This GMS Flash Alert reports on a new measure in Brazil that allows employees who resign or their employment terminates to withdraw their FGTS amounts.
The Brazilian federal government has promulgated Provisional Measure no 763/161 to allow employees who have resigned or have their employment contract terminated for just cause prior to December 31, 2015, to withdraw their FGTS2 (Government Severance Indemnity Fund for Employees) amounts before the end of a “three-years of inactivity in the fund” wait period. Up until the PM no 763/16, rules mandated, with some exceptions, a three-year wait.
Employees who resigned or have their employment contract terminated for just cause prior to December 31, 2015 will be entitled to withdraw the amounts deposited in their FGTS inactive accounts.
This will be a financial “windfall” for these employees. This represents an important change in the law that affects international assignees who have participated in the FGTS. Such assignees who return to their home countries or have started another international assignment may immediately withdraw funds from their FGTS accounts, whereas previously they had to wait until after an uninterrupted period of inactivity that lasted three years. These changes apply to employees who were not dismissed by the company (in other words, if they retire or their assignment comes to an end).
The FGTS is a monthly contribution made by the employer on the employee’s behalf, to a specific account registered under the employee’s name in a government bank, at 8 percent of the employee’s monthly remuneration. Note that it is not a withholding or deduction from the employee’s wages – it is a cost fully paid and remitted by the company. The purpose of this fund is so the employee can eventually use the amounts deposited under special conditions, such asretirement or dismissal without just cause.
Upon dismissal without just cause or after three years without contribution to the fund (the fund is inactive) – among other circumstances such as disease or serious illness or retirement, for example – the individual can withdraw the amounts.
Under the new changes introduced by PM no 763/16, employees who resigned or have their employment contract terminated for just cause prior to December 31, 2015, will be able to withdraw the FGTS amounts prior to this inactive three-year period for the fund.
In addition, the employees are entitled to receive a profit-sharing payment according to the FGTS’s investment performance.
1 Medida Provisória nº 763, de 22 de dezembro de 2016, published in Diário Oficial da União de 23.12.2016 – this changes some articles of the Federal Law 8.036/90 that regulates the FGTS.
2 FGTS stands for “Fundo de Garantia do Tempo de Serviço.” It is a type of “personal reserve savings” scheme for employees.
The information contained in this newsletter was submitted by the KPMG International member firm in Brazil.
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