By Globalization PartnersDecember 2020
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As the largest and most populous country in South America and the eighth-largest economy in the world, Brazil is an attractive place for companies looking to expand globally. Brazil does present some challenges for international companies since they have strong employment laws in place that favor employees. Establishing and operating a business there can be a complex process.
If you’re looking to expand your company into this country or simply hire a few remote employees to join your company, you need to understand hiring practices in Brazil and the requirements you’ll have to meet. If you can navigate the process correctly, then you can enjoy a positive experience adding new talent to your team.
What to Know Before Hiring in Brazil
There are some aspects of Brazilian employment laws that companies from other countries should understand before they start the hiring process in Brazil.
1. Employee-Friendly Regulations
First, it’s helpful to understand that Brazil’s employment laws tend to favor employees. Brazilian employees may be entitled to more rights and benefits than you are used to in your home country. This puts some companies at risk of noncompliance if they do not carefully study the local employment laws or consult a lawyer. If you work with an Employer of Record (EOR), you can pass the burden of legal compliance onto them.
It’s also important to know that terminating an employee in Brazil is likely to result in a lawsuit. Of course, this means you need to make firing decisions carefully, but it also means you’ll want to do your best to hire the right people for the job so you can avoid these scenarios. It’s also wise to have a written employment contract in place even though they are not legally required in Brazil. This document will create more transparency around your expectations for employees.
Portuguese is the official language of Brazil and is far and away the most widely spoken language there. Brazil is the only Portuguese-speaking country in South America, and Spanish — the prevailing language throughout the rest of the continent — is not a very common second language for Brazilians, though it has recently begun to catch on more. You may also hear a pidgin language that combines features of Portuguese and Spanish along Brazil’s borders.
As with most countries, you’re more likely to hear English in city centers in Brazil than in other parts of the country, but English is not widely spoken. English-speaking companies that do not have someone on staff who is fluent in Portuguese should plan to work with a translator when hiring in Brazil.
3. Working Hours and Compensation
The workweek in Brazil is 44 hours, which can be divided across the five weekdays or can be eight hours Monday through Friday with a half-day on Saturdays. Employees typically take an hour or more for lunch. When employees work overtime, they should receive 1.5 times their usual hourly wages or double their usual pay if it is a holiday or Sunday.
Pay must equal or exceed the national minimum wage, which is regularly adjusted to account for inflation. Some states in Brazil have their own minimum wage which may differ from the national standard. These changes may not affect you if you’re paying your employees well above the minimum wage, but you should still be prepared to adjust their salary each year since labor unions will negotiate for annual pay raises.
Brazilian law also requires employers to pay their employees a “13th-month salary”, which is equal to one month of wages plus the medium of commissions and bonuses (if applicable) received during the year. The 13th-month salary is used to compensate for any months in the year with shorter 4-week durations based on a 5-week month’s pay.
4. Vacation Leave and Sick Leave
Annual leave requirements are generous in Brazil compared to some other countries. After one year of service, employees are entitled to 30 days of vacation leave. Rather than taking a day here and there, employees should use their leave all at once or in a couple of large chunks. Employees can divide their vacation time into three periods; one lasting at least 14 days, and two more lasting at least 5 days. Additionally, employees have the option to “cash-in”, or sell, up to 10 vacation days back to the company should they choose to do so. These vacation days are paid, and employers must pay a vacation bonus equal to one-third of the employee’s monthly salary. Vacation time is on top of the 11 paid holidays that Brazilian employees also enjoy.
When an employee has to miss work due to a medical issue, employers must pay them for their first 15 days off, as long as the employee provides a doctor’s note. If the employee misses more than 15 days due to their medical condition, then the National Institute of Social Security (INSS) will take over.
5. Required Benefits
Brazil is known for a robust system of employee benefits. This includes the vacation time we just discussed, as well as other statutory benefits that can add substantially to an employer’s costs. It’s safe to add on an additional 80% or so of an employee’s salary when you’re estimating what the end cost will be with both salary and statutory benefits. This makes the cost of Brazilian employees exceptionally high. The required benefits include the following:
- Social security: Employers must withhold a portion of employees’ paychecks and add their own contributions to go to the INSS. The rate of contributions varies based on an employee’s salary.
- Meal and transportation vouchers: One thing that may surprise international employers is that, in Brazil, you are required to give your employees vouchers for meals and transportation. In the case of transportation vouchers, employers deduct 6% from employees’ paychecks for the vouchers, and employees can opt out if they want.
- Severance fund: Employers must also withhold 8% of employees’ paychecks and deposit them into a Guarantee Fund for Length of Service (FGTS). This is a severance fund that employees will receive if you ever terminate their employment, but not if they resign.
Since all of the above benefits are guaranteed to all employees, if you want to attract employees with your benefits package, you will need to offer more than this baseline. Some other common benefits include private medical insurance, dental insurance, daycare, tuition assistance, and profit sharing.
