Bolsonaro government prepares proposal to reduce FGTS of all workers

The Jair Bolsonaro (PL) government is studying a broad flexibility in the rules of the FGTS (Fundo de Garantia do Tempo de Serviço), under the justification of reducing the cost of employers in hiring.

In three draft MPs (provisional measures), to which the Sheet had access, the Ministry of Economy proposes to cut the contribution rate that companies collect on workers’ wages, from 8% to 2%, and to reduce the fine paid in case of dismissal without just cause, from 40% to 20%.

“The proposal to reduce the rates of contributions of autonomous social services will not only reduce the cost of hiring workers, but will also contribute to the generation of new jobs”, says the text, which is repeated in the three documents.

The measures were drafted by the Undersecretary of Fiscal Policy of the SPE (Secretariat of Economic Policy), linked to the Ministry of Economy.

A member of the economic team confirmed to the report that the proposal is under study, but stressed that there is still no final decision on the subject. This source explained that the attempt to alleviate labor burdens is a matter of concern to the ministry.

For this reason, technicians have been working on options for measures, some restricted to groups of workers or others broader, such as the general cut in rates.

Officially sought after, the Ministry of Economy did not respond.

The FGTS is linked to the Ministry of Labor and Social Security. Ministry sources reported not having been consulted about the proposal and admit skepticism about the possibility of advancement.

Today, companies need to collect 8% of the salary in an individual FGTS account in the name of the employee. This resource is in the background and can be redeemed in some situations, such as buying a home or being fired without just cause. More recently, the government authorized the option of annual withdrawals, through the birthday withdrawal modality, upon the worker’s adhesion.

If the worker is dismissed without just cause, he can redeem the entire balance available in the fund (if he has not opted for the birthday withdrawal). The company still needs to pay a fine of 40% on the amount received during the contract, directly into the worker’s pocket.

When drawing up the measures, the government claims that the reduction of the tax burden “favors the country’s economic growth and development, as it helps in the resumption of economic activity, as well as in the generation of employment and income”.

For the Ministry of Economy, “the FGTS burdens the employer as it affects the payroll of companies”.

“The proposal to reduce from 8% (eight percent) to 2% (two percent) of the monthly rate related to the contribution due to the FGTS could contribute, not only to the reduction in the cost of hiring workers, but also to the improvement of the economic scenario, which will make it possible to increase new jobs and new hires”, says an excerpt from the explanatory memorandum of one of the measures.

In the proposal referring to the reduction of the FGTS fine to 20%, the government states that the measure would reduce the cost of hiring workers, in addition to contributing to the increase in new admissions.

“This reduction can increase the productivity and competitiveness of companies, since employers will have additional resources that can be invested both in training workers and in generating new jobs,” says the draft.

In a third proposal, the government is studying cutting the rates referring to contributions to the S System. They would be reduced to 0.30% for Sebrae, to 0.50% for Senac, Senai and Senat learning services, to 0, 75% for social services Sesi, Sesc and Sest and 1.25% for Sescoop and Senar.

Minister Paulo Guedes is a staunch supporter of cutting labor charges, which he often calls “weapons of mass destruction”.

In the 2018 presidential campaign, one of the pillars of the government’s economic plan was the launch of the Green and Yellow Card, a more flexible contracting modality than the CLT (Consolidation of Labor Laws). The model, which according to the government would be optional for workers, would include lower FGTS collection rates.

The government never proposed the creation of the Yellow Green Card, only leaner versions, focused on groups such as young people and people over 55 years old. Even so, the flexibilization always faced strong resistance in the National Congress, and the measures presented ended up losing validity.

In addition to criticism from government opponents, who pointed out on these occasions the risk of harm to workers, changes in the FGTS usually face strong objection from the civil construction sector.

The activity uses the Guarantee Fund’s resources as a cheaper source of financing for the construction of new homes. Workers can also take out loans with FGTS money to purchase their own home, paying a lower interest rate.

The fund also finances actions in the areas of sanitation and urban infrastructure. More recently, the government announced measures to direct a portion of R$ 3 billion to a microcredit guarantee fund for small entrepreneurs and to release the withdrawals for workers with children up to five years old who need to pay daycare.