Reforms to Brazil's labour laws were put in place at the end of 2017 and were designed to promote employers to create new jobs and to make it somewhat easier to pay your employees in Brazil.
The labour reform hoped to create a more business-friendly environment in the country but it is still a very complex system. Employment in Brazil is governed by the Federal Constitution and the Consolidated Labour Laws (CLT), which guarantee specific rights to every Brazilian employee.
New employees will have their salary set by their employment contract along with collective agreements and they will be paid monthly. There are 12 pay cycles with 12 regular pay cycles and a 13th mandatory cycle as a Christmas bonus, paid in two parcels, the first parcel must be paid by 20 November and the second parcel in December. The federal minimum monthly wage in Brazil is BRL 998, which is equivalent to 226 Euros.
Social security and income tax
Both employers and employees pay into the local social security contributions which range from 8 to 11 percent (depending on the salary amount, limited to a salary of R$ 5.645,80) by employees and 20% to 22.5%, depending on the industry's sector, by the employer. Employers are responsible for deducting the local social security contributions from the employees pay and passing it along to the relevant authorities.
Employees in Brazil are taxed at a progressive rate of 7.5 – 27.5% depending on their salary amount. Residency status is relevant to income tax in Brazil meaning that residents of Brazil are taxed on all worldwide income, while no residents are taxed only on income sourced from within the country.
With almost all companies operating under different unions in Brazil, the union agreements can affect the types of benefits offered. Employees can have the options of meal cards, supermarket cards, health insurance and life insurances taken out of their payroll. A minimum amount is taken out of the pay check with the rest covered by the employers to provide these benefits.
Another benefit for employees offered by most companies in Brazil is a profit sharing plan that gives a percentage of earnings to employees once a year.
Vacation, maternity and paternity leave
For every year of employment after the first 12 months, each employee is entitled to 30 days of vacation. In addition, the employee must be paid 1/3rd of a month's salary as a holiday bonus.
The employees can divide the 30 days in three parts and can also sell back 10 of these days to the company.
Female employees receive mandatory paid maternity leave for six months. Paternity leave is normally 5 days but can vary depending on union contracts.
Labour agreements may be ended for many reasons, such as:
- voluntary or involuntary termination from both parties, with or without cause;
- expiration of the employment agreement;
- death of the employee;
- mutual consent of the employee and employer.
Working hours and overtime
The labour laws in Brazil limit weekly working hours to 44 hours: eight hours each day from Monday to Friday and four hours on Saturday which is the equivalent of 220 hours a month. Hours that exceed these limits, must be paid as overtime and at a minimum of an additional 50 percent. This amount can be increased by collective labour agreements.
In 2017, eSocial, the digital bookkeeping, tax, social security and labour obligation system, was put in use for companies to declare all information and transmit reports electronically to the government. This system helps employers to meet all their obligations and also to unify all of the systems and data surrounding the processes of hiring, paying and firing employees. Another benefit of using eSocial is to give more transparency for businesses and to avoid fraud.
We can help your business
Doing business and paying your employees in Brazil requires in-depth local knowledge to stay compliant. TMF Brazil has a team of expert providers of payroll services, HR and benefit administration for both local and global clients. If you are looking to expand your business into Brazil, we can help with all your payroll needs so you can focus on running a successful company. Talk to our experts in Brazil.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.