Brazil’s Government to Allow Companies to Halve Hours and Wages

RIO DE JANEIRO, BRAZIL – Jair Bolsonaro’s government will allow companies to cut workers’ wages by up to 50 percent amid the advancing coronavirus crisis. The initiative should be submitted to Congress through a Provisional Measure (MP).

The Ministry of Economy states that the measure, which requires individual negotiation, will preserve jobs. “Offering companies and employees the means to overcome this turbulent period is required. The interest of both is to preserve jobs and income,” said Bruno Dalcolmo, the Labor Secretary.

Under the rules outlined by the Ministry, companies must continue to pay at least the minimum wage. The worker’s hourly wage may not be reduced.

The proportional reduction of hours and wages may last while the state of calamity is in effect. This week, the government submitted a request to Congress to decree the emergency situation until the end of this year.

However, the economic team believes that there might be an improvement in the economy before then, within four months, which would prompt companies to normalize their employment contracts.

“It’s not a simple matter, but the plan is to preserve jobs. Much more serious, in the face of such a crisis, is people losing their jobs and getting by without a salary,” said Bruno Bianco, the special secretary of Social Welfare and Labor.

The experts do not rule out the adoption of even deeper measures. One of the concepts debated is the option of allowing the suspension of the employment contract with access to unemployment benefits for workers.

“Tougher measures may be taken for a number of sectors,” Dalcolmo said when asked on the matter. The concept has not yet reached a consensus within the government.

The country has 39 million formal workers, according to data from December 2019 released by the Ministry of Economy’s CAGED (General Registry of Employed and Unemployed).

The MP will change the CLT (Consolidation of Labor Laws) text. Among the measures is the streamlining of rules for companies to establish collective holidays, which may be applicable to the whole company or to only a part of it.

In the past, employers were required to notify the government and unions of this initiative at least two weeks beforehand. Now, the notification may be provided 48 hours beforehand.

In addition, non-religious holidays may be brought forward to the workers’ retirement period during the restriction on the free circulation of people, so that as soon as the pandemic recedes companies may recruit employees rather than dismiss them on those days.

Workers may have 15 days’ holiday time in advance even if they have not completed a year in the company.

Companies may also suspend payment of the FGTS (Severance Premium Reserve Fund) to workers, which according to the government allows greater flexibility for the company’s cash flow.

In this case, employers may stop collecting the contribution for three months and, in the following months, collect the shortfall. “This does not affect either employees or the fund. If a worker is fired during the period, he/she will have access to all the benefits as usual,” Dalcolmo said.

Furthermore, the rules for banked hours and remote work will be relaxed, which in the government’s opinion would have many constraints. “With regard to teleworking, the instrument was introduced by the 2017 labor reform, but is still inflexible in its operation, like signing an individual contract stating what the terms are. The goal is to remove these constraints,” said the secretary.

The government will also suspend the obligation for workers to undergo medical and clinical examinations to avoid overburdening the health system. In addition, mandatory training will be waived.