What is FGTS?
FGTS (Fundo de Garantia do Tempo de Serviço, Brazil's severance guarantee fund) is a monthly deposit the employer makes into an account held in the worker's name at Caixa Econômica Federal, the federal savings bank. The amount is 8% of gross pay (2% for apprenticeship contracts) and is not deducted from the salary — it is an employer cost, on top of what the employee receives.
The deposit applies to salary, overtime, premiums, the 13th salary and vacation pay. The balance earns interest and can be withdrawn in situations defined by law: dismissal without cause, buying a home, retirement and certain serious illnesses, among others. Workers who opt into the 'birthday withdrawal' (saque-aniversário) take out a slice of the balance every year, but give up the full withdrawal upon dismissal.
On dismissal without cause, besides releasing the balance, the employer pays a penalty of 40% of everything deposited during the contract. Since 2024, the monthly payment is made through FGTS Digital, due by the 20th of the following month.
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An employee with a gross salary of R$ 3,000 generates a monthly deposit of R$ 240 (8%). Over a 3-year contract, deposits add up to R$ 8,640, before interest. If dismissed without cause, the employee withdraws the balance and receives the 40% penalty: another R$ 3,456 paid by the employer.
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What is FGTS and who pays it?
FGTS is the Length-of-Service Guarantee Fund: a monthly deposit of 8% of gross salary that the employer makes into an account held in the employee's name at Caixa. It is an employer charge, not an employee deduction, and it does not reduce take-home pay.
When can FGTS be withdrawn?
On dismissal without cause, with a 40% penalty paid by the company, on retirement, to buy a home, in cases of serious illness and other legal situations. There is also an optional birthday withdrawal that releases part of the balance every year and suspends the full withdrawal on dismissal.
How can an employee check that FGTS is being deposited?
Through the Caixa FGTS app or the Carteira de Trabalho Digital app, which show the deposits month by month. Since 2024 payment runs through FGTS Digital, based on what the company declares in eSocial, by the 20th of the following month.