termination of employment in Brazil: laws & severance policies

Legal Grounds for Termination of Employment in Brazil

In Brazil, employment can be terminated either with or without cause. Termination without cause allows either party to end the employment relationship at any time, provided that the notice period is respected or compensation is provided in lieu of notice, and that severance payments are made accordingly.

Termination with cause is the most severe sanction for an employee and results in the reduction of the employee’s severance entitlements. The employer should only terminate employment with cause when the misconduct is foreseen by law and serious enough to justify such a severe sanction.

Valid reasons for termination with cause include:

 
• Improbity (e.g., fraud)
 
• Impropriety
 
• Unauthorized business dealings
 
• Competition with the employer
 
• Criminal conviction (final decision)
 
• Negligence in the performance of duties
 
• Drunkenness, either habitual or at work
 
• Breach of confidentiality
 
• Disobedience or insubordination
 
• Abandonment of employment
 
• Libel, slander, and physical acts of offense
 
• Gambling or similar conduct
 
• Loss of professional qualifications due to willful misconduct

Certain employees enjoy additional protections against dismissal. Pregnant employees are protected from termination from pregnancy confirmation until five months after childbirth. Employees recovering from a work-related accident or illness are protected from dismissal for one year following recovery.

Employment Laws and Severance Policies in Brazil

Notice Period in Brazil

The minimum statutory notice period is 30 days. However, the specific duration may vary based on the grounds for termination and the employee's tenure with the company:

• Termination by mutual consent: 15 days
• 1 year of service: 30 days notice
• More than 1 year of service: 30 days notice + 3 days for each year of service (maximum of 60 days)

Employers may choose to pay employees in lieu of notice. Termination with cause, such as gross misconduct, does not require notice.

Employees serving their notice period are entitled to a work schedule reduction of two hours daily or seven days in total to seek new employment. This benefit applies only to employees with at least 12 months of service.

Severance Pay in Brazil

Employees terminated without cause are entitled to severance pay, which includes:

 
• Fundo de Garantia do Tempo de Serviço (FGTS) balance
 
• Employer penalty payment of 40% of the FGTS balance
 
• Proportional 13th-month salary
 
• Unused vacation pay plus an additional one-third salary

If both parties agree to the termination, the FGTS penalty is reduced to 20%. Fixed-term contract termination without cause requires compensation of 50% of the remaining pay.

Probation Period in Brazil

The probation period in Brazil for employees with indefinite contracts is typically up to 90 days. If divided into two parts, the first part can last up to 45 days, and the extension cannot exceed 90 days total. Termination during probation requires respecting the notice period or payment in lieu of notice, but severance obligations differ from post-probation terminations.

Process for Ending Employment in Brazil

 
• Notification: Provide written notice of termination specifying whether it is with or without cause.
 
• Notice Period: Respect the required notice period or offer payment in lieu of notice.
 
• Final Payments: Settle outstanding salary, unused vacation, proportional 13th-month salary, and FGTS-related amounts.
 
• Medical Examination: Conduct a mandatory medical check-up to confirm work-related conditions before finalizing termination.
 
• Documentation: Prepare necessary termination documents such as the termination letter, notice letter (Aviso Prévio), and employment contract termination form (TRCT).
 
• Notification to Authorities: Inform relevant entities like FGTS and CAGED about the termination.
 
• Payment Deadline: Complete all due payments within 10 days from the last day of employment.

Employee Rights During Termination in Brazil

Unfair Dismissal Protections

Unfair dismissal occurs when an employee is terminated without proper notice, severance payments, or due process. Employees can challenge dismissals in labor courts to seek reinstatement or severance compensation.

Grievance Procedures

Employees can raise concerns about unfair dismissal through formal grievance procedures. While Brazilian labor law does not mandate specific processes, many companies establish internal policies for resolving disputes effectively.

Final Pay and Benefits

Upon termination, employers must settle all final payments, including:

 
• Outstanding wages
 
• Unused vacation pay with an additional one-third salary
 
• Proportional 13th-month salary

Final payments must be made within 10 days of termination to avoid penalties.

What Termination Documentation Is Required by Law?

Employers must provide the following termination documents:

 
• Termination Letter: Specifies the reason for termination and effective date.
 
• Termination Notice Letter (Aviso Prévio): Outlines the notice period or payment in lieu of notice.
 
• Termination of Employment Contract Terms (TRCT): Details termination calculations and payments.
 
• FGTS Withdrawal Form (GRRF): Enables employee access to FGTS funds.
 
• Unemployment Insurance Form (Seguro Desemprego): Provides access to unemployment benefits if eligible.

How to Stay Compliant as An Employer in Brazil

Expanding your workforce across international borders is an exciting step, but it can be a logistical nightmare to hire and pay employees in different countries. And if you need to terminate employment, it’s critical to adhere to local compliance laws. That’s the advantage of using a trusted Employer of Record like Playroll. They can:‍

• ‍Handle international compliance: Different countries each have their own federal and local laws governing employee rights. An EOR helps ensure that you are compliant with the unique set of laws for any country in which your company operates. 
• ‍Run payroll for your global team: An EOR will act as your payroll provider, paying your employees on your behalf in the local currency. The company will also have in-depth knowledge of local tax codes, regulatory practices, and everything else that goes into managing global payroll.
• ‍Scale your team anywhere: Legally hire and swiftly onboard new hires in 180+ regions without the need for entity set-up by leveraging Playroll's infrastructure, so you can freely explore new markets and focus on growth.