Provisional Measure of Green and Yellow Labor Contract institutes changes in labor legislation and brings economic benefits to the entrepreneur

Published on November 12, 2019 in the Federal Official Gazette, Provisional Measure n. 905 establishes the Green and Yellow Labor Contract, changing labor legislation and bringing a series of facilitations to the entrepreneur.

The new hiring modality aims to create new jobs positions from January 1, 2020 to December 31, 2022. This new model will only apply to people aged 18-29 who have never worked under CLT (Consolidated Labor Laws). The Ministry of Economy foresees the creation of 2.5 million new job openings by 2022, including people with disabilities.

The number of “Green and Yellow employees” allowed for hiring is limited to 20% of the company’s total number of employees, taking into consideration the payroll of the current month of calculation. Companies with up to ten employees are allowed to hire two employees, and employees in this modality will have a salary cap of up to 1.5 of the national minimum wage.

The measure also brought with it a series of changes in the tax and previdenciary aspects, which aim to reduce bureaucracy and relieve entrepreneurs when hiring employees under this new category, for example:

  • Companies that hire in the Green and Yellow mode will be exempt from the Employer’s social security contribution, education salary and social contributions, which are levied on the employee’s payroll.
  • In addition, the monthly rate for FGTS (Employee Time Guarantee Fund) contribution made monthly by the company to the employee will be 2%, regardless of the amount of compensation, and not 8% as provided for in conventional contracts.
  • The rate reduction also occurs in cases of dismissal without cause, when there is agreement between the parties. From 40% in conventional contracts to 20% in the new model.
  • The extra 10% fine in these cases has been extinguished.
  • A worker hired under other forms of contract, once dismissed, may not be rehired by the same employer under the Green and Yellow Labor Contract, for a period of 180 days from the date of dismissal.
  • In case of exposure of the worker due to hazardous work, the company will pay 5% of the base salary and not 30%, as stated by law in other types of contract.

For Joice Izabel, accountant and partner of Drummond Advisors, the changes introduced by Green and Yellow Contract not only boost job creation in the country, but also encourage the opening of new companies. “Working with tax consultancy for companies in Brazil and the United States, I see that the difficulties in hiring an employee in Brazil are great. This greatly simplifies and reduces corporate expenses and bureaucracy when hiring an employer. Both parties involved will benefit.”

The Provisional Measure still needs approval from the National Congress in the coming months to definitely become ordinary law.

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