Brazil: government proposes a new employment contract to promote youth employment

On 12 November 2019, and in line with its goal of creating 1.8 million jobs by 2022, the government of Brazil’s President Jair Bolsonaro passed a ‘provisional measure’ that proposes instituting as of 01 January 2020 a new type of employment contract called the ‘The Green and Yellow Contract’ (Contrato Verde e Amarelo). This new contract will be available for first hires aged between 18 and 29, will have a maximum duration of 24 months, and can pay a monthly salary of up to 1.5 times the minimum salary level. In order to encourage employers to take up the new contract option, Green and Yellow contracts will be exempt from employers’ charges (approximately 20% gross), while the FGTS* contribution will be lowered to 2% of monthly salary compared with 8% for other employees. Workers employed under the new Green and Yellow contract will nonetheless be able to avail of benefits employees on other contracts enjoy under the Constitution, including for example the 13^th month payment. The Green and Yellow contract will, after its maximum duration elapses, automatically transition into a permanent employment contract. Companies will only be able to employ up to a maximum 20% of headcount with this new type of employment contract and 180 days will have to elapse before a company can re-employ a worker on another Green and Yellow contract. This new measure can take immediate effect but still has to secure approval in the months ahead by both congress Chambers in order for it to definitively entering the Labor Code. *FGTS contributions are payments made into a Service Time Guarantee Fund, an individual savings scheme that workers can access under certain employment contract termination conditions.