Measures for salary reduction and suspension of employment agreement may be extended


Measures for salary reduction and suspension of employment agreement may be extended

By Leonardo Bezerra

The MP 936/2020 created by the federal government, in force since April, to preserve employment and income and to support the business community in response to the crisis triggered by the coronavirus pandemic, has just been converted into law. With the new version of the text sanctioned by the presidency on July 6, the effects of the measure could be extended.

The MP established the Emergency Program for Maintenance of Employment and Income, allowing a reduction of salaries and working hours and suspension of agreements as a way to make the maintenance of employment possible, minimizing the effects of Covid-19 on the economic and productive sector.

As the deadlines of the first suspended and reduced contracts have ended or are close to the maximum limit previously foreseen in the Provisional Measure, the conversion into law may give more time to companies. Currently, more than 1.3 million employers have joined the program, covering about 9 million agreements

Businesses that have benefited from the measure so far and will choose to continue with the planned actions, should pay attention to some points, as we will list throughout the text.

In legal matters, once the amendments to the original text of Provisional Measure 936 were consolidated, the Conversion Law Project (PLV) 15/2020 was approved. he conversion was now implemented after the sanction, resulting in the Law 14,020/2020. The essence of what the measure proposes is preserved, but the final wording of the law brings some changes.

Suspended agreements and reduced working and salary that have ended

Due to the delay in the processing and sanctions, the suspended and reduced agreements reached their maximum deadline.

Effective since the beginning of April, the measure allowed the actions for up to ninety (90) days, in cases of agreements to reduce salaries and working hours, and for up to sixty (60) days in cases of suspension of contracts. Thus, the agreement entered at the very first stage of effectiveness may have their validity period already ended.

For example, the company that reduced working hours and salary at the beginning of April will have to resume full payment of salary from July, as the maximum ninety days period has expired.

Under the approval of Law 14,020/2020, the possibility of extending the salary reduction and suspension of employment agreements for longer periods was opened, however, this extension is conditional on the executive power action. The decree has not been published to date extending the terms, and we therefore advise employers interested in extending these measures to await this publication.

In a recent interview, the Secretary of Labor of the Ministry of Economy indicated that there are studies to extend the salary and working hours reduction for a further thirty days, and the suspension of employment contracts for a further sixty days. If confirmed, it means that both measures may have a maximum 120 days period, counting the original periods of MP 936.

It noteworthy that this renewal would remain linked to the maintenance of employment for the same period of the agreement.

Domestic workers

Also covered by the MP, domestic employees who had their agreements suspended and working hours and salaries reduced are in the same situation.

If the parties have interest to continue the measures, it will be necessary to wait for an executive power’s decree extending the periods.

The employment is also maintained for the length of the agreement.

From the MP 936/2020 to Law 14,020/2020

In the conversion process of the provisional measure into law, some provisions were changed, and others were included by the legislative power. Some of these changes were promoted to ensure greater legal certainty in the adoption of these measures.

We prepared the following comparative table with the main items that have changed:

Law 14.020/2020 (Current)

MP 936/2020 (Formerly)

Companies earning a gross revenue in 2019 of BRL 4.8 million or less : can negotiate directly the suspension of contract or reduction of salary (of 25%, 50% or 70%) with their employees who earn up to three minimum salaries (BRL 3,135), or higher-level employees and who receive a salary equal to or greater than BRL 12,202.12.

Not provided.

Companies earning a gross revenue in 2019 of greater than BRL 4.8 million: can negotiate directly the suspension of contract or reduction of salary (of 25%, 50% or 70%) with their employees who earn up to two minimum salaries (BRL 2,090), or higher-level employees and who earns a salary equal to or greater than BRL 12,202.12.

Formerly, the salary range limit was three minimum salaries, equivalent to BRL 3,135.


*Attention: the rule will apply only to new agreements signed after the publication of Law 14,020/20. For agreements signed during the term of MP 936/20, the salary range in force in the PM will apply.

If the individual agreements conditions are more favorable to the worker, they prevail over collective bargaining.

Not provided.

The pregnant employee who receives the Emergency Benefit has a temporary employment guarantee for a period equivalent to that agreed for reductions in the working day and salary or for the suspension of the employment agreement. The temporary guarantee must be applied after the employment guarantee of the maternity leave (from the confirmation of pregnancy until five months after the birth).

Not provided.

Intermittent employment contract: if signed before Apr-01-2020, the employee is entitled to the benefit in three monthly installments of BRL 600 each. The benefit cannot be cumulative if the worker has more than one employment relationship in this modality.

Not provided.

The reversal of the employee's dismissal during the notice period is allowed, with the application of reductions in hours and salaries or the suspension of the employment relationship.

Not provided.

The program extends to apprenticeship contracts and part-time contracts and covers pregnant employees, including domestic workers.

Not provided.

The program extends to employees who receipt the retirement benefit, as long as the employer pays the amount of the Emergency Benefit to which the employee would be entitled.

Not provided.

In case of suspension of the employment agreement, the system remains as follows:

  • The government will pay the equivalent to 100% of the unemployment insurance to which the employee would be entitled to those who have the contract suspended in case of companies earning annual revenues of up to BRL 4.8 million.
  • In case of companies earning annual revenues greater than BRL 4.8 million, the employer bears 30% of the employee's salary, while the government pays the equivalent of 70% of unemployment insurance to the worker.

Other items of attention

With the changes in the system and coverage, workers who were formerly classified in the measure, now can be out of the cut or subject to different rules.

Communicating the adoption of measures

The employer must inform the reduction of working hours and salary or the suspension of the employment contract to the Ministry of Economy within ten days from the signature of the agreement.

Changes to the labor rules provided for in this new law should be reported to eSocial.

The acts required for the settlement of the individual written agreements referred to in the Law may be performed by any effective physical or electronic means.

Individual agreements to reduce working hours and salaries or to temporarily suspension of the employment agreement entered in accordance with the law shall be communicated by employers to the respective professional union within a ten-calendar day period, counted from the date of signature.

Consequences of suspension and salary reduction on the "twelfths" of vacation and Christmas Bonuses

The text does not specifically address the impact on the calculation of the Christmas bonus and vacation. Thus, it is recommended that the evaluation of the effects of the period in which the worker had a reduction in salary or suspension of contract be submitted to the legal department of the company.

Benefits paid to the employee

Whether in the case of salary reduction or suspension of the agreement, the benefits that the company regularly provides the employee should m be maintained.

Labor consultancy to support strategic decisions

In this period, many companies continue to operate home-based, concentrating their efforts on keeping the quality of service and finances up to date.

In this context, it is important to have support for the management of labor and social security issues in order to fully meet the requirements and make a better use of measures supported by legislation, such as MP 936 and MP 927, to mention some current highlights.

The client focuses on the business, while the Domingues e Pinho Contadores team stands at front of personal department practices and, more consultatively, supplies you with information that guides strategic decision making.

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