Navigating employment termination in Brazil requires a thorough understanding of the country's complex labor laws, primarily governed by the Consolidated Labor Laws (CLT). Both employers and employees have specific rights and obligations that must be strictly adhered to during the termination process. Non-compliance can lead to significant legal challenges, fines, and liabilities for the employer.
Understanding the correct procedures for different types of termination, calculating appropriate severance pay, and respecting employee protections are crucial steps for any company operating in Brazil. This guide outlines the key aspects of employment termination under Brazilian law as of 2025.
Notice Period Requirements
When terminating an employment contract without just cause, Brazilian law requires a notice period. The standard minimum notice period is 30 days. However, the length of the notice period increases with the employee's tenure with the company.
The calculation for the extended notice period is 30 days plus an additional 3 days for each full year of service, up to a maximum total of 90 days. This extended notice period applies to terminations initiated by the employer without cause.
The notice period can be worked or indemnified. If the employer chooses to indemnify the notice period, the employee is paid for the duration of the notice period without being required to work.
| Employee Tenure | Minimum Notice Period |
|---|---|
| Up to 1 year | 30 days |
| 1 year + 1 day to 2 years | 33 days |
| 2 years + 1 day to 3 years | 36 days |
| ... | ... |
| 20 years + 1 day or more | 90 days |
Severance Pay and Entitlements
Severance pay in Brazil for termination without just cause involves several components. The primary elements include the balance of salary, proportional vacation pay plus one-third bonus, proportional 13th salary, accrued and unused vacation pay plus one-third bonus, and amounts related to the employee's Severance Fund (FGTS).
The FGTS is a mandatory savings fund where employers deposit 8% of the employee's monthly salary into a linked bank account. Upon termination without just cause, the employee is entitled to withdraw the full amount deposited in their FGTS account during their employment. Additionally, the employer must pay a fine equivalent to 40% of the total FGTS deposits made throughout the employment period.
Key severance components for termination without cause:
- Balance of Salary: Payment for days worked in the month of termination.
- Proportional 13th Salary: Payment for months worked in the current year, calculated as 1/12th of the monthly salary per month worked.
- Proportional Vacation + 1/3: Payment for vacation accrued in the current vacation period but not yet taken, calculated as 1/12th of the monthly salary per month worked, plus one-third.
- Accrued Vacation + 1/3: Payment for any full vacation periods earned but not taken, plus one-third.
- Notice Period Pay: If the notice period is indemnified, the employee receives payment equivalent to the salary for the notice period duration.
- FGTS Withdrawal: Employee is entitled to withdraw the balance of their FGTS account.
- 40% FGTS Fine: Employer pays a fine of 40% on the total FGTS deposits.
- Unemployment Insurance: Eligible employees can apply for unemployment benefits from the government.
Grounds for Termination
Brazilian law distinguishes between termination with just cause (demissão por justa causa) and termination without just cause (demissão sem justa causa). The grounds for termination significantly impact the employee's entitlements.
Termination Without Just Cause (Sem Justa Causa)
This is the most common type of termination and occurs when the employer decides to terminate the contract for reasons not related to employee misconduct. In this case, the employer must pay all the severance components listed above, including the notice period (worked or indemnified), FGTS withdrawal, and the 40% FGTS fine.
Termination With Just Cause (Por Justa Causa)
Termination with just cause occurs when an employee commits a serious offense as defined by the CLT. This is a punitive measure, and the employee loses the right to most severance payments, including the notice period, FGTS withdrawal, and the 40% FGTS fine. They are typically only entitled to the balance of salary and accrued, untaken vacation pay (if any) plus one-third.
Common grounds for termination with just cause include:
- Acts of dishonesty or bad faith.
- Incontinence of conduct or bad behavior.
- Habitual negotiation on the employer's behalf without permission, or on one's own behalf, when it constitutes an act of competition against the employer.
- Criminal conviction (unless suspended).
- Disobedience or insubordination.
- Abandonment of employment.
- Acts of indiscipline or insubordination.
- Habitual gambling.
- Acts against national security.
- Loss of qualification or professional requirements due to willful misconduct or gross negligence.
- Constant intoxication (alcohol or drugs) during work hours.
- Violation of company secrets.
- Acts of physical violence or defamation (unless in self-defense).
- Commission of acts that violate the company's code of conduct or internal policies, provided these are known to the employee and the violation is serious.
Termination by Mutual Agreement (Distrato)
Introduced by the 2017 labor reform, employers and employees can mutually agree to terminate the employment contract. In this case, the employee is entitled to:
- Balance of salary.
- Proportional 13th salary.
- Proportional and accrued vacation + 1/3.
- 50% of the notice period pay (if indemnified).
- 20% FGTS fine (instead of 40%).
- Withdrawal of up to 80% of the FGTS balance.
- The employee is not eligible for unemployment insurance.
Procedural Requirements for Lawful Termination
Executing a lawful termination in Brazil requires strict adherence to procedural steps and documentation.
- Communication: The employer must formally communicate the termination to the employee, preferably in writing. For termination with just cause, the communication must clearly state the reason(s) for the dismissal, referencing the specific article(s) of the CLT violated.
- Termination Document (TRCT): The employer must prepare the Termo de Rescisão do Contrato de Trabalho (TRCT), a standardized document detailing all amounts paid to the employee upon termination.
- Payment of Severance: All severance payments must be made within strict deadlines:
- Within 10 calendar days from the date of termination if the notice period is indemnified or if there was no notice period (e.g., termination with just cause).
- On the first business day following the end of the worked notice period. Late payment incurs penalties.
- Documentation Delivery: The employer must provide the employee with copies of the TRCT, proof of payment, keys for FGTS withdrawal (Chave de Identificação), and documents required for unemployment insurance application (Guia do Seguro-Desemprego), if applicable.
- FGTS and Social Security: The employer must process the termination information with the Caixa Econômica Federal (for FGTS) and social security authorities.
While the mandatory homologation (review and approval of the termination by the union or Ministry of Labor) for employees with over one year of service was largely removed by the 2017 labor reform, it is still highly recommended to have the termination documents reviewed and signed by the employee, ideally with the assistance of their union or a legal professional, to minimize future disputes. Some collective bargaining agreements may still require union assistance in the process.
Employee Protections Against Wrongful Dismissal
Brazilian law provides significant protections against wrongful dismissal, particularly for certain categories of employees who have "stability" (estabilidade) or temporary job security. Terminating an employee with stability without a valid, legally recognized reason (either just cause or specific circumstances allowing termination) can result in the employer being ordered to reinstate the employee or pay substantial compensation.
Categories of employees with stability include, but are not limited to:
- Pregnant employees (from the confirmation of pregnancy until five months after childbirth).
- Employees injured at work or suffering from occupational diseases (for 12 months after receiving social security benefits).
- Elected internal commission members (CIPA) (during their term and one year after).
- Union leaders (during their term and one year after leaving office).
- Employees on temporary sick leave receiving social security benefits (in some cases, stability may apply upon return).
Terminating an employee belonging to a protected category without just cause or specific legal grounds constitutes wrongful dismissal. Even for employees without formal stability, termination without a clear, documented reason (when required, like for just cause) or failure to follow correct procedures can be challenged in labor court, potentially leading to the employer having to pay additional compensation or face other penalties. Common pitfalls include incorrect calculation of severance, late payment, failure to provide correct documentation, and terminating protected employees without legal basis.
