Not only is Brazil the world’s fifth largest economy, it is Latin America’s most influential. Nearly 50 percent of the population is under twenty years of age and there is an abundance of skilled and semi-skilled labor there. Brazil is often regarded as a potentially rich country with a strong industrial sector that includes solar energy, agricultural goods, iron ore and oil. Brazil was instrumental in leading the creation of several trade agreements – Mercosur, the Free Trade Area of the Americas (FTAA) and the Group of 20 (G-20) allowing participating countries more fluid and advantageous trade terms. Having reacted quickly to the 2008 global financial crisis, Brazil emerged far faster from the resulting economic depression than many other countries around the world and as a result, attracted increased interest from foreign investors. Despite the increase in cross border M&A investment and being the epicenter for world events like the World Cup and the 2016 Olympics, Brazil is notorious for its employee favorable and costly labor legislation – or the “Brazil tax”.
Basic Facts about Hiring in Brazil:
The Consolidacao das Leis do Trabalho (CLT) in conjunction with the Federal Constitution of 1988 directs all the employment laws in Brazil from the more general to the minute. The most recent Federal Constitution, introduced in 1998, enhanced certain standards provided in the CLT like the minimum wage, work week hour limits and irreducibility of wages. Adherence to the CLT standards is critical for hiring in Brazil and determining their practical application is overwhelming to say the least.
All employees must be registered with the tax authorities in Brazil. There are six employee categories and two contract types:
- Celetista – an employee with a written and signed CTPS (contract or book) with an employer. This is the most common relationship with an employer
- Trabalhador Cooperado – a cooperative or partner of an employer
- Trainees – recent graduates entering the job market
- Interns – students in high school, technical school or college who are hired part-time
- Self-employed – a person who provides services to one or more companies without a traditional Celetista relationship.
- Domestic worker – person providing domestic or household work. The CLT has specific rules for these types of employees. They enjoy many of the benefits of the “Celetista” relationship
- Indefinite term – most common type of contract. Based on the “principle of continuity” employment concept the general rule is that any CTPS entered into is for an indefinite time period
- Definite term – used in very limited circumstances like seasonal or project oriented work
A written employment contract is not necessary in Brazil. However, filling in the details of the employee’s employment book is a mandatory requirement and serves as the official employment contract.
The majority of employees will fall into the Celetista category for whom very detailed records on employment, payroll information, job position, salary, benefits and social security contributions must be kept. Improper recording keeping creates a substantial risk for an employer should a labor dispute arise.
As mentioned above, all registered employees, including foreign workers, are required to hold an employment registration book or carteira de trabalho that details the employment terms. Employers must keep official registers on each employee and must submit returns to the local employment office every year listing employees, interns, etc. on their books.
Overtime work during regular business days requires a minimum payment of 50 percent of the regular rate. Work on Sundays requires a special permit and pay at 100 percent of the regular rate.
Paid Time Off:
The following paid holidays are observed in Brazil:
- New Year’s Day
- Martyr’s Day
- Labor Day
- Corpus Christi
- Brazilian Independence Day
- Patron Saint of Brazil
- All Souls’ Day
- Proclamation of the Republic Day
- Christmas Day
Employees who have completed one year of continuous service are entitled to an annual 30 calendar days’ vacation in addition to paid holidays throughout the year. Time off must be taken in the year following the employee’s anniversary date. If the employee does not take the time, the employer is required to pay double the respective compensation.
Employers must pay an additional one-third the monthly salary as a vacation bonus. The bonus must be paid before the vacation begins.
Female employees are entitled to 120 day paid maternity leave. Employers may extend this by 60 days.
The Federal Constitution and CLT provide for a series of minimum benefits that must be granted by all employers in Brazil.
- Minimum wage by category of worker
- Maximum hours – 8 hours per day/44 hours per week
- 13th Month or Christmas Bonus – one extra salary payment per year. This payment is made in two installments. One between February and November and the other before the 20th of December. Bonus is based on the employee’s entire remuneration and not just the base salary.
- Profit sharing – negotiated between the employer and employee’s labor representative
- Social Security Benefits – both employees and employers must contribute. Rates vary depending on the total amount of employee remuneration from 8-11%. Employers must deduct the employee portion and pay on the employee’s behalf.
Summary of Social Security contributions paid over employee payroll:
|Social Security Contribution (INSS)||20%|
|Labor Accident Contribution (SAT)||From 1-3%|
|Third Parties contribution||From 2-5.8%|
|Includes: Education contribution, INCRA, SENAI, SESI and SEBRAE contributions|
- Severance fund – 8% of the employee’s monthly compensation set aside in a Federal Savings Account and paid out upon termination. Withdrawal can also be made under certain circumstances like a home purchase
- Training – training appropriate to the workplace
Collective Bargaining Agreements are common in Brazil add will add an extra layer of complexity regarding wages, overtime and additional benefits.
Understand employee classifications and document properly! Allow a significant percentage over the gross salary for total employer burden – social security, plus other statutory items such as 13th month bonus, vacation pay and severance, can push the employer burden up beyond 60%.
Dismissing employees in Brazil is costly. Dismissal without cause, obligates the employer to pay an additional 40% of the accumulated balance in the employee’s severance fund and 10% to a government social fund. If the employee and employer are mutually at fault, the additional percentage is reduced to 20%. This is in addition to any salary and vacation compensation owed to the employee.
A severance notice of 30 days is required for all employees who’ve worked for 12 months or less. After 12 months, an additional three days per each year worked is added to the notice period.
Severance payments must be documented and signed in the presence of the employee’s labor representative.
Employee actions that allow employers to terminate with cause:
- Performing a dishonest act
- Performance on behalf of the business without prior permission
- Criminal conviction
- Violation of company secrets
- Abandoning the position
- Defaming the reputation of a person during work hours
- Physical violence
Employers must supply transport vouchers to employees. Employees contribute approximately 6% of their monthly base salary toward the cost of transport vouchers.
Employers must establish an internal accident prevention committee in every establishment. The committee is made up of employers and employees who work together to prevent accidents in the workplace.
Can a Professional Employment Organization or International Employer or Record help me hire in Brazil? The record keeping and tax considerations alone are enough to overwhelm even the most sophisticated HR team. Using Globalization Partners’ Employer of Record Platform and Global PEO services allows you to quickly hire the perfect candidate without having to manage the considerable record keeping and social security tax deductions.