days. For each year of service completed, 3 additional days are added to the 30 days.
Employers can choose to pay employees in lieu of notice. Employees who decide not to work during the notice period won’t receive the total severance pay.
Termination with cause does not require a notice. Termination by mutual agreement allows the notice period to be cut in half if both parties agrees to it.
Employees who work through their notice period are entitled to a work schedule shortened by two hours daily or seven days in total while receiving their full remuneration to look for work. The employee must have been employed for at least 12 months to be entitled to this right.
Severance pay in Brazil
Severance payment in Brazil includes the following items:
- Salary balance
- Notice period salary
- 13th month salary (Pro-rata including notice period)
- Accrued and unused holidays (Pro-rata + notice period)
- Any penalties or fines related to collective bargaining agreement**
- FGTS fine (In case of termination without cause)
** In Brazil, an employer will pay a fine if the the termination occurs one month before the publication of the collective agreement
Severance payment : when does it need to be made ?
The Consolidation of Labor Laws (CLT) has clear rules regarding the payment of an severance.
The article 477 of the CLT states that the employer must update the CTPS (Carteira de Trabalho e Previdência Social), notify the competent labor organization and make the severance pay within ten days from the termination of the contract.
WHAT HAPPENS IF THE COMPANY EXCEEDS THE DEADLINE ?
If the company doesn’t meet the deadline for the severance payment, they will have to pay a fine according to the CLT labor law (article 477).
The article states that a fine equal to one month salary will be added to the total severance pay amount.
Manage end of employment and termination in Brazil with Europortage
Manage end of employment and termination in Brazil is complex especially when it comes to compliance. That’s why we recommend working with a direct and local partner like Europortage.
Our team of local experts is on hand to support you throughout the entire employee lifecycle, including time-off management. We can give you clear advice on business incorporation and global hiring, in addition to handling employment contracts, payroll, and benefits. That way, you can focus on growing a world-class team and business.
Get in touch to find out more and start hiring top talent in Latin America!
