Provisional Measure 936/20 allows companies to reduce working hours and wages

Provisional Measure 936 (“PM”) was published last night (01/04/20), to institute the Emergency Employment and Income Maintenance Program due to current state of public calamity caused by coronavirus crisis. The purpose of the PM is to i) preserve employment and income; ii) guarantee the maintenance of labor and business activities; and iii) reduce the social impact of the crisis.

The PM includes the following measures:

I – payment of Emergency Job and Income Preservation Benefit;

II – proportional reduction of working hours and wages; and

III – temporary suspension of the employment contract.

The Emergency Employment and Income Preservation Benefit will be paid in the following cases:

I – proportional reduction of working hours and wages; and

II – temporary suspension of the employment contract.

The benefit will be paid by the Federal government in monthly installments starting from the date of the beginning of the reduction in the working hours and salary or the temporary suspension of the employment contract.

To enjoy the benefit, the following must be taken into consideration:

I – the employer must enter into an agreement with the employee;

II- within a period of up to 10 days the employer must inform the Ministry of Economy about the reduction of the working hours and salary or the temporary suspension of the employment contract;

III – the first installment of the benefit will be paid within 30 days, counting from the date of the signing of the agreement; and

IV – the Emergency Benefit will be paid exclusively during the period of the working hours reduction or the period employment contract is suspended.

If the employer does not inform the authorities within 10 days, it will be subject to the following consequences:

I – it will be responsible for paying the remuneration for the same amount prior to the reduction, including social charges up to the time the information is provided;

II – the payment of the benefit will start on the date on which the information is provided; and

III – the first installment will be paid within 30 days from the date the information is provided

The exact manner and form the information needs to be provided to the authorities by the employer and the way the benefit will be granted are still pending further regulations.

Value of the Emergency Benefit

The Benefit will be based on the monthly unemployment insurance amount to which the employee would be entitled under current legislation and subject to the following provisions:

I – in the event of a reduction in working hours and wages, the amount will be calculated by applying the reduction percentage to the calculation basis; and

II – in the event of temporary suspension of the employment contract:

  1. a) 100% of the unemployment insurance amount to which the employee would be entitled for a maximum period of 60 days, which may be divided into two periods of 30 days; or
  2. b) 70% per cent of the unemployment insurance amount to which the employee would be entitled, in case of companies (employer) that have earned, during the calendar year 2019, gross revenue exceeding R$ 4,800,000. The difference will be assumed by the employer.

Proportional reduction of working hours and wages

During the state of public calamity, the employer can reduce the working hours and wages of its employees for a period not exceeding 90 days, observing the following:

I – preservation of the value of hourly wages for work;

II – elaboration by means of an individual written agreement between the employer and the employee, which needs to be sent to the employee at least two calendar days in advance; and

III – the reduction of working hours and wages is allowed only under the following percentages:

  1. a) 25%;
  2. b) 50%; or
  3. c) 70%.

The working day and the salary paid prior to this measure will be reestablished within 2 calendar days, counting from:

I – the cessation of the state of public calamity;

II – the date established in the individual agreement with the employee; or

III – the date the employer communicates to the employee its decision to bring forward the end of the agreed reduction period.

Temporary suspension of the employment contract

The employer can temporarily suspend the employment contract of its employees for a period not exceeding 60 days, which can be divided in 2 periods of 30 days.

During this period of temporary suspension from the contract, the employee remains entitled to all benefits granted by the employer and authorized to contribute to the social contributions system (INSS) as an optional insured person.

Similar to the reduction of working hours and salary, the employment contract will be reestablished within 2 calendar days after the state of public calamity ceases; the date established in the individual agreement or from the date the employer communicates to the employee its decision to bring forward the end of the agreed suspension period.

During the suspension period, the employee is not allowed to perform any work activity, even if partially through, as examples, teleworking or home office. In such case the suspension will be canceled, and the employer will be subject to:

I – immediate payment of remuneration and social charges for the entire period;

II – penalties provided for in the legislation in force; and

III – sanctions provided for in a convention or collective agreement.

Companies that have earned, in the calendar year 2019, gross revenue exceeding R$ 4,800,000, may only suspend the employment contract of their employees by paying a monthly compensatory aid in the amount of 30% of the employee’s salary during the period of temporary suspension of work agreed.

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