When you wish to grow your company, you may hire independent contractors to support various project needs. Before you set out to hire an independent contractor in Brazil, you must understand the regulations surrounding this worker type to remain compliant.
Hiring independent contractors in Brazil
While you may be ready to hire an independent contractor in Brazil, you should first understand the laws.
Employees vs. contractors
According to the Brazilian Labor Code, an individual is considered an employee when:
- They render services for an employer on a permanent basis.
- They operate under the direction of the employer.
- They receive a salary for their work.
The independent contractor relationship is governed by civil law, and a contracted individual should be free to determine how and when their service is performed. Additionally, these individuals typically do not provide essential services for a company, and the relationship isn’t permanent.
Penalties for misclassification
Filing labor claims is free for workers, so misclassification penalties are common. If you have misclassified an employee as a contractor, you may face:
- Hefty fines and fine doubling for relapse cases
- Backpay for statutory rights with interest
How to hire independent contractors in Brazil
The contractor hiring process should involve three key steps.
1. Carefully conduct interviews
Generally, the interview process will be the same for your independent contractors, but there are two factors to consider. First, you should clarify that you are looking for a contractor in your job description. This step will help you find the right worker for the job.
Second, you should focus the job interview on specific project needs. While employee interviews may focus on character traits and goals, contractor interviews should focus on skills and experience.
2. Create a service agreement
While there are not many required provisions for independent contractors, clarifying terms will benefit both parties. Contractors have the ability to negotiate provisions, so you’ll have to create a contract of service. This contract should include:
- Schedule and method of payment
- Description of the project and when it’s considered complete
- Termination conditions and any negotiated provisions
3. Introduce necessities
While training programs can take away performance freedom for your contractor, introductions can be a helpful way to familiarize them with your company without overstepping boundaries. Give your contractor the chance to meet the people they’ll work with and answer any questions they may have about the workflow and tools for your project.
How to pay independent contractors in Brazil
It’s common for independent contractors to receive pay on a project basis. Taxation is one of the more complex aspects of contractor status.
Employers are never required to make social security contributions or tax payments when the contractor is registered as a legal entity. If the contractor operates as an individual, employers are still responsible for income tax withholding and social security payments.
Terminating independent contractors
Both parties are free to negotiate termination conditions and terms, such as notice requirements, severance payments, and termination types. The civil code states termination can be initiated by either party with the following minimum notice periods:
- Eight days for monthly remuneration
- Four days for weekly or biweekly remuneration
- One day if the contract is valid for less than seven days
Turn to Globalization Partners when hiring independent contractors in Brazil
As an extension of Globalization Partners’ Global Employment Platform™, G-P Contractor allows companies to hire anyone, anywhere, for both short- and long-term projects. Whether you’re hiring employees or contractors, we streamline the process with a single solution for your global workforce. Contact us to learn more.
THIS CONTENT IS FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE LEGAL OR TAX ADVICE. You should always consult with and rely on your own legal and/or tax advisor(s). Globalization Partners does not provide legal or tax advice and the information is not tailored to the specific situations of your company or your workforce. Globalization Partners makes no representations or warranties concerning the accuracy, completeness or timeliness of this information. Globalization Partners shall have no liability arising out of, or in connection with, the information, including any loss caused by use of, or reliance on, the information.