On the last newsletter, we had reported about the precautions that companies should take when hiring foreigners to work in Brazil.
Today, we will focus on the types of labor agreements. There are currently several forms of formalization, but we will devote our attentions to the six most common ones.
1. Definite-term Labor Agreement
In this type of agreement, there is a pre-established date for beginning and conclusion of the labor relationship between the company and the employee. The definite-term agreement may only be used when the company is about to perform any transitory activity or the nature of the service justifies the transitoriness.
The agreement can be extended only once, and it must not exceed two years. At the end of the stipulated period, the employee will not be entitled to prior notice, unemployment insurance, and the payment of a fine amounting to 40% of the FGTS (Guarantee Fund for Length of Service).
2. Indefinite-term Labor Agreement
As the name suggests, there is no set term for completion. Overall, there is a probationary period that shall be, at most, 90 days and, after such period, an indefinite-term agreement shall be entered into. In this type of agreement, the employee is entitled to all labor rights. If the employee is dismissed by the company without a cause, the prior notice, unemployment insurance, and the 40% FGTS fine will be paid.
3. Temporary Labor Agreement
This type of agreement covers temporary work, either to replace an employee who is on leave, or to meet extraordinary demand. It cannot be extended for more than nine months.
Once the agreement is completed, the employee will have the same rights as those in an indefinite-term agreement.
4. Intermittent Labor Agreement
In this type of agreement, the provision of services will occur in alternate periods. An example would be those people who work at events whose services are performed on specific days only. The intervals may be counted in weeks, days, or hours in which the compensation itself will already be included in the salary, as well as vacations, Christmas bonus, paid weekly rest, and other legal additions.
In this format, the employee is allowed to provide services to other companies as well, not being limited to a single employer.
5. Independent Contractor Labor Agreement
In this type of agreement, the service provider is fully responsible for defining their
work activities. It is them who will assume all the risks. The independent contractor is not an employee.
The main point of attention for companies is to avoid characterizing such service
provision as an employment relationship, as the independent contractor does not enjoy any labor benefits such as vacation, Christmas bonus, FGTS, etc.
The internship agreement does not represent an employment relationship. In fact, it is a learning opportunity for the student.
The intern is not entitled to severance pay, Christmas bonus, paid vacations, or FGTS, but during the term of the internship agreement, they will be entitled to personal accident insurance, transportation allowance, a recess period, preferably during school holidays, and receiving a stipend, for example.
Among the types of labor agreements presented above, the indefinite-term agreement is the one that is mostly used by companies.