FGTS in English: Brazil's Severance Fund, Explained (2026)

● Updated August 20, 2026 · 2026 figures — Brazil revises payroll tables every January

The FGTS (Fundo de Garantia do Tempo de Serviço — "length-of-service guarantee fund") is Brazil's mandatory, employer-funded severance savings system: every month the employer deposits 8% of each employee's remuneration into a government-held account in the employee's name — on top of salary, never deducted from it — and, on dismissal without cause, pays a fine of 40% of everything ever deposited for that employee. Since March 2024 the whole thing runs through FGTS Digital, fed directly by eSocial and paid by Pix by day 20 of the following month. This guide explains how the fund works, what the 40% fine really costs, when employees can withdraw, and where foreign-owned subsidiaries get caught.

Key numbers for 2026

• Monthly deposit: 8% of remuneration (apprentices: 2%) — an employer cost, never withheld from pay (Law 8,036/1990)
• Base includes salary, overtime, premiums, the 13th salary and vacation pay with its 1/3 bonus
• Deadline: day 20 of the following month, via FGTS Digital (Pix)
• Dismissal without cause: 40% fine on all deposits made during the contract — ≈ 3.2% of every wage the employee was ever paid
• Mutual-agreement termination (distrato): fine 20%
• Termination deposits + fine: by the 10th day after separation (GFD guide)
• Non-compliance blocks the company's CRF — the FGTS good-standing certificate required for public contracts and financing

What the FGTS is

Created by Law 8,036/1990 (replacing an older job-stability regime), the FGTS is best understood as forced severance savings with a public-policy day job: the balances fund Brazil's housing, sanitation and infrastructure programs, and the employee draws on the account at defined life events — above all, dismissal.

Mechanically:

• Each employee has an individual FGTS account at Caixa Econômica Federal (the federal savings bank), opened automatically with the first deposit.
• The employer deposits 8% of the month's remuneration into it — this is on top of gross pay. An employee earning R$ 10,000 costs R$ 800/month in FGTS; their paycheck shows no FGTS deduction, ever. (A payslip that deducts FGTS from the employee is simply wrong — it happens, and it is a labor-claim magnet.)
• Balances earn TR (the reference rate) + 3% per year, plus a share of the fund's profits distributed annually (Law 13,446/2017) — and, since a June 2024 Supreme Court ruling (ADI 5090, effective June 17, 2024, no retroactivity), total returns must be topped up to at least IPCA inflation when TR + 3% + profits fall short. For 2026, the fund distributed R$ 13.04 billion of its 2025 profits to accounts, credited by August 31, 2026.
• The money belongs to the employee but is locked until a legal withdrawal event (below).

For where the 8% sits inside the full employer cost stack — alongside INSS, RAT, third parties and the accruals — see the true cost of a CLT employee.

What the 8% applies to

The deposit base is remuneration in the broad CLT sense, not just base salary:

Two consequences worth internalizing: FGTS follows the payroll, automatically — every overtime hour in a hotel or logistics roster generates 8% more FGTS; and the annual FGTS bill is ≈8% × 13.33 salaries, not ≈8% × 12, because the 13th and the vacation bonus are in the base.

FGTS Digital: how it is paid since 2024

In March 2024 the FGTS moved from the old SEFIP/Conectividade Social filing to FGTS Digital, run by the Ministry of Labor:

• The amounts due are assembled directly from your eSocial submissions (the S-1200 remuneration events family) — there is no separate FGTS return to prepare. If eSocial is wrong, the FGTS bill is wrong: one more reason the eSocial layer is not optional plumbing.
• Payment is by Pix, against a guide generated in the FGTS Digital portal.
• The monthly deadline is day 20 of the following month (it was day 7 under the old system — teams that migrated playbooks from pre-2024 guides still get this wrong in both directions). When the 20th falls on a weekend or holiday, the deadline anticipates to the prior business day — it never postpones.
• Termination deposits and the 40% fine are paid through a dedicated guide — the GFD — by the 10th calendar day after separation (same anticipation rule), regardless of whether the notice was worked or indemnified.
• Competences prior to March 2024 (old debts, corrections) are still settled through the legacy SEFIP/Conectividade Social channel — they do not enter FGTS Digital.

