EMERGENCY EMPLOYMENT AND INCOME MAINTENANCE PROGRAM
The current situation being faced with the pandemic caused by Covid-19, the Brazilian government has published yet another measure to enable work activities and preserve the financial health of businesses and, consequently, jobs. Provisional Measure No. 936 published on April 1, 2020 (MP 936), institutes the Emergency Employment and Income Maintenance Program and advances complementary labor directives applicable to all workers, rural and domestic, and apprentices, to confront the current state of public calamity. The main alternatives provided under MP 936 are the following:
|
Option for proportional reduction of workday and salaries |
|
Option for temporary suspension of employment contracts |
| AND |
|
Payment by government of Emergency Employment and Income Maintenance Benefit |
The general provisions applicable to both alternatives, considering the deadlines of each, are the following:
| > | They can be implemented by way of individual agreement or collective bargaining agreements for employees earning salaries of less than R$ 3,135.00 and for those holding university degrees with salaries above approximately R$ 12,200.00 (the “High-Earners” employees). For employees earning salaries from R$ 3,135.00 to approximately R$ 12,200.00, the provisions may only be implemented through collective bargaining except when proportional workday and salary reduction of up to 25% has been implemented. |
| > | MP 936 ensures job stability to impacted employees (i) during the impacted period and (ii) after normalcy is reestablished for the period equivalent to the agreed reduction or suspension period. Dismissals without cause may occur during the stability period provided that, in addition to the mandatory severance pay, indemnification is paid calculated based on the workday and salary reduction/suspension. Requests by employees for resignation or dismissal for just cause shall not be affected by the job stability rules. |
| > | Government disbursement of the Emergency Employment and Income Maintenance Benefit will be based on the percentage of unemployment insurance to which an employee is entitled. The employer may also provide Compensatory Aid, not to be considered as salary (employers registering gross income above R$ 4,800,000.00 in 2019 that opted to suspend employment contracts are obligated to pay compensatory aid). |
Regular work conditions shall be reestablished either up to two consecutive days after the state of public calamity is lifted, or the date stated in the collective bargaining agreement or the date on which the employer notified of its decision to bring forward the end of the agreed reduction period.
The current scenario is that of insecurity and the measures being taken are not exhaustive and should better clarified by the government, by the Ministry of Economy and they may be submitted to the analysis of the Judiciary Branch (furthermore for review of their constitutionality).
The following are the main aspects of these measures.
PROPORTIONAL REDUCTION OF WORKDAY AND SALARIES
The employer may reach agreement for proportional reduction of the workday and salaries of its employees once it has satisfied the following requirements:
- Duration: during the state of public calamity for up to 60 days;
- The value of the hourly wage shall be preserved;
- The concluded negotiated terms shall be formalized in an agreement to be delivered to the employee within at least two consecutive days prior to the reduction being implemented;
- The workday and salary reduction shall be equal to 25%, 50% or 70%.
These percentages shall observe the following rules:
| Percentage of workday and salary reduction | Emergency Employment and Income Maintenance Benefit paid by the government | Form of negotiation | |
| > | 25% | 25% of unemployment insurance | Individual or collective bargaining agreement for all |
| > | 50% | 50% of unemployment insurance | Individual bargaining agreement for employees earning salaries below R$ 3,135.00 or for High-Earners. Others: Only by means of agreement with the labor union |
| > | 70% | 70% of unemployment insurance | Individual bargaining agreement for those earning salaries below R$ 3,135.00 or for High-Earners employees.
For others: Only by means of agreement with the labor union |
*The employer may also adjust reduction percentages different from those mentioned in the above table by negotiations with the labor union.
Payment of compensatory aid is not compulsory when proportional workday and salary reduction has been implemented.
