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One of the main rights guaranteed to formal workers, the FGTS (Guarantee Fund for Length of Service) is the resource most used by Brazilians who wish to buy their own home.
This fund is made up of deposits that are made monthly by the company where the employee works, but most workers only have access to the amount at specific times: in the event of dismissal, property financing or Federal Government campaigns.
The FGTS was created with the aim of providing stability for those who work under the CLT regime and the resources are used to create a reserve used in the event of unfair dismissal, increase the budget in some cases and when purchasing a property.
Deposits are made by the contracting company into a Caixa Econômica Federal account that is linked to the employer. This payment is mandatory and the amount cannot be deducted from the employee in any way.
Who is entitled to FGTS?
To be entitled to the FGTS it is necessary to comply with some labor rules. First, the worker must be duly hired within the CLT provisions and receive monthly in their Caixa Econômica account the amount of 8% on the value of their contracted salary.
Anyone hired as a Young Apprentice is also entitled, but the deposits are smaller, 2% on the value of the gross salary. As for domestic employees, the payment is higher. It corresponds to 11.2% of the gross monthly salary, with 8% of monthly deposit and 3.2% of advance termination.
For the payment to be effective, the employee must be registered with Social Security and the employer must be registered with the CEI, which is the INSS Special Registry.
Deposits are made by companies, and it is important to know that deposits do not only apply to the monthly salary, but also to vacation and bonus payments, as well as thirteenth salary, notice, overtime and nighttime premiums.
If an employment contract is interrupted, the company must continue contributing during the period of absence in cases of work accidents or health treatment, when the employee has to perform military service or in the case of maternity or paternity leave.
What is the FGTS for?
In case of unfair dismissal, the company is also obliged to pay a termination fine of 40% on everything deposited in the worker's account.
Even if part of the money is withdrawn, which may occur in the case of real estate financing, the 40% fine will be calculated on the total value of the deposits that were made during the period that the worker was at the company.
And contrary to what many people think, money doesn’t just sit still. It is directed to FI-FGTS, which is an investment fund managed by Caixa Econômica Federal and respects the approvals of the Board of Trustees.
The application of resources is managed by the Federal Government and finances housing programs and sanitation and infrastructure works. But how much does the FGTS yield? Well, this is a controversial subject.
The yield is low. The amount deposited yields 3% per year, plus the TR, which is the Reference Rate updated monthly. Part of the results are distributed among all workers. Compared to inflation, the yield is very low.
