Brazil’s economy is facing a challenging period of recession and the economic forecast is looking weak. Many companies are struggling to survive the economic downturn. One of the biggest challenges facing companies is the rising cost of employment. Companies are being forced into making redundancies in an attempt to reduce their costs during the crisis.
On 6 July 2015 President Dilma Rousseff issued a new measure (Medida Provisoria 680/2015) with the aim of slowing down the rise in unemployment and protecting struggling companies from the worsening economy. This measure introduces an employee security program (Programa de Protecao ao Emprego – ‘PPE’). The program enables eligible companies to agree a temporary reduction in employee working hours and wages in order to reduce labour costs which would therefore help retain employees during the economic recession.
On 28 October 2015 the Senate approved the provisional measure 680/2015, adopting the changes that the original measure underwent during the consultation in Congress. The bill now only requires Presidential approval.
Key aspects of the program
- A temporary reduction in working hours and respective salaries by up to 30%
- A government subsidy equivalent to 50% of the salary reduction, limited to R$900.84, during the period of reduced working hours
- A temporary protection for employers from redundancy or unfair dismissal claims
- An agreement between labour unions and companies is required
- A restriction on recruitment of new employees
Companies from any sector can participate in the program as long as they can prove the company has suffered financial difficulties and that over the past 12 months the total number of employees has decreased, remained stable or increased by a maximum of 1%.
Companies granted approval to participate in the program will not be allowed to recruit new employees to perform the same activities as the employees in the program and will generally be required to maintain their existing workforce throughout the duration of the program. The program was initially designed to last for 6 months with the option of an additional 6 month period (i.e. up to a maximum of 12 months in total). This has been modified to accommodate successive renewals up to a maximum period of 24 months. The program contains a condition that, once the program ends, employment contracts must be maintained for the equivalent of an additional 1/3 of the program period.
The deadline to join the program was 31 December 2016. The program will terminate on 31 December 2017.