The monthly sequence for a competence, end to end: payroll closes → eSocial by day 15 → FGTS by day 20 → INSS/IRRF via DCTFWeb by the last business day. The full calendar, with what happens when each deadline is missed, is in the Brazil payroll guide.

The 40% fine: the real price of dismissal

On dismissal without cause, the employer pays a fine of 40% of all FGTS deposits made during that employment contract, duly adjusted — directly into the employee's account, on top of severance.

The details that matter to a budget owner:

• The base is the contract's total deposits, not the current balance. Amounts the employee already withdrew (say, to buy a home) still count in the fine's base. You cannot shrink the fine by the employee having used the account.
• Planning identity: 40% × 8% = 3.2%. The fine equals ≈3.2% of everything the employee was ever paid. A R$ 10,000/month employee accrues ≈R$ 4,300 of future fine per year of tenure (13.33 salaries × 8% × 40%). Long tenure = material exit liability; provision it.
• Mutual agreement (distrato, CLT art. 484-A) halves the fine to 20% and lets the employee withdraw 80% of the balance (no unemployment insurance for them).
• The extra 10% social contribution is gone — abolished as of January 2020 (Law 13,932/2019). Precision that most English guides miss: that 10% was a levy paid to the federal treasury, never part of the employee's fine — the employer's cost fell from 50% to 40%; the employee always received 40%.
• With cause or resignation: no fine, and the employee cannot withdraw the balance — it stays in the account for a future withdrawal event.
• The termination math in full — notice, proportional 13th, vacation, the fine, deadlines — is in our severance guide + calculator.

When employees can withdraw

The main legal withdrawal events (hipóteses de saque):

• Dismissal without cause — full balance + the 40% fine;
• Mutual-agreement termination — 80% of the balance + the 20% fine;
• End of a fixed-term contract at its term;
• Retirement;
• Home purchase or mortgage amortization within the housing-finance system;
• Serious illness (cancer, HIV, terminal stage) of the employee or a dependent;
• Natural disaster in the employee's municipality (saque-calamidade);
• Three uninterrupted years outside the FGTS regime (no CLT employment);
• Saque-aniversário (birthday withdrawal, Law 13,932/2019): an opt-in mode that releases a slice of the balance every year around the employee's birthday. The catch employees often discover too late: whoever opts in cannot withdraw the balance on dismissal — only the 40% fine is released — and reverting to the standard mode only takes effect 24 months after the request. (A one-off exception: provisional measures MP 1,331/2025 and MP 1,355/2026 opened a temporary window releasing balances locked by dismissals between January 2020 and December 23, 2025 — but the permanent lock rule stands for dismissals after that date.)

From the employer's chair you never handle these withdrawals — Caixa pays the employee directly. What you handle is depositing correctly and on time, because:

What non-compliance costs the employer

• CRF blocked. The Certificado de Regularidade do FGTS is the good-standing certificate the law requires for selling to the public sector, taking government-linked financing and certain corporate acts. It is checked automatically and constantly — an FGTS debt surfaces fast, and it is one of the first things a due-diligence checklist pulls on a Brazilian subsidiary.
• Fines, correction and collection. Late deposits accrue adjustment, interest and administrative fines, and the debt is enforceable as federal active debt (Law 8,036/1990, arts. 22–23).
• Personal exposure in labor claims. Missing FGTS is among the most common — and most objectively provable — items in Brazilian labor litigation: the deposits either exist in the account or they do not. Employees can also see their balances in real time in the FGTS app, so discovery is immediate, not at termination.

FAQ

What does FGTS stand for and what is it?
Fundo de Garantia do Tempo de Serviço — Brazil's mandatory severance fund (Law 8,036/1990). The employer deposits 8% of each employee's remuneration monthly into a government-held account in the employee's name; the employee withdraws at defined events, mainly dismissal without cause.

Is FGTS deducted from the employee's salary?
No — never. The 8% is entirely an employer cost, paid on top of gross salary. It is not a withholding, and a payslip showing an FGTS deduction is incorrect.

How much is the FGTS fine for dismissal?
40% of all deposits made during the contract, adjusted — including amounts the employee already withdrew. That equals ≈3.2% of the employee's total career remuneration with you. A mutual-agreement termination (distrato) halves it to 20%. The old extra 10% contribution — an employer levy to the treasury, never part of the employee's fine — was abolished in January 2020.

