What is the notice period in Brazil?
If an employee is terminated without cause, the employer must serve the employee with a dismissal notice of at least 30 days. This is increased by three days for each year of service up to a maximum of 90 days. Collective Bargaining Agreements (CBAs) may also increase the notice period.
Although payment of notice can be given as a part of the severance payment in “at will” terminations, Velocity Global does not recommend this for various reasons.
If the employee works during their notice period, they will have the right to take time off to search for new employment and decide whether to work two fewer hours per day or to reduce the notice period by seven days.
If an employee resigns, they must give the employer the same amount of notice that would have been due to the employee.
Are unused vacations days paid out at the time of termination?
Upon termination, employees are entitled to compensation for their unused vacation days, regardless of how long they have been with the company. This includes employees terminated before one year of service. Termination payouts are either paid in full or proportionally, depending on how many months the employee has completed in the accrual year, factoring in their notice period.
What is the severance payment in Brazil?
In the event of termination of employment agreements in Brazil, labor rights relating to obligatory severance pay differ according to the form of termination.
Termination pay is made up of the following components:
- Salary balance: The amount corresponding to the employee’s base salary divided by 30 and multiplied by days worked until the termination;
- Payment in lieu of prior notice of dismissal: The party initiating the termination must give the other party at least 30 days’ notice (which may be higher depending on service). If the employer is initiating termination, they may choose to offer payment of 30 days for the duration of the notice period instead of having the employee work the requisite notice period;
- 13th-month salary: 50% of the 13th-month salary is paid between February and November and the remainder is due by December 20. When an employee is terminated, a prorated payment of 1/12 for each month worked in the year must be made. A month is considered fully worked if the employee has worked 15 days.
- Accrued and unused vacation: any unused vacation shall be paid out at termination along with a 1/3 bonus payment due on vacations;
- FGTS (Fundo de Garantia do Tempo e Serviço) penalty: the employer must pay the equivalent of 40% of the balance in the employee’s FGTS government account when termination is initiated by the employer (20% in cases of mutual termination). It is important to note that the regular 8% fee of the FGTS must be paid on the severance pay (except for the FGTS penalty and vacation days), the same way it is done on the monthly salary.
If the employee is terminated and is working in the notice period, this employee has the right to choose:
- Work 2 hours less every day during the notice period; or
- Work 7 days less during the 30 days notice period.
During this period of time off, the employee will have the chance to look for a new job and organize his/her life after leaving their position in the company.