TST: Signing Bonus is Salary

Written by | Contracts, Corporate, Dispute Resolution

Brazil’s Superior Employment Court (Tribunal Superior do Trabalho or “TST”) has recently issued its final decision addressing whether an employee’s signing bonus should be treated as salary for the purposes of Brazilian employment law.

The case involved an employee of a large bank who had received R$800,000 as a signing bonus. The bank paid the signing bonus as a lump sum upon hiring him. The executive was terminated by the bank without cause and filed an action against the bank seeking employment-related entitlements.

The Court found that an employee’s signing bonus was analogous to the payments received by soccer players when they are signed by clubs and was to be treated as a salary.

However, the Court decided that because the signing bonus was paid as a lump sum for the purposes of calculating employment termination payments the bonus should only affect the employee’s Employment Guarantee Fund (FGTS) liability for the month when the bonus was paid and for the purposes of calculating the applicable FGTS fine.

This decision is likely to be followed by all of Brazil’s Employment Courts from now on.

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Last modified: December 10, 2018