In the last decades, Brazil faced an increase in the number of foreigners requesting work visas and coming to work in the country. In contrast to the first immigration wave in the early 1900s, currently Brazil is receiving high level employees, either with high specialization in technical areas, or intended to develop managerial duties.
Same way, the number of expatriations of Brazilian employees - especially in multinational companies - has increased as well, reinforcing the international mobility trend to share experiences and knowledge.
Considering this new profile of professionals - who moves only temporarily from one country to another -, it has become common for Brazilian companies to have employees receiving payments both in Brazil and abroad.
However, the "split payroll" is a more complex situation than it may seems in principle, and Brazilian company must take some precautions which many times are not verified in practice.
The main concern regards the inclusion in the Brazilian payroll of the amounts paid abroad i.e., to consider payments made abroad for calculation of employee's rights and retentions in Brazil.
Regarding foreign employees working in Brazil, Brazilian companies contumacious disregard the payments made abroad, calculating Brazilian labor rights and social security contributions only over the payments made in Brazil, by the Brazilian company.
This situation resulted in several notices of infraction served by Labor Ministry and Brazilian Federal Revenue, under the argument that there would be no legal justification for the portion of employee's remuneration paid abroad as a result of the same employment contract signed and fulfilled in Brazil not being included for employment rights purposes.
In this sense, the National Council of Immigration issued Technical Notice No. 02/2005, expressly providing that the deposits to Unemployment Saving Funds (so called "FGTS") must consider the portion paid abroad, even if paid by other company.
It is important to mention that one change in the bureaucratic procedures to obtain work visas in Brazil led some companies to the belief that Labor Ministry has changed its position about this issue. Such change was the waiver by National Council of Immigration of a company's statement that amounts paid abroad would be considered to Brazilian labor law for all purposes.
However, this change is included in a wider change of orientation of immigration authorities to accelerate the issuance of the visas, almost eliminating the analysis of remuneration issues at this point, and does not have any power to bind Labor Inspection or Labor Courts.
Despite the disagreement of some specialists, and even though there are arguments to support an interpretation contrary to the understanding of the labor authorities in Brazil, the fact is that current position is that such amounts must be considered for all labor purposes. Not including those payments in Brazilian payroll exposes company to the risk of being fined in labor inspections, and even to pay differences in labor rights in case of a labor claim proposed in Brazil by the foreigner.
Risks will be higher if most portion of the foreigner's payment is made abroad. Also, still today the form to request the work authorization in Brazil has fields to indicate the last remuneration paid abroad, and the remuneration that will be paid in Brazil, so a significant difference in those amounts may indicate payments abroad during the period in which the foreigner will be working in Brazil.
In what concerns Brazilian employees working abroad the discussion is less intense, since Law no. 7,064/82, as amended by Law no. 11,962/09, expressly provides the application of Brazilian law - in what it is more beneficial than the law of the destination country - for employment agreements developed abroad by employees hired in Brazil or transferred to another country, including the FGTS.
Therefore, payments made abroad for Brazilian employees transferred abroad shall also be considered in Brazilian payroll.
Including the global amount (Brazil + foreign country) in Brazilian payroll is only the first step to have a "free-risk" procedure when remunerating an employee in another country. Measures regarding currency and exchange rate fluctuations, nature of payments and benefits, tax and social security aspects must be considered as well, for what a previous legal support is always recommended when bringing a foreign employee or sending a Brazilian employee abroad.
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.
