In response to the economic impact of the Covid-19 pandemic, Brazil’s government enacted a range of support measures to protect the country’s businesses and employees.

One of the most significant support measures is the Emergency Program for the Maintenance of Employment and Income, which was enacted on 1 April 2020 as part of Provisional Measure 936.

The Emergency Program sets out a range of labour measures designed to mitigate the adverse effects of the pandemic restrictions and guarantee continuity of work for employees. The program includes measures that impact the 13th month salary (Christmas Bonus) for millions of Brazilian workers.

With the 13th salary month approaching, it’s important that business owners in Brazil understand the measures included in the Emergency Program and, in particular, how to process payment of their employees’ Christmas bonuses.

Reduction of Working Hours

One of the main provisions of the Emergency Program is the reduction in employee working hours and wages. Employers can make a proportional reduction in wages of 25% for all workers and of 50% or 75% for workers on salaries equal to or less than R$3.135. The Brazilian government will then make up the salaries of those workers with an Emergency Benefit to ensure they are not significantly adversely affected by the reduction.

In order to facilitate the reduction in working hours, employers must have signed an individual agreement with their employees and ensure that those affected are aware of what is happening while the measures remain in place. The Emergency Benefit ensures that employees have financial stability for the duration of their reduced employment term.

Suspension of Employment Contract

Under the Emergency Program, companies that have annual incomes lower than R$4.8 million may, if necessary, suspend the contracts of their employees. Those employees that have their contracts suspended will receive compensation from the government through the Emergency Benefit equal to the amount that they would have received from their unemployment insurance salary.

Companies with annual incomes above R$4.8 million will be responsible for paying 30% of their suspended employees’ wages while the government will pay the remaining 70% through the Emergency Benefit.

Christmas Bonus

The details of the Emergency Program and the payment of the Emergency Benefit complicate the payment of Brazilian employees’ Christmas bonus 13th salaries, with confusion over how much employees will receive if they have had their salaries reduced or their contracts suspended.

The government of Brazil has issued a technical note in order to address the confusion:

  • Employees who have had their salaries reduced will have their 13th salaries paid in full.
  • Employees who have had their contracts suspended and who have not worked for more than 15 days in the month will not have their suspended time taken into account for the calculation of their 13th salaries.

The Brazilian government is following existing provisions of the Labour Law, that stipulates that employees who work less than 15 days in a month will not be entitled to have that time included in their 13th salary calculation.

To learn more about coronavirus support measures for employers and employees browse activpayroll’s blog and latest news page. For more insight and information on Brazilian tax and social security measures read our Brazil Global Insight Guide.

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