Complete Guide to Employment Funds: Withdrawal, Returns, and Smart Use

Employment savings funds are among the most important rights for workers with formal employment contracts. Every month, your employer deposits a percentage of your salary into a dedicated account. This money accumulates and can be withdrawn in specific situations.

But many people don’t fully understand how these funds work, when they can withdraw, and most importantly: how to use this money wisely. In this complete guide, you’ll learn everything about employment funds and how to make smarter financial choices with them.

What Are Employment Funds and How Do They Work

Employment savings funds were created to protect workers who are laid off without cause. The idea is simple: every month the employer deposits a percentage of the salary into an account linked to the worker. This money stays saved and can only be withdrawn in specific situations.

How it works in practice

1. You are hired with a formal employment contract
2. Every month, by the 7th, the employer deposits 8% of your gross salary
3. The money goes into a dedicated account at a government-backed bank
4. The account earns interest (typically 3% per year + inflation adjustment)
5. You can withdraw in specific situations (layoff, home purchase, etc.)

Who is entitled to employment funds

• Workers with formal employment contracts
• Rural workers
• Temporary workers
• Day laborers
• Professional athletes
• Domestic workers

Who does NOT have employment funds:

• Self-employed and independent contractors
• Statutory public servants
• Informal workers (no contract)

How Much Your Employer Deposits

The monthly deposit is calculated on your gross salary (before deductions).

Deposit percentages

Practical example

Gross salary: $600

• Monthly fund deposit: $48 (8%)
• Annual deposit: $576
• In 5 years: ~$2,880 (not counting returns)
• In 10 years: ~$5,760 (not counting returns)

What’s included in the calculation basis

The fund applies to:

• Base salary
• Overtime
• Night shift bonus
• Hazard pay
• Commissions
• Bonuses
• Year-end bonus

Does not apply to:

• Transportation vouchers
• Meal vouchers (if not in cash)
• Profit sharing
• Compensated vacation

How to Check Your Balance (App and Website)

There are several ways to check how much you have in your employment fund:

1. Official App (most practical)

1. Download the official app from your phone’s store (Android or iOS)
2. Register with your ID and personal data
3. Validate your identity (may require document photo)
4. Done! View your balance and statement

In the app you can:

• See total balance
• View statement with all deposits
• See accounts from previous jobs
• Request annual withdrawal
• Check if there are unclaimed amounts

2. Official Website

1. Access the government’s employment fund portal
2. Click “Check Balance”
3. Log in with your ID and password
4. View your statement

3. Internet Banking

If you have an account at the designated bank, you can check directly through internet banking.

4. SMS

Register your phone through the app or website and receive automatic notifications of deposits.

What to verify on the statement

• Monthly deposits: Are they being made correctly?
• Compatible value: 8% of your gross salary?
• Regularity: Is there a deposit every month?
• Old accounts: Are there amounts from previous jobs?

If you find irregularities: Contact your company’s HR or report to the Labor Department.

When You Can Withdraw the Fund

The employment fund is not like a savings account you withdraw whenever you want. There are specific situations that allow withdrawal:

Full withdrawal situations

1. Layoff without cause

• Withdraw entire balance + 40% penalty
• Deadline: up to 5 business days after layoff

2. End of fixed-term contract

• Withdraw entire balance (no penalty)

3. Retirement

• Withdraw entire balance
• Can continue working and accumulating new funds

4. Death of the worker

• Dependents/heirs withdraw the amount

5. Age (70 years or older)

• Withdraw entire balance at any time

6. Serious illness

• HIV/AIDS, cancer, terminal illness
• Medical documentation required

7. Account without movement for 3 years

• If the company closed or you weren’t found
• Must prove end of employment

Partial withdrawal situations

1. Home purchase

• Can use for down payment, amortization, or pay off mortgage
• Property must be residential and new to you
• Some specific rules (see section below)

2. Annual withdrawal (birthday withdrawal)

• Annual withdrawal in your birthday month
• Amount depends on balance (see section below)
• Option that needs to be activated

3. Natural disasters

• If your city was hit by flood, earthquake, etc.
• Specific release by decree

Birthday Withdrawal: Is It Worth It?

The birthday withdrawal is a modality where you can withdraw part of your fund every year, in your birthday month. It seems advantageous, but there are catches.

How it works

• You opt for the birthday withdrawal (through the official app)
• Every year, in your birthday month, you can withdraw a portion
• The amount depends on your total balance

How much you can withdraw

Example: With $1,600 in funds, you’d withdraw $320 (20%) + $130 = $450 per year.

The big catch

If you opt for the birthday withdrawal and are laid off without cause:

• You only receive the 40% penalty
• You do NOT receive the total balance
• The balance stays locked for a few more years

When it’s worth it

May be worth it if:

• You have very stable employment (public servant, solid company)
• You need the money annually for something planned
• You prefer partial access to none at all

Probably not worth it if:

• Your job is unstable
• You might be laid off in the coming years
• You prefer having the security of full withdrawal upon layoff

How to change options

If you’re in birthday withdrawal and want to return to full withdrawal:

• Request through the official app
• The change only takes effect after 24 months
• During this period, you stay under birthday withdrawal rules

Fund Returns vs Other Investments

Here’s a truth few talk about: employment funds earn very little.

