The Severance Indemnity Fund (FGTS) was created by the Brazilian government to protect workers in case of unfair dismissal. The worker accumulates a fund, which works as a type of savings account, which can be redeemed on specific occasions in addition to dismissal.
The objective of the FGTS is to guarantee the worker a financial reserve that can be used in times of need. Currently, the labor benefit has 14 forms of withdrawal, the four main ones being: dismissal without just cause, retirement, home ownership and treatment of a serious illness.
Who is entitled to withdraw the FGTS?
Every Brazilian worker with a formal employment contract, governed by the Consolidation of Labor Laws (CLT) is entitled to withdraw the FGTS. This list also includes domestic workers, rural workers, temporary workers, intermittent workers, casual workers, harvesters and professional athletes.
What are the FGTS modalities?
The FGTS has 14 types of withdrawal that range from unfair dismissal to natural disasters. Check them all out below;
- Unjustified dismissal by the employer;
- Termination of the contract for a specified period;
- Termination due to bankruptcy, death of the individual employer, domestic employer or nullity of the contract;
- Termination of the contract due to reciprocal fault or force majeure;
- Retirement;
- Personal, urgent and serious need, resulting from a natural disaster caused by rains or floods that have reached the worker’s area of residence, when the emergency situation or the state of public calamity is thus recognized, by means of a federal government ordinance;
- Suspension of Separate Work;
- Death of the worker;
- When the holder of the linked account is 70 years of age or older;
- When the worker or his dependent is HIV positive;
- When the worker or his dependent has cancer;
- When the worker or his dependent is in a terminal stage, due to a serious illness;
- Permanence of the worker holding the linked account for three uninterrupted years outside the FGTS system;
- Acquisition of a home, liquidation or amortization of debt or payment of part of the housing finance installments.
The 4 main redemption models
1. Withdrawal-termination
To request the FGTS termination withdrawal, the worker has up to 5 working days after the date of dismissal. The request can be made at any branch of Caixa Econômica Federal, where it will be necessary to present the term of termination of the employment contract, the work card and an identification document with a photo.
It is also possible to order through the Caixa app through the digital savings account, created in 2020 due to the covid-19 pandemic. In case of dismissal by agreement between the parties, the worker is entitled to withdraw up to 80% of the FGTS amount.
2. Retirement
The FGTS withdrawal covers all types of retirement, whether by contribution time, age, or disability. Some modalities have specific rules on the amount that can be withdrawn, such as the example of the worker who retires due to contribution time or age, but continues to work — being entitled to withdraw only 80% of the value of the fund.
The professional who retires due to contribution time, age or disability, and is fired without just cause, has the right to withdraw the FGTS, in addition to a fine of 40% on the total amount deposited in the account. Other cases can withdraw the full value of the fund. Those who retire but continue working can keep their FGTS balance and continue depositing or open a new account.
3. Own house
To apply for the withdrawal when buying a home, the worker must have at least three years of work under the FGTS regime, even if not consecutive, and have 10% of the value of the property for down payment. In addition, the building must be residential, located in the city where the employee works, or in a neighboring city; and have a maximum value of R$ 1.5 million.
The fund is only valid for professionals who do not own another residential property in the municipality where they work or in neighboring municipalities; and who have an employment contract in force, or have a sufficient balance in their FGTS account. The value of the fund can be used to pay part of the value of the property, amortize the outstanding balance or pay part of the installments of the real estate financing.
4. Treatment of serious illness
The fund can be used for the treatment of serious illnesses, whether of the patient or his dependents, making withdrawals every 12 months, regardless of the amount. The request must be made by the holder or his legal representative, based on the presentation of the medical report attesting to the illness, and documents to prove the kinship (if this is the case). The list of serious diseases is defined by the Ministry of Health and includes cancer, HIV, Parkinson’s, among others.
