The staggering cost of the Federal Government’s payroll is a key concern for an administration intent on ensuring meaningful State reform. So is the fact that the Government lacks the possibility of laying off unproductive workers and of effectively managing the size of its work-force. Attempts at legal reform aimed at ensuring greater flexibility have been met, historically, with fierce resistance by powerful unions. It remains to be seen whether the incoming administration will succeed where previous ones have failed.
A civil servant in Brazil can only be dismissed in exceptional circumstances, as career civil servants are stable under the 1988 Federal Constitution (FC). Civil servants must be hired through public exams and become stable after three years of probation and after an almost fictitious performance evaluation. The FC provides that a civil servant that has gained job stability can only be dismissed in three instances: i) as a result of a final judicial decision; ii) due to some malpractice, as established under an administrative decision which ensures due process of law; iii) due to poor performance, as established in periodical assessments to be carried out under criteria to be set forth by subordinate legislation – which has never been enacted.
A draft bill to this effect was presented by the Federal Government to the House of Representatives in 1998 (PLP 248/1998), and still awaits vote. In 2017, the Senate presented a new proposal (PLS 116/2017), which was approved in a first commission, but has since stalled.
Under another constitutional provision, the Government has the prerogative to dismiss civil servants in case certain financial limits set forth by the Fiscal Responsibility Law (FRL) are surpassed. According to FRL, the Federal Government’s Executive branch can spend up to 37,9% of its net revenues with salaries and pensions of active and retired workers. The Constitution provides that once that limit is reached the following steps be taken: expenditures with political appointees (which the administration can hire as to a limited number) must be reduced by 20%; civil servants that have not yet gained job stability shall be dismissed; and, if the previous measures are insufficient, civil servants with job stability can be laid off.
This threshold has not been attained. According to the May/2017-April/2018 Fiscal Report1, R$ 209 billion were spent with active and retired workers while the limit set by FRL was at R$ 281 billion. Hence, the administration at large only has residual flexibility in relation to its work force – namely, when it comes to employees hired according to the general labor law.
1 http://www.tesouro.fazenda.gov.br/documents/10180/352657/RGF1Q2018.pdf
L&S Authors
