Understanding the intricacies of local labor laws is critical for any business with operations in multiple countries or looking to establish operations in a new country. This is especially true for laws regulating or mandating vacation time as many countries, such as Brazil, have systems that differ from what employers may be accustomed to in the United States. Failure to rigorously comply with these laws could force employers to pay costly penalties and allow employees to use up large amounts of accrued vacation time.
Here are three intricacies of Brazil’s vacation laws that employers operating in the country might want to consider:
1. 30 Days Paid Vacation
Under Brazil labor law, employees are entitled to 30 paid vacation days each year after their first 12 months of work and accrue 30 days each 12 months thereafter. Under Brazil’s 2017 labor reform, employees may use the vacation in three periods, but one of those periods must be at least 14 consecutive days in length and the other two must be at least five consecutive days each. The vacation time may not begin on a Friday, Saturday, or Sunday, or within two working days prior to a paid rest day or a federal public holiday.
2. Vacation Bonus
When taking vacation time, employees are entitled to their regular pay in addition to a vacation bonus equal to one-third of the employees’ monthly pay. The law requires employers to pay out the vacation bonus two days prior to an employee’s planned vacation. This vacation bonus is due to an employee at termination on a pro-rated basis.
3. Vacation Penalty
Vacation time must be taken within one year after it is earned, though employees have the option to sell back up to 10 days to their employers—essentially requiring employers to pay out the cash equivalent of those days to employees. However, the law permits such cash outs to be made only at the employee’s request, and the law prohibits employers from requiring an employee to sell back his or her vacation time. If an employee does not take all of his or her accrued vacation time, and thus has unused vacation time at the end of the year, the employer must pay the employee double his or her salary for the accrued vacation time. These provisions reflect that in Brazil, vacation time is meant to provide employees with actual time away from work to rest, relax, and recharge.
Unlike typical paid time off (PTO) accrual or unlimited PTO systems in the United States, Brazil does not permit vacation days accrued under its labor law to be cashed out (except for the 10 days that the employee may sell back each year). For United States employers new to Brazil, this is a tricky scenario as the law requires employers to proactively ensure that their employees actually take their vacation days. To that end, employers may have to consider setting and adjusting work schedules, staffing, or other operations to accommodate employees taking vacation time. Failure to do so may result in significant costs. Thus, employers operating in the country may want to consider how they encourage and provide opportunity for their employees to use their vacation time each year.
Ogletree Deakins’ Cross-Border Practice Group will continue to monitor developments with Brazilian labor laws and will post updates on the Cross-Border blog. Important information for employers is also available via the firm’s webinar and podcast programs.