What Severance Pay Rules Must Employers Follow in Brazil?

Which Employees Qualify for Severance Pay?

• Employees hired under the CLT regime generally qualify for severance when dismissed without just cause.
• Employees terminated without cause are entitled to prior notice, FGTS deposits, and a 40 percent FGTS fine paid by the employer.
• Employees on fixed-term contracts may receive proportional severance if the employer ends the contract early without just cause.
• Employees who resign or are dismissed for just cause usually forfeit key severance items like the FGTS fine and some notice rights.
• Employees affected by mutual termination agreements receive reduced severance, including a 20 percent FGTS fine and partial FGTS withdrawal.
• Pregnant employees, union leaders, and others with job stability may have additional protections and reinstatement or enhanced severance rights.

What Are the Legal Timelines for Paying Severance?

In Brazil, severance must be paid very quickly after termination, and delays can trigger automatic penalties. For terminations with prior working notice, you must pay all severance items on the first business day after the end of employment. If you provide pay in lieu of notice, payment is due on the termination date itself. Severance includes accrued salary, unused vacation plus one-third bonus, proportional 13th salary, FGTS deposits and the applicable fine, and any other contractual amounts. Payments are typically made via bank transfer and must be documented in the termination receipt and, where applicable, in union or Ministry of Labor procedures.

What Penalties Apply if Severance Is Not Paid Correctly?

If your company fails to pay severance correctly or on time in Brazil, you risk automatic labor fines and employee claims in labor courts. Authorities and judges tend to favor employees, so even small errors can become expensive when multiplied by interest, monetary correction, and attorneys fees.

• Late payment of severance can trigger a statutory fine equal to one monthly salary in many cases.
• Underpayments can lead to back pay with monetary correction and interest ordered by labor courts.
• Noncompliance may result in administrative fines from labor inspectors and FGTS authorities.
• Disputes can expand into audits of broader payroll, FGTS, and social security practices.
• Reputational damage and increased scrutiny from unions and regulators can follow repeated violations.

Does Outsourcing Employment via an EOR Change Severance Liability?

Using an Employer of Record (https://www.playroll.com/employer-of-record) in Brazil does not remove the need to follow CLT severance rules, but it shifts day-to-day compliance work to the EOR. The EOR becomes the legal employer responsible for calculating and paying severance, FGTS deposits, and related fines. However, your company still carries commercial and, in some cases, joint liability if you direct the work or push for noncompliant terminations. You should ensure your EOR contract clearly allocates severance responsibilities and requires strict adherence to Brazilian timelines and documentation. Regular audits and clear approval workflows for terminations help protect your company from surprise liabilities.

Be 100 Percent Compliant in Offering Severance with Playroll

Brazilian severance rules are technical, time-sensitive, and heavily enforced, which makes manual handling risky for growing teams. Playroll helps your company navigate CLT requirements, FGTS obligations, and the different severance outcomes for dismissal without cause, resignation, and mutual termination. Your team gets clear cost estimates before you confirm a termination, so you can budget accurately and avoid last-minute surprises.

With Playroll, you can centralize employment data, automate statutory calculations, and ensure payments land within Brazil’s strict deadlines. Our local experts track legal changes, union practices, and court trends so your policies and contracts stay aligned with current expectations. That means fewer disputes, cleaner audits, and a smoother offboarding experience for your employees in Brazil.