FGTS

FGTS, or Fundo de Garantia do Tempo de Serviço, is a Brazilian government social security fund created to protect workers and provide liquidity in key situations such as job termination and housing purchases. It acts as a savings mechanism linked to formal employment, funded primarily by employers.

Funding and accounts: Each formal employer deposits 8% of the employee’s monthly wage into the employee’s FGTS account. The funds are managed by Caixa Econômica Federal and accrue interest at a rate of 3% per year plus the Taxa Referencial (TR). The balance belongs to the worker and can be accessed under specific conditions defined by law.

Access and withdrawals: The FGTS can be withdrawn in several scenarios, including dismissal without just cause, retirement, serious health problems, or for housing-related needs such as purchase, amortization, or repayment of a mortgage. In the case of dismissal without cause, the worker may withdraw the FGTS balance, and the employer is also required to pay a penalty of 40% of the total FGTS deposits made during the contract.

Saque-Aniversário: Since 2020, workers may opt into the Saque-Aniversário modality, which allows the withdrawal of a portion of the FGTS balance in the month of the worker’s anniversary each year. Choosing this option changes the withdrawal rules in the event of termination, as access to the full balance is then restricted unless the option is reversed.

Administration and significance: The FGTS is administered by Caixa Econômica Federal under the supervision of the Ministry of Economy. It plays a central role in social protection, offering liquidity to workers and supporting housing programs and other policy goals.