The Cost of Hiring an Employee in Brazil
When it comes to hiring new employees in Brazil, the most significant costs to consider are the ongoing costs of compensation and benefits. However, there are also upfront costs associated with recruiting employees in Brazil for which you should budget. These costs can include:
- Legal services: Because Brazil guarantees many rights to their employees, you need to have legal help to ensure your employment practices are legally compliant. If you don’t hire Brazilian lawyers early on, then you may have to hire them to represent you in a lawsuit later.
- Incorporation: Incorporating your business in Brazil can also involve registration fees. You need to establish your company legally before you can start hiring employees in the country.
- Hiring agencies: A staffing agency can simplify the recruitment process a great deal, so it can be a good option to consider, despite the cost.
- Job advertisements: Advertising job openings can also add to your recruitment costs. You can post on some free job portals online. While roughly one-third of Brazilians do not use the internet, sites like Linkedin and Indeed are ideal resources for the other two-thirds that would serve as qualified candidates.
- Hiring committee: If you handle hiring internally rather than partnering with a hiring agency, then you should factor your hiring committee’s time spent on recruitment into your total hiring costs. This includes creating job descriptions, evaluating applications, and interviewing candidates, among other tasks.
- Translator: Unless you have a member of staff who is fluent in Portuguese, you’ll need to hire a translator to facilitate your hiring process in Brazil. This is helpful for communicating with job seekers and for understanding and filling out government paperwork.
- Pre-employment screenings: Background checks to verify a job candidate’s credentials or right to work in Brazil can also add to your costs. Keep in mind that criminal background checks are only permitted in Brazil in exceptional circumstances, such as in the hiring of armed guards.
What Does a Company Need to Hire Employees in Brazil?
Before you can start hiring someone in Brazil, you need to establish your business there legally and prepare to take on these new employees. You can establish a branch of your company, but you can only do so with special authorization from the Brazilian Ministry of Development, Industry, and Foreign Trade. Most companies choose instead to set up a subsidiary, which can take on one of nine different corporate structures. To establish your subsidiary, you must have the following in place:
- Articles of organization
- Board of Trade registrations
- Tax ID
- Brazilian bank account
- Business license specific to the municipality where you will operate
- Inscricao Estadual registration for paying taxes
- Authorization to Issue Notas Fiscais (AIDF)
- INSS registration
Setting up a branch or subsidiary of your business in Brazil is not a simple task. Brazil currently holds the 124th spot in the ease of doing business index, meaning there are 123 countries where setting up and running your business there will be an easier task. That doesn’t mean you should choose not to hire employees in Brazil, though.
A simple and effective solution is to partner with an Employer of Record that will handle legal compliance, payroll, and other technicalities so you don’t have to. Going with an EOR means you can avoid all the requirements above and get straight to hiring employees.
Steps to Hiring in Brazil
Let’s turn our attention to how to hire in Brazil. The process should look similar to what your company is used to.
1. Publish Job Ads
First, you need to create detailed job ads for all the positions you want to fill in Brazil. Make sure you note whether you are hiring remote employees in Brazil, or whether you are looking for people to come work in your Brazilian office. This is important since the second scenario will limit the geographical pool of possible candidates. Once you’ve written job ads, post them on online job boards, and look for at least one way you can also advertise your job offline.
2. Evaluate Applications
Your staffing agency or hiring committee will need to look through applications to determine which candidates are worth further consideration and an interview. Brazilians are typically used to applying for jobs with a succinct CV of about one or two pages and a cover letter. If you want to get additional information from candidates, you could include a questionnaire in your application process.
3. Interview Top Candidates
When you’ve narrowed down your list of candidates, you can schedule interviews. For in-person interviews, you’ll need to travel to Brazil and host interviews in your new branch or subsidiary office or reserve another location to meet with interviewees.
If you’re conducting interviews remotely, make sure you consider the time difference in Brazil so you can schedule interviews at a time that works for the interviewers and the interviewees. Brazil has four time zones, so check the time zone for various candidates if you’re interviewing residents from various parts of the country.
4. Extend Job Offers
Now you can select your very best applicants and contact them to offer them a job with your company. Make sure the applicant has an opportunity to ask any questions they may have. If you haven’t already discussed salary, now is the time to discuss it. You do not need to outline all the benefits you’re offering if those benefits are in line with the legal requirements. Instead, just emphasize any special benefits that go beyond these requirements, whether it’s extra vacation days, a private health insurance plan, or any other bonus.
5. Onboard Your New Hire
Once an applicant has agreed to join your company as an employee, you can onboard them. Or, your Employer of Record will take care of this step. In addition to necessary paperwork, make sure you take time to get to know your new employees as much as possible. You should also provide your new hires with an itinerary for their first week and give them whatever training they need.
Hire Brazilian Employees With Globalization Partners as Your EOR
Because of the complexities and extensive requirements involved with setting up a business in Brazil and with employing Brazilian workers, many companies have found partnering with an Employer of Record to be the ideal choice.
Globalization Partners has a presence in Brazil and many other countries across the globe, so we can help you expand in a way that’s simpler and faster. As your Brazilian employees’ Employer of Record, we’ll handle onboarding, payroll, and more. We can even offer impressive benefits packages to entice top talent to join your company. Request a proposal to learn more.