1/2/2020
Published on November 12, 2019, Provisional Measure No. 905 introduced different novelties in the legislation in force, aiming at stimulating the hiring of young adults between 18 and 29 years old. Among others, this measure is part of a package created by the current president of Brazil to reduce unemployment in the country.
The Green and Yellow Agreement [Contrato Verde e Amarelo] – a name created for this modality of hiring of young people, introduced by the Provisional Measure – establishes that this shall be the first job recorded in Social Security Card (CTPS) of the future employee, excluding from the characterization of first job the work as apprentice, the work by way of probation, the intermittent work and/or the port work; further, the hiring shall be under the modality of agreement for a definite term of at most 24 months. If such period is exceeded, the agreement shall be automatically converted into an agreement for an indefinite term.
In addition to such requirement, the period for hiring is limited to the time between January 1, 2020 and December 31, 2022. Another issue is that the employers may hire up to 20% of the total employees of the company under that category, and such calculation shall consider the average of the total employees included in the payroll between January 1 and October 31, 2019.
Finally, the salary to be paid shall not exceed 1.5 minimum wage, and the benefits of the proportional 13th salary and vacation pay added by 1/3, as well as the indemnification on the Unemployment Compensation Fund (FGTS) balance (as long as previously agreed upon by the parties), shall be paid together with the monthly compensation, which is different from the regular agreements, where such allowances are paid only at the moment of termination of the employment agreement.
The financial benefits for the companies are evident. This is because the cost of this workforce, compared to the other employees, is about 34% lower, taking into account the tax exemptions that the Provisional Measure provides for.
Such agreements will be exempted from the payment of the social security contribution by the employer, of the tax rates of the “S” System, and of the education allowance, which demonstrates the economy that the companies will be making. The contribution intended to FGTS shall be of only 2% per month – against the regular 8% – and the indemnification fine of FGTS shall be 20%, which is half the usual percentage.
Thus, in a preliminary analysis, under the business point of view, it is certain that the Green and Yellow Agreement will bring significant economic gains, which will stimulate the growth of the companies and the acceleration of the economy, in a general manner, making feasible the increase of the market in all segments, in addition to contributing to reduce in a significant manner the unemployment rate among young people.
As it is a Provisional Measure, its effectiveness is limited to 120 days and, if not approved by the National Congress within that period, it will definitively lose its validity; therefore, it is certain that, in order to mitigate the risks, the companies must, when opting for the hiring of young adults under the “green and yellow” modality, consult their legal advisors in order to ensure the effective application of the rules, both in the administrative and judicial areas.
