"After two months of negotiations aimed at reforming the terms of the contract signed last year, Flamengo and coach Dorival Junior did not reach an agreement which was satisfactory to both parties, despite progressing in the talks," the club said in a statement.
The 50-year-old, who has coached at more than a dozen Brazilian clubs, had been at the helm for nine months.
"The salary was not in line with Flamengo's reality," club director Paulo Pelaipe told the Sportv cable channel.
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"Flamengo want to honour our commitments and we weren't able to maintain the coach's salary levels."
Flamengo struggled to pay the wages of their employees on time last year and the new administration, which took over in January headed by president Eduardo Bandeira de Mello, have said they are determined to cut costs.
Pelaipe said the problem of late wage payments had been settled. "The February salaries were paid on the fifth working day of March," he said.
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