IB Business & IB Economics.
For the first time since 1945, as from today, November the 11th, 2017, new labour laws come into force in Brazil. The new laws have been welcomed by the business community, who feel that the laws bring Brazil’s labour market into the 21st century, but many, including the Trade Unions and the poor, have protested against the changes.
In economic language these types of changes are often referred to as ‘ making the labour market more flexible’. In economics it is an example of a ‘ market based supply side policy’ the aim of which is to increase economic growth and shift the long run aggregate supply curve of the economy to the right (see below).
The laws make it easier for companies to hire and fire workers, allow companies to use their workforce in more flexible ways, which will cut the cost of labour for many businesses. However, they are controversial and some feel that Brazil’s poor will be worst hit by the changes.
It is difficult to summarize all the changes to the law in such a short blog, but here are some of the highlights:-
- It will be easier and less expensive to hire and fire workers.
- Meal vouchers, medical insurance, bonuses and travelling expenses will no longer be classified as ‘ employee remuneration’ as they are now.
- Compulsory union contributions have been abolished. They will be voluntary from now on.
- Allowing companies to split their employee’s vacation time into three separate periods. Previously holidays had to be taken over one period of 30 days per year.
- From now on employers will not pay their workers overtime if they stay on at their work premises because of poor weather or unsafe conditions.
- Time spent travelling to work is no longer considered as ‘ working hours’. In the past it was.
- Employers can now bargain directly with their workers to set pay and conditions, rather than with a Trade Union.
- It will be easier to hire workers on different types of contracts – part-time , remote workers (working from home) and intermittent workers.
- Companies with 200 or more employees will have to set up a Worker Representation Committee.
- Outsourcing will now be allowed , even for ‘core business’ functions. Previously it was only allowed for peripheral business functions like catering and security.
- ‘ Equal pay for equal work’ rules will be more flexible. Previously workers working on different business sites, or even in the same city, could claim equal pay for equal work. Now it will be restricted to workers only working on the same site.
Labor Newsletter: Mayer/Brown/Tauil/Chequer. Labor Law (“Labor Reform”) – Federal Law No. 13.467/2017, July 20th, 2017.