At-will vs CLT dismissal rules: what ending a job costs in Brazil

Under US at-will employment, either side can usually end the job at any time without a statutory payment; under the CLT, an employer can also end the job without giving a reason, but it must pay for doing so. The Brazilian approach prices the decision instead of forbidding it.

At-will is the default across most of the United States, shaped by state law, written contracts, anti-discrimination statutes and public-policy exceptions. There is generally no federal requirement to give notice or severance to an individual employee, so exit packages are a matter of company policy or negotiation.

Brazil’s Consolidação das Leis do Trabalho (CLT) takes a different line. A dismissal sem justa causa (without cause) is allowed, and it triggers aviso prévio (notice), a fine on the employee’s severance fund and a full final settlement. A dismissal por justa causa (for cause) avoids some of those costs but only on grounds listed in the statute.

What changes in practice for a US manager is that every Brazilian exit has a price that can be calculated in advance. It depends on length of service, salary and the FGTS balance, and it has to be paid on a fixed timetable. Knowing the formula before a hire is made avoids difficult conversations with finance later.

A dismissal without cause costs at least 30 days’ notice, a charge equal to 40% of the contract’s total FGTS deposits, and the employee’s accrued entitlements. The two variable items grow with length of service.

Notice follows Lei 12.506/2011: a 30-day base covering the first year, then 3 additional days per completed year, with the additions capped at 60 so that no notice exceeds 90 days. The multa do FGTS is set by Lei 8.036/1990 art. 18: the employer deposits 40% of the FGTS paid in during the whole contract, or 20% where the courts find shared fault or force majeure.

An illustration helps. Take the salary from our São Paulo example, R$ 15.000,00 a month, and an employee dismissed without cause after exactly three full years. Assume notice is paid in full at the monthly salary, FGTS deposits were 8% of R$ 200.000,00 a year (salary, 13º and holiday bonus), and ignore interest on the FGTS account:

• Notice: 30 days plus 3 days for each of three years, 39 days, about R$ 19.500,00.
• FGTS deposits: R$ 16.000,00 a year for three years, R$ 48.000,00.
• FGTS fine: 40% of R$ 48.000,00, R$ 19.200,00.

Length of service moves the notice figure steadily. After one completed year the notice is 33 days; after ten completed years it is 60 days; and the 90-day cap is reached after twenty completed years. For long-serving staff, notice can therefore approach three months’ pay on its own.

Those two items alone come to about R$ 38.700,00 before the proportional 13º salário, any unused holiday and its one-third bonus. The FGTS balance itself already belongs to the employee, so it is not an extra cost at exit. An employer of record’s payroll team will run the exact figures, which can differ where notice is worked, where pay changed during the contract or where a collective agreement adds terms.

A Brazilian employer can dismiss por justa causa only for one of the reasons catalogued in CLT art. 482, and it carries the burden of showing that one of them applies. A US employer rarely needs to prove cause at all, unless a contract or policy requires it.

In the US, “for cause” is mostly a contractual idea. Executive agreements and some union contracts define it, and it affects severance or equity, but it does not change whether the employer may end the job. In Brazil it changes the cost: a fair dismissal for cause avoids notice and the 40% FGTS fine.

That makes the label worth arguing about, and former employees often do. If a labour court is not persuaded that the misconduct fits art. 482, the employer can end up owing what a dismissal without cause would have cost. US managers should therefore treat justa causa as an exception for well-documented, serious cases, and should expect the employer of record to ask for evidence before agreeing to use it.

Performance concerns that would lead to a routine exit in the US are usually handled in Brazil through a dismissal without cause, with the costs described above. Budgeting for that outcome is more realistic than hoping to rely on cause.

Where cause is being considered, managers should keep dated written notes of each incident, of any warning given and of the employee’s response, and pass them to the employer of record’s HR team promptly. Evidence gathered after the decision carries far less weight than a record made at the time.

