Social Security Reform: what are the effects to the companies?

Leonardo Bezerra and Rita Araujo

The proposal for Social Security reform (PEC 6/2019), considered by most businessmen as fundamental for the balance of public accounts and for the resumption of the country's growth, has been stirring the Brazilian political scenario throughout the year.

The House of Representatives approved on August 6 the reform basic text in a second-round. The house will analyze the notes to change the wording of the legislative proposal.

After final adjustments to the text, the Constitution, Justice and Citizenship Commission will review the agenda. Afterwards, the Proposal for Constitutional Amendment (Proposta de Emenda Constitucional - “PEC”) goes to the Senate plenary, where its approval should be negotiated within two rounds. The expectation is that the entire process will be completed by September.

After the Senate president’s promulgation, the reform takes effect immediately. Follow the voting stages and the main points of the “New Social Security” here.

It is possible to evaluate that this reform, articulated in the PEC form, generates a structural change just because it is linked to the Constitution, which is more appropriate from the legal perspective, because it does not give room for legal uncertainties.

The text proposes changes related to the minimum salary to retire, end of retirement by the INSS salary ceiling, contribution length, minimum age by gender, new rules for some categories, among other points that are being followed with interest by citizens.

How does social security reform affect companies?

The reform was built and conducted so as not to burden the entrepreneur and carries a strong economic bias.

According to a study released by the Federation of Industries of the State of Rio de Janeiro (Federação das Indústrias do Estado do Rio de Janeiro - “Firjan”), the reform has the potential to unlock BRL 1.2 trillion in investments. For the institution, the effects go beyond reducing costs with mandatory expenses, but also affect the perception of the economy, generating optimism and leveraging business activity.

And that seems to be the big issue for the business community, which in general has the approval of the reform to warm the economy. For companies, there will be a need to adjust the calculation systems of the rates that will be passed on to the government, which will require the review of social security payment parameters.

The reform, currently, does not change the way companies contribute. But there are other aspects to be aware of related to a movement with implications on human relations, involving the people management sector.

One of these issues concerns the aging of the workforce, a trend already worldwide observed, but, with the new rule, it should be strengthened in a short term in Brazil.

New rates

The government's proposal for “New Social Security” provides for changes in the contribution rates of employees under CLT. The payroll discounts will follow a progressive rate table, which will focus on salary ranges, similar to what happens with the income tax calculation method.

• In the first range, which goes up to a minimum wage (BRL 998) the rate will be lower: 7.5%.
• In salary range that comes from the minimum salary up to BRL 2,000, the rate will be 9%.
• In the next range, between BRL 2,000 and BRL 3,000, the rate will be 12%.
• In the last range, between BRL 3,000 and the INSS ceiling (BRL 5,839.45), the charge will be 14%.

 

If kept in its original text, This proposal unifies the rates for public and private servants who receive up to the INSS salary ceiling, which is currently BRL 5,839.45.

People management

What lies ahead puts organizations in the face of a new reality, as it will be necessary to reconsider the spaces for elderly professionals. With changes in the social security system, the worker will remain longer in active employment until he or she can enjoy retirement.

Each company will be responsible to find a way to operate in face of its entire set of employees, dealing in a planned way with the different generations of professionals who will be in contact

A new hiring culture and the development of new career plans will be needed.

With the presence of the seniors, we must rethink practices to retain talent, considering the demands of the entire workforce, from the youngest to the most mature.

Reflections on cost and benefit management are also expected. In a work environment composed of the elderly, the expenses with medical assistance tend to increase.

Providing employees with supplementary pension plans can be attractive, given the significant changes in retirement rules promoted by the retirement.

More than ever, life-quality policies will be a viable path to a healthy and productive work environment.

Follow-up of social security legislation

Domingues e Pinho Contadores has a whole department dedicated to monitoring Brazilian social security legislation to provide assertive, qualified and up-to-date information to clients who wish to comply with such obligations.

Advice on payroll and social charges (INSS, FGTS and IRRF taxation), analysis of pending issues on social security, preparation of reports, benefits management and review of procedures are some of the services provided by DPC.