PM 905/2019 – Green and Yellow Employment Contract and other social security and labor changes

Please be advised that, on November 12 2019 (Tuesday), the Provisional Measure 905/2019 was published creating the Green and Yellow employment contract, as well as changing the labor and social security legislation.

a) Green and Yellow Employment Contract

The Green and Yellow program was launched to stimulate job creation to individuals from 18 to 29 years old, as follows:

• Applicable to new hiring of employees, not replacements;
• Hiring limited to up to 20% of the company’s employees;
• Base salary up to 1.5 minimum wages;
• Contract with determined term up to 24 months;
• Monthly FGTS (severance fund) reduced from 8% to 2%;
• FGTS penalty may be reduced from 40% to 20%, under agreement, and without the 10% social contribution;
• The company is exempt from the payment of social security contributions upon the compensation of the Green and Yellow employment contract employees – reduction of the tax burden around 28.8%;

b) Changes in the labor legislation

The Provisional Measure also changed several provisions of the Labor Code:

• Regulates electronic storage related to labor duties and obligations;
• Provides penalties for mistakes, non-annotation and falsification of CTPS (labor booklet), among other provisions;
• Ensures a weekly paid rest of 24 consecutive hours, preferably on Sundays;
• Allows work on Sundays and holidays and excludes the requirement of prior authorization from labor authorities;
• Regulates Saturday work for banks;
• Changes the monetary adjustment index of labor debts;
• Regulates Terms of Conduct Adjustment (TAC) and Labor Inspection;
• Regulates the Tip Law, stating that tips are not considered employer / company revenue;
• Clarifies that meals granted in natura or through tickets / cards are not part of employees’ compensation;
• Clarifies some controversial points about Law no. 10,101 / 2000 – Profit Sharing – PLR;
• Clarifies some controversial aspects on the payment of “awards”, as determined by Law no. Art. 457, §§ 2o and 4o, Labor Code and Art. 28, § 9o, ‘z’, Law 8,212/1991;
• Creates new parameters for administrative penalties, to be applied from February 10, 2020, in case of breach of labor protection regulations, from R$ 1,000.00 to R$ 100,000.00.

c) Changes in the social security legislation

The Provisional Measure also changed the social security legislation, as follows:

• Creates the Program for Physical and Professional Rehabilitation, Occupational Accident Prevention and Reduction – there is no impact on companies;
• • Determines the incidence of the social security contribution on the amounts paid to the unemployment insurance beneficiary – there is no impact on companies;
• • Revokes the 10% fine due by employers in the event of dismissal of unfair employee, related to the FGTS, from 01.1.2020 – reduction of the dismissal charge;
• Clarifies that the feeding in natura or through tickets / cards is subject to social security contributions neither withholding income tax;
• Clarifies that, for the payment of Profit Sharing – PLR (Law No. 10,101 / 2000), exempt from contributions: (i) there is no longer the need for participation of the Union member in the joint commission; (ii) the company may have several PLR programs, subject to periodicity; (iii) reiterates the prevalence of autonomy of the will of the parties; (iv) the plan signature must precede any payment and occur at least 90 days prior to the final installment; (v) periodic errors only affect payments made in disagreement and not the entire plan; (vi) the PLR may be negotiated directly with the employee referred to in the paragraph of article 444 of the Labor Code (e.g. employed officers).
• Clarifies the payment of ‘awards’ is exempt from the levy of contributions (§§ 2o and 4o of article 457 of the Labor Code, and paragraph “z” of § 9o of article 28 of Law 8.212/1991), regardless of the form of payment and the means used for its determination, including by unilateral act of the employer, previous adjustment with the employee or group of employees, as well as by collective negotiation, including when paid by foundations and associations, observing the following requirements for the validation of the awards: (i) are paid exclusively to employees, individually or collectively; (ii) are due to higher than ordinarily expected performance, at the discretion of the employer, provided that the ordinary performance has been previously defined; (iii) the payment of any advance or distribution of amounts is limited to four times in the same calendar year and a maximum of one in the same calendar quarter; (iv) the rules for premium perception must be established prior to payment; and (v) the rules governing the payment of the premium shall remain filed by any means for a period of six years from the date of payment.

Please let us know should you need any further clarification.This e-alert is a general review of the subjects discussed above and does not constitute a legal opinion or legal consult.