The government has just issued provisional measure 680/2015 which allows companies in financial distress to reduce the work hours of their employees and their salaries up to 30%, the PPE.

The program still needs further regulation by the government and then it may be implemented through a collective bargaining agreement ("CBA") between the company and the labor union representing the employees working on the principal business.

The government will determine the business sectors which will be entitled to benefit from this special program through a committee formed by members of different ministries and the general secretariat of the presidency of the republic.

With respect to the prospective CBA, there are three main aspects worth stressing: (1) The reduction of salaries and work hours must apply to all employees of a given company or at least to all employees in a given department or sector of the company; (2) The reduction of salary and work hours may be agreed for a period of up to six months and may be renewed for another six months through a CBA; (3) During the program and for an additional period of 1/3 of the term of the program, employees cannot be terminated without cause. These employees will enjoy a temporary employment guarantee as a result of the application of this provisional measure.

The economic component of this program consists of compensating the employees with public funds. The government will pay to the employees an amount equal to a maximum of 50% of the salary reduction implemented, limited to R$900.84 (65% of the maximum allowance provided for in the unemployment insurance rules).

The companies will be required to make the FGTS and social security contributions during the reduction period considering the amounts they will pay to the employees (original salaries less 390%) and the amounts paid by the government using FAT funds (up to 50% of the reduction)

In a hypothetical case in which an employee earns R$5,000, his/her salary can be reduced by 30% to R$ 3,500. In this case, the government would complement his/her salary by paying him/her R$ 750.00 so that his/her final compensation would be R$ 4,250, i.e., 15% less than his/her original salary.

The fundamentals of the program are laid down but its implementation will depend on regulation by the government and CBA's. Some questions will require further consideration and assessment, such as the definition of "fraud" - which shall cause the cancellation of the program - or the possibility of adhering companies to make its employees work overtime.

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