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Social Security Consequences of the Labour Reform in Brazil

Fabio Medeiros signed the Brazilian chapter of the august edition of the RECHT & STEUERN.

Social Security Consequences of the Labour Reform in Brazil

Although most of the recent labour reform to be implemented by Law 13,467/2017 as of November 11, 2017, changes the Consolidation of Labour Laws, the so-called “CLT”, which is the main labour legislation in Brazil ruling the contractual relationship between employers and employees, the new law also brings important modifications that directly and indirectly impact the social security contributions on the compensation for work.

The first impact arising from Law 13,467/2017 on the social security system is related to the employees’ costs with health or dental care paid as a benefit.

Although the current CLT already states that such amounts are not considered as salary for any purpose (such as for paid vacation, overtime and Christmas bonus, the so-called 13th salary), the labour reform included paragraph 5 on Article 458 of the CLT to detail that medical or dental care expenditures, including reimbursement of expenses with medicines, glasses, orthopaedic devices, prostheses, orthoses, medical and hospital expenses and similar ones, even if granted in different types of plans and coverage, are not part of the employee’s salary for any purpose and are not subject to social security contributions. Article 28, paragraph 9, item “q” of Law 8,212/1991, which is the law ruling the social security contributions for employers and workers, was changed accordingly.

Therefore, while according to the current social security law the employer must grant the same type of health and dental plans and coverage to all employees and administrators to avoid that such costs be considered as tax basis for social security contributions, once the labour reform is in force all the employers’ cost with health or dental care will be exempt from social security contributions, no matter how many workers are eligible to such benefits or how each one is benefited.

Considering that nowadays there are many employers facing notices of violation issued by the Federal Revenue Service with charges of social contributions on these costs, plus interest and fines, these changes will be extremely favourable, not only because they will allow that the employers claim for the cancellation of such levies, but mainly to motivate employers to offer more health and dental care benefits to their workers in a scenario where the Brazilian public health system unfortunately is far from being protective and effective.

One related matter, however, may continue triggering employer’s concerns.

Their costs with benefits for employees’ dependents are neither addressed by Law 8,212/1991, nor by the labour reform. Thus, although in our opinion the law is clear enough to exempt the employers’ costs with health and dental insurance from social contributions, some companies have already faced notices of violations and relevant levies due to the peculiar tax authorities’ interpretation that only costs with employees would be comprised by the exemptive law.

Another important modification brought by the labour reform concerning social security system is related to the following payments that will not be considered as part of the salaries for labour or social security purposes, even when they are customary, and regardless of their amounts:

a) expense allowances (usually applicable in case of relocations);

b) food allowances, such as meal vouchers (except for payments in cash);

c) work travel allowances (currently the payment is limited to 50% of the em ployee’s salary, otherwise the whole amount is considered salary and basis for social contributions);

d) performance award and bonuses.

Finally, the labour reform also changed paragraph 2 of Article 58 of the CLT, which currently establishes that the time spent by the employee in commuting is not considered work time, unless the employees use transportation provided by the employer because they live in places difficult to reach and without public transportation. With the new Law 13.467/2017, besides stating that the time for commuting will not be considered work time, the new CLT will also reinforce that the employees will not be at the employer’s disposal while they are going back and forth from home to work.

In our opinion, however, this will be also an important change in respect to social security benefits, because nowadays commuting accidents in Brazil are considered as work accidents in accordance with Law 8,212/1991, regardless of the fact that the employees are not working or at the employers’ disposal.

Thus, once a commuting accident occurs nowadays and the employee receives any social security benefits due to such work-related accident, the employer is prevented from dismissing the employee without cause for 12 months as of the date when the worker returns to work. Besides, the employer must continue paying the employee’s unemployment severance fund (which corresponds to 8% of the employee’s monthly salary) during a sick leave triggered by a commuting accident. Finally, the law forces the employer to issue a formal work accident communication to the National Institute of Social Security within one day as of a commuting accident and the employer’s failure to do so triggers fines imposed by the authorities.

Thus, in our opinion, art. 21, IV, “d” of Law 8,213/1991, which is the social security law currently considering commuting accidents as work-related accidents, will be incompatible with the new paragraph 2 of article 58 of the CLT. This situation may be interpreted as a revocation of the first wording by the second, and thus be used by employers to try to obtain judicial decisions against that social security law.