Issued Provisional Presidential Decree authorizing reduction of wages and working hours.

  • 17 March, 2017 - News

In order to keep jobs during periods of crisis, the Federal Government issued, on July 6th, the Provisional Presidential Decree 680 establishing the EPP – Employment Protection Program (“Programa de Proteção ao Emprego – PPE”). The new Decree allows the temporary reduction of employees’ working hours by up to 30% (thirty percent) with the corresponding salary reduction. These reductions will be valid for up to six (6) months and may be extended for a maximum of another 6 (six months).

May join the program companies that are in a situation of economic and financial difficulty, in the conditions and manner prescribed by act of the Federal Executive Power. The accession can be made until December 31st, 2015. The reduction is subject to the conclusion of a collective bargaining agreement with the specific purpose of increasing flexibility regarding working hours and wages with the union representing workers in the category of major economic activity, and should cover all employees of the company or, at least, employees of a specific sector.

Employees who have their salary reduced will be entitled to monetary compensation equivalent to 50% (fifty percent) of the amount of salary reduction. Said amount is also limited to 65% (sixty five percent) of the maximum value of the installment of unemployment insurance, as long as the period of temporary reduction in working hours lasts.

In accordance to the rules for accession published by Administrative Rule 1013, on last Tuesday, July 21st 2015, companies with financial difficulties will have to enter into agreement with the union and prove that all their vacation periods, including collective vacations, have been exhausted; as well as zero their “hour banks”. Companies should also take into account the rate of current job generation, as measured by the Liquid Employment Indicator (ILE – in Portuguese), which should be equal to or less than 1%.

Importantly, companies that adhere to the EPP will be prohibited from unreasonably dismissing employees who had their journey reduced for the period in which the EPP is in effect; and after its termination, for a period equivalent to one third (1/3) of the membership period.

Questions about the new Employment Protection Program? Contact us; our labor law team will be on hand to help you.