How much the fund earns

The fund earns 3% per year + inflation adjustment.

In practice, this amounts to approximately 3.5% to 4% per year.

Comparison with other investments

The employment fund earns less than a regular savings account. And savings accounts are already considered a poor investment.

The opportunity cost

If you have $4,000 in your fund earning 4% per year, you earn $160/year. If you had that money in government bonds earning 6%, you’d earn $240/year.

Difference: $80/year that you’re “losing” by having money locked in the fund.

What this means in practice

1. Don’t leave funds sitting if you can withdraw - Use for paying off mortgage, buying property, or birthday withdrawal if it makes sense
2. The fund is not an investment - It’s worker protection, not financial reserve
3. Prioritize other investments - Don’t count on the fund for your retirement

Using Funds to Buy Property

One of the best ways to use your employment fund is for buying your own home. You take money from a poor investment and put it into a real asset.

Ways to use

1. Down payment on mortgage

• Use the fund as part or all of the down payment
• Reduces the financed amount and monthly payments

2. Principal amortization

• Use every 2 years to reduce the remaining balance
• Can reduce term or payment amount

3. Paying part of monthly payments

• Use to pay up to 80% of 12 consecutive payments
• Useful during tight financial moments

4. Full payoff

• Use entire fund to pay off the mortgage

Rules for using

To use the fund for property purchase, you need:

• Have 3 years of work with fund contributions (doesn’t need to be consecutive)
• Not have another residential property in the same city
• Not have active financing in the housing system
• The property must be urban residential
• Property value up to the housing system limit (varies by region)
• You must live in the property (not for investment)

Strategic tip

Use the fund to reduce the mortgage, not to increase the property value.

Many people think: “I have $10,000 in funds, I can buy a more expensive property.”

Better to think: “I have $10,000 in funds, I’ll finance less and pay less interest.”

Funds Upon Layoff: What to Do with the Money

If you were laid off without cause, you’ll receive:

• Entire fund balance
• 40% penalty on the balance

This can be a significant amount. Here’s what to do:

What NOT to do

• Don’t spend it all at once - The excitement of receiving a large sum can lead to bad decisions
• Don’t buy unnecessary things - New car, trip, electronics that can wait
• Don’t lend to others - You might need this money

What to do (priorities)

1. Build or reinforce emergency fund

• You’re unemployed, you need security
• Save at least 6 months of expenses
• Put in high-liquidity investment (government bonds, liquid CDs)

2. Pay off high-interest debts

• Credit card revolving debt
• Overdraft
• Personal loans

3. Invest the rest

• Don’t leave it in checking account
• Choose investments appropriate to your profile
• Diversify

How long the money lasts

Do this calculation before spending:

Amount received (fund + penalty + severance)
/ Your monthly expenses
= Months of peace

If you received $6,000 and spend $1,000/month, you have 6 months to find new employment. Don’t spend $2,000 in the first week.

Common Mistakes When Using Funds

1. Not checking if deposits are correct

Many companies delay or don’t deposit funds correctly. Check your statement regularly.

2. Opting for birthday withdrawal without understanding consequences

Many people activate birthday withdrawal for easy money without understanding they lose full withdrawal upon layoff.

3. Using for down payment beyond capacity

The fund helps with the down payment, but you need to pay the monthly payments afterward. Don’t buy a property that doesn’t fit your budget.

4. Leaving money from old jobs forgotten

You might have funds from previous jobs you never withdrew. Check the app.

5. Spending everything at once upon layoff

The fund is your safety net. Don’t turn it into a farewell party from your job.

6. Counting on the fund for retirement

With returns of 3-4% per year, the fund won’t give you a comfortable retirement. It’s a supplement, not the foundation.

Planning Use Before Withdrawing

If you know you’ll receive funds (retirement, planned layoff, birthday withdrawal), plan the use before receiving.

Step by step

1. Check the exact amount

• Verify in the app how much you have
• Consider the penalty if it’s a layoff

2. List your financial priorities

• Debts to pay off
• Emergency fund
• Medium-term goals
• Investments

3. Define destination for each dollar

• $X,XXX for emergency fund
• $X,XXX to pay off debt Y
• $X,XXX to invest in Z

4. Execute the plan as soon as you receive

• Don’t leave money “available” in checking account
• Transfer immediately to planned destinations

How Monely Can Help

Employment funds are extraordinary income that needs planning. Monely helps you:

Record the income: Register the amount received as extraordinary income and maintain control of all money coming in.

Plan use with goals: Create financial goals for each money destination (emergency fund, pay off debt, invest) and track progress.

Control spending during unemployment: If you were laid off, use Monely to control spending and ensure the money lasts until you find new employment.

Track investments: Record where you invested the money and track your wealth evolution.

Conclusion

Employment funds are an important right for workers, but they need to be understood and used wisely:

Key points:

• Regularly verify if deposits are correct
• Understand withdrawal rules before needing them
• Think carefully before opting for birthday withdrawal
• Know that returns are low — use when you can
• Plan use before receiving

The fund is not an investment, it’s protection. Use it strategically to buy your home, pay off debts, or reinforce your emergency fund. But don’t count on it as your only financial security.

Next steps: Download Monely and create financial goals to plan the use of your employment funds. Whether for buying property, building an emergency fund, or paying off debts, having a clear plan makes all the difference.