II. THE GOVERNMENT ACTIONS

 

II.5 Reducing Labor Costs

The fifth group of actions has as objective the reduction of labor costs other than wages and the introduction of new forms of contract. To diminish the costs of the admission and dismissal processes, the Government is negotiating with all of the parties involved in the subject in order to reduce the payroll taxes, specially those of fiscal nature, that incide upon the payroll. For limited duration contracts, the Government has presented the National Congress a bill for changing the nature of these contracts.

The reduction in the payroll taxes will contribute to the diminishing of the "Brazil Cost", stimulate the growth of more jobs and reduce informality in the labor market.

In relation to the "Brazil Cost", the objective is to reduce the costs of intenationally tradable goods, increasing the competitiveness of Brazilian goods and services abroad as well as in the domestic market. The payroll taxes affect the labor cost, whose level and variation can be decisive in the determination of the degree of competitiveness in the economy.

In the labor market, the reduction of payroll taxes will propitiate the downfall of the formal employment cost through the diminishing of the admission and dismissal costs. The reduction of the labor cost incentivates the enterprises not only towards expansion of employment, but also towards the formalization of labor relations, placing the worker under social protection.

New Types of Contract

One way of reducing the job costs and, simultaneously, of gua-ranteeing rights for the workers is by introducing other types of contracts into the labor market. Such contracts should stimulate the growth of working posts for the more vulnerable social groups, that present greater difficulty in obtaining a job (young people, women, and the elderly that seek reinsertion in the market). There is also an intention of making the labor law more flexible in order to attend to what is freely negotiated by the parties.

The bill presented by the Federal Government to the National Congress foresees these new forms of contract. It has the objective of conferring flexibility to the contracts and reducing costs without renunciation of the social rights of the beneficiary groups of this new model. All the workers sheltered by this contract will have their employment booklets signed.

The bill broadens the reach of the limited duration contract, extending it to all the enterprise's activities. Article 443 of the CLT restricted this type of contract to transitory activities.

The Ministry of Labor, in its turn, negotiates with the employees' and employers' leaderships aiming at a more generalized reduction in the payroll taxes. The negotiations move towards an alternative form of financing of these charges, that must be dislocated from the payroll to other tax bases, such as invoicing, net profit and aggregate value.

Another governmental initiative for reducing the costs was the institution of the Deregulation of the Administrative Labor Rules Program (Directives no. 401 and 402, dated April 28, 1995), whose purpose is to rationalize and extinguish old and bureaucratic procedures of internal control within enterprises referring to labor contractual relations.