When is FGTS due in 2026?
Monthly deposits: by day 20 of the following month, via FGTS Digital (Pix), anticipating to the prior business day when the 20th is not a business day. Termination deposits and the 40% fine: by the 10th calendar day after separation, via the GFD guide.

Does FGTS apply to the 13th salary and vacation pay?
Yes. The 8% applies to both installments of the 13th, to vacation pay taken during employment including the 1/3 bonus, to overtime and habitual premiums, and to indemnified notice on termination. Vacation paid out at termination is out of the base. The realistic annual FGTS cost is ≈8% × 13.33 salaries.

What is saque-aniversário and does it change anything for the employer?
An opt-in mode where the employee withdraws a slice of the balance annually. It changes nothing in the employer's deposits or the 40% fine — but an employee who opted in cannot withdraw the balance on dismissal (only the fine), and reverting takes 24 months. Worth a line in your offboarding communication.

What happens if the company doesn't deposit FGTS?
The company loses its CRF good-standing certificate (blocking public contracts and financing), owes the deposits with correction, interest and fines, and hands every affected employee a ready-made labor claim. Employees see their balances in the FGTS app in real time, so gaps are noticed immediately.

Run FGTS on autopilot

FGTS is the clearest example of Brazil's compliance chain reaction: the roster drives payroll, payroll drives eSocial, eSocial drives the FGTS bill — the deposit is only as correct as the events behind it. Garoa generates the eSocial events and the FGTS Digital amounts from the same payroll engine, tracks the day-20 and day-10 deadlines, and shows HQ the accumulating termination-fine liability per employee in English, before it is due. Start with the Brazil payroll guide to see the whole monthly cycle.

Sources

• Law 8,036/1990 (FGTS statute — deposits, fine, withdrawal events, enforcement): https://www.planalto.gov.br/ccivil_03/leis/l8036consol.htm
• Ministério do Trabalho e Emprego / gov.br — FGTS Digital portal and guidance: https://www.gov.br/trabalho-e-emprego/pt-br/servicos/empregador/fgtsdigital
• MTE / gov.br — FGTS Digital: monthly deposit due day 20: https://www.gov.br/trabalho-e-emprego/pt-br/servicos/empregador/fgtsdigital/videos-e-tutoriais/novo-prazo-para-recolhimento-do-fgts-mensal-dia-20
• MTE / gov.br — FGTS Digital FAQ (GFD, termination deposits, 40% fine): https://www.gov.br/trabalho-e-emprego/pt-br/servicos/empregador/fgtsdigital/perguntas-frequentes
• Caixa Econômica Federal — FGTS for workers (accounts, remuneration, withdrawals): https://www.caixa.gov.br/beneficios-trabalhador/fgts/Paginas/default.aspx
• Law 13,446/2017 (distribution of FGTS profits to accounts): https://www.planalto.gov.br/ccivil_03/_ato2015-2018/2017/lei/l13446.htm
• Law 13,932/2019 (saque-aniversário; end of the 10% extra contribution): https://www.planalto.gov.br/ccivil_03/_ato2019-2022/2019/lei/L13932.htm
• Caixa — FGTS account returns and the IPCA floor after STF ADI 5090: https://www.caixa.gov.br/beneficios-trabalhador/fgts/rendimentos-perguntas/Paginas/default.aspx
• fgts.gov.br — 2026 profit distribution (R$ 13.04 bn over Dec 31, 2025 balances): https://www.fgts.gov.br/Paginas/subpaginas/distribuicao-resultados.aspx
• Caixa — exceptional saque-aniversário release window (MP 1,331/2025): https://www.caixa.gov.br/beneficios-trabalhador/fgts/saque-mp-1331-25/Paginas/default.aspx
• CLT art. 484-A (mutual-agreement termination — 20% fine, 80% withdrawal): https://www.planalto.gov.br/ccivil_03/decreto-lei/del5452.htm
• Caixa — CRF (FGTS good-standing certificate): https://www.caixa.gov.br/empresa/crf/Paginas/default.aspx

Researched and written by the Garoa team. Every figure on this page was verified against official sources (gov.br, Caixa, Ministério do Trabalho) on August 20, 2026.