Brazil’s government proposes voluntary cuts for civil servants

Brazil’s government proposes voluntary cuts for civil servants

Civil servants will be offered voluntary redundancy packages
Brazil Business

Brazil’s Ministry of Planning, Development and Management is proposing a program of voluntary cuts for civil servants. The government will offer civil servants shorter hours in exchange for a pay cut, while others can opt for a voluntary exit.

Those who take the government up on its offer of a voluntary exit will receive a severance package of 125 percent of their salary for each year they worked. Meanwhile others can trim their working week from 40 hours down to 20.

The proposed measure will reduce social security costs, which could reach 248 billion BRL for 2017. The Ministry hopes that around 5,000 civil servants will accept the deal and that more will choose shorter hours. The measure could save a total of approximately 1 billion BRL per year, with ministers hopeful that the measure will help combat federal debt.

The government is facing the possibility that it will not reach its primary deficit target of 139 billion BRL. Civil servants are a cost that rises annually for Brazil’s government, due to mandatory salary raises and social security benefits. The government also recently added 22 billion BRL in expenses for civil servants per year. Additionally, it spent 15 billion BRL on budgetary amendments.

Immediate introduction

Minister for Planning Dyogo de Oliveira said that the program will begin its rollout this year. According to Oliveira, nothing like this has been attempted for the last two decades. However, he warned that although the government would act fast, the move’s economic effects wouldn’t be visible until 2018.

Meanwhile, other ministers are focusing on other elements important for boosting Brazil’s shaky economy. Finance Minister Henrique Meirelles is due to meet with investors this afternoon. He has expressed hope regarding the initiative’s potential, but is focusing on attracting investment as well as cutting costs.

“There is a consensus that Brazil is growing again,” he told EBC. “The idea now is to consolidate the reform agenda in the macroeconomic and microeconomic area, aiming at achieving a path of sustainable development for the country.”

This is the latest in a string of measures introduced by the government in an attempt to address its budget deficit. Some still fear that the country may not reach its primary 139 billion BRL target, despite measures.