The final settlement, called the verbas rescisórias, has a 10-day deadline under CLT art. 477, running from the end of the contract. It collects every sum the employee is owed and has not been paid.

• Salary balance for days worked in the final month.
• Proportional 13º salário for the part of the year already worked.
• Holiday owed: any completed but untaken férias and the proportional period, each with the one-third bonus.
• Notice, where it is paid rather than worked.

Because the deadline is 10 days, an exit cannot wait for the next monthly pay run. The employer of record’s payroll team needs the decision, the last working day and any agreed terms early enough to calculate every item, report the termination and release the payment on time.

A consensual alternative exists. Under CLT art. 484-A, employer and employee can agree to end the contract; notice and the FGTS fine are halved, to 20% for the fine, and the employee can withdraw 80% of the FGTS balance but receives no unemployment insurance. It suits cases where both sides want to part and the employee accepts the reduced package. Our guide to aviso prévio and dismissal in Brazil goes through each exit route in turn.

Yes. Brazilian law bars dismissal without cause for certain employees during defined periods, so the at-will habit of acting quickly can create real exposure. The categories depend on the person’s circumstances at the time of the decision.

One change is already on the statute book. From 1 January 2027, Lei 15.371/2026 extends paternity leave to 10 days and shields the father from dismissal throughout that leave and for one further month. The same law raises paternity leave to 15 days from 2028 and to 20 days from 2029, with the final step conditional on fiscal targets.

Further protections exist under the Constitution, the CLT and social security law for employees in particular personal circumstances or holding particular roles, and their exact scope should be checked case by case. Before any dismissal, ask the employer of record to confirm whether the employee falls into a protected group and, if so, until what date.

US managers should also build a short pause into their own process. In Brazil, the order of steps matters: check protections, calculate the settlement, then communicate the decision. Reversing that order is the most common way a straightforward exit becomes a labour claim.

A former employee in Brazil can file a claim up to 2 years after the job ends, and the claim can cover the 5 years preceding it (Constituição Federal art. 7, XXIX). These cases belong to the Justiça do Trabalho, a specialist court system.

US limitation periods vary by claim type and by state, and many employment disputes must first pass through an agency before reaching court. Brazil’s system is more direct: the employee files with a Vara do Trabalho, appeals go to a regional labour court (TRT) and then to the Tribunal Superior do Trabalho (TST).

The long look-back means that small payroll errors can build up. A mis-set overtime rule or a missing benefit from a collective agreement can become a claim covering years of pay. Records of hours, payslips, FGTS deposits and holiday dates should be kept for well beyond the 2-year window.

Settlement documents matter too. A signed record of what was paid, when and on what basis gives the employer something concrete to show a court if a former employee later disputes the amounts, and it helps the employer of record answer any questions from the labour inspectorate.

For US companies, the lesson is to treat the Brazilian exit file as a legal record from the day of hire. A clean contract, accurate eSocial reporting and a correctly paid settlement are the best defence against a later claim.

Under Employer of Record Brazil, we hold legal employer status in Brazil as employer of record. We therefore issue the notice, calculate and pay the settlement and report the exit, while your company makes the business decision and funds the cost. The steps and deadlines are the same as for any Brazilian employer.

A practical sequence for a US manager looks like this:

• Tell the employer of record early and share the reason, even for a dismissal without cause.
• Ask for a written cost estimate covering notice, the FGTS fine, proportional 13º salário and holiday.
• Confirm whether any protection applies before a date is set.
• Agree whether notice will be worked or paid, and fund the settlement within the 10-day window.

Finance teams can soften the impact by building a termination reserve into the monthly accrual for each Brazilian role. Growing the reserve in line with the FGTS deposits and the extra notice days earned each year means that an exit, when it comes, draws on money already set aside instead of an unplanned payment.

Planning also starts before the hire. Our overview for US businesses employing in Brazil explains how exit costs fit into the first-year budget, and the Brazil team can prepare an estimate for a specific employee.