TEMPORARY SUSPENSION OF EMPLOYMENT AGREEMENT
The employer may agree terms within at least two consecutive days in advance in the form of a written agreement. The requirements for suspension of employment contracts are the following:
- Duration: during the state of public calamity, for up to 90 days, which can be split into up to two periods of 30 days each;
- During that period the employee shall continue eligible to all benefits offered by the employer;
- During the employment contract suspension period, the employee shall not engage in any other work activity, not even remotely.
Employers with registered gross income in 2019 in excess of R$ 4.8M may only suspend employment agreements by payment within that period of monthly compensatory aid in the amount equivalent to 30% of each employee’s salary. The rules to be followed, based to the employer’s gross income, are the following:
| Employer | Emergency Employment and Income Maintenance Benefit paid by the government | Compensatory aid | Form of negotiation | |
| > | Gross income (2019) of
less than R$ 4.8M |
100% of unemployment insurance | Not obligatory | Individual bargaining agreement for employees earning salaries lower than R$ 3,135.00 or for High-Earners employees. For others: only by agreement with the labor union. |
| > | Gross income (2019)
above R$ 4.8M |
70% of unemployment insurance | Obligatory: 30% of employee salary | Individual bargaining agreement for those earning salaries lower than R$ 3,135.00 or for the High-Earners employees. For others: only by agreement with the labor union. |
EMERGENCY EMPLOYMENT AND INCOME MAINTENANCE BENEFIT
The Emergency Employment and Income Maintenance Benefit shall be paid by the government and was created to preserve workers’ income when employers opt for the two foregoing alternatives. This is how the benefit works:
- The employer shall inform the Ministry of Economy within 10 days of deciding its option to proportionally reduce the workday and salaries or to temporarily suspend employment agreements, under penalty of liability for payment of the amount prior to the reduction/suspension, including fiscal and social contribution tax.
- The value of the Emergency Employment and Income Maintenance Benefit shall be calculated based on the value of the monthly unemployment insurance to which the employee is entitled.
The Emergency Employment and Income Maintenance Benefit is calculated based on the value of the unemployment insurance, but this factor does not prevent the employee being granted the unemployment insurance nor does it alter the value of the insurance that the employee will be entitled to normally when its employment agreement is terminated. Additionally, the Benefit shall be paid to the employee independent of (i) completion of the reference period, (ii) duration of employment and (iii) number of salaries received.
Further detailing of the procedures for communication to businesses and for workers to receive the Emergency Employment and Income Maintenance Benefit are still to be issued by the Ministry of Economy.
COMPENSATORY AID
The Emergency Employment and Income Maintenance Benefit can be combined with the monthly compensatory aid to be paid by the employer (which is obligatory in the case of employment agreements suspended by employers with gross income in 2019 exceeding R$ 4.8M). The compensatory aid:
- shall be determined in the individual agreement or in collective bargaining agreement;
- shall be of an indemnification nature;
- shall not be computed into the withholding tax basis or the annual individual income tax return of the employee;
- shall not be computed into the basis for calculating social contribution tax and other taxes on salaries;
- shall not be computed into the basis for calculating the value due to the Employee Severance Fund (“FGTS”) account, and
- may be excluded from net profit when determining the tax basis of corporate income tax and social contribution tax on net profit of businesses taxed on actual profits.
OTHER PROVISIONS
MP 936 further establishes that, during the state of public calamity:
- electronic means shall be used to comply with the requirements of collective bargaining process, as well as for convening, deliberative procedures, decision making, formalization and publication;
- the collective bargaining deadlines shall be reduced by half, and
- workers under intermittent employment agreements shall be entitled to an emergency bonus of R$ 600.00 for a 3-month period regardless of the number of businesses with which the individual holds intermittent employment agreements.
We remain available to clarify any doubts arising from the contents of this newsletter.
Juliana Dal Moro Amarante P. Freitas
juliana.amarante@mellotorres.com.br
+55 (11) 3074-5720
This newsletter (i) presents a summary of legislative changes in Brazil, (ii) is intended for clients and members of Souza, Mello and Torres, and (iii) is not intended to provide legal advice on the matters dealt with herein and should not be interpreted as such.
