Minimum statutory severance pay depends on the reason for dismissal and / or the length of employment, and ranges from one average monthly salary for any dismissals for organisational reasons (including collective redundancies) of employees whose employment lasted less than one year, to 12 times the average monthly salary for dismissals for health reasons. The parties may negotiate a larger severance payment, or the payment of severance pay in the case of dismissal for other reasons.
In case of dismissal for cause, no severance pay is due to the employee.
In such cases the employer must only make payments related to rights the employee accrued during the employment period, which can include pro-rata payment for accrued holiday entitlements (1 / 12 of the employee’s holiday pay for each month of the incomplete holiday accrual period at the time of dismissal (such holiday pay being, in full, equivalent to one monthly salary plus an additional 1 / 3 of monthly salary), proportional 13th salary (1 / 12 of one monthly salary for each month worked in the then current calendar year), as well as double payment for any overdue holiday periods (i. e., holiday periods not enjoyed by the employee within 12 months of the employee acquiring the right to enjoy such holiday period).
If the employee is dismissed without cause, the employer must pay to the employee, in addition to the payment of accrued rights and as a penalty for unfair dismissal, an amount equal to 40 % of that which the employer has deposited into the employee’s severance compensation fund (“FGTS”) during his / her employment. In addition, the employer must pay a further 10 % of the amount deposited into the FGTS to the government. Every month, employers are required to deposit 8 % of the employee’s monthly salary into his / her FGTS account, which is managed by the Federal Savings Bank on behalf of the employee. Thus, this penalty will depend on the length of employment and on the amount of the employee’s monthly salary.
If the dismissal is amicably agreed to between the employee and the employer, the employer will have to pay half of (a) the financial compensation for prior notice, if the parties agree that the prior notice will be financially compensated for instead of the employee actually working during such period, and (b) the penalty equivalent to 40 % of the amount the employer has deposited into the employee’s FGTS (i. e., 20 % of the amount deposited into the FGTS).
All other termination payments, such as amounts due in respect of accrued rights, should be fully paid.
In cases of fixed term employment contracts where there is no provision allowing the parties to terminate the agreement early without cause and the employer opts for early termination without cause, the employer must pay the employee half of the amount the employee would otherwise have been entitled to receive during the remainder of the agreement term.