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How to Hire Employees in Brazil: A Complete Guide for Overseas Employers

As the largest and most populous country in South America, Brazil has many talented workers in its broad economy who may be potential recruits as remote employees.  If you are looking abroad to hire new workers, Brazil is one good option especially for US employers that are in a similar time zone.

What you need to know about hiring employees in Brazil

Before you commit to hiring a remote Brazilian employee, it is necessary to understand how employment is structured, as the laws of Brazil will control the relationship.  This includes the use of contracts, employee entitlements and the role of labor unions.  This guide will give you the basics, but as always, in-country expertise is recommended.

Employment in Brazil

Employment Contracts

Employment contracts are not required but are commonly used and should be drafted in Portuguese.  Employment of expats needs approval of the labor department.  If a probationary period is used it is limited to 90 days.

Employee Entitlements

Employee entitlements in Brazil are fairly generous, and could exceed the benefits that you are used to paying.

  • Paid vacation of 30 days after every 12 months of employment, and the payment is one month’s wage (plus one-third, to help pay for the vacation).
  • Employer paid sick leave of 15 days, and after that wages are paid by social security.
  • There is 120 days of paid maternity leave (very high compared to the world average of 90 days), which also applies to adopting mothers.  Fathers receive 5 days paid paternity leave.  There is even a 3 day ‘wedding leave’ available for employees getting married.

Work Permits

Mercosul nationals (Argentina, Paraguay, Uruguay, Bolivia, Chile, Colombia, Ecuador, Peru) dont need a work permit in Brazil, but other nationalities need work permission with a Brazilian sponsor.

Collective Bargaining

One unusual aspect of Brazilian employment is that union membership is mandatory for all employees.  This is important because collective bargaining can increase employee entitlements depending on the industry.  Unions may also be involved in any terminations that violate collective bargaining agreements.

Termination and Severance

Termination requires 30 days-notice for the first year of employment, and then 3 days extra for each additional year up to a 90-day maximum.  There are severance payments due out of several sources, such as the unemployment/severance fund, accrued vacation leave and bonus, plus one month’s salary in some cases.

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Payroll and Taxes in Brazil

All employees enroll in Brazil’s social security system, and contributions are made in payroll, along with tax withholding. 

Payroll and Social Security Contributions

Brazil raised the social security contribution rates in March 2020, and the new rates are progressive based on monthly salary.  Employer contributions rates depend on the industry.

Employer Contribution:7.5% – 14% (based on salary level)
Employer Contribution:
Pension:20% or 22.5% (based on industry)
Severance Fund:8%
Health and Safety:1 – 3%

Tax Rates

Non-residents pay a 25% flat rate on all income with no deductions allowed.  Taxes for non-residents are only paid on Brazilian sourced income, but residents pay tax on worldwide income.  Residents pay a rate of 0-27.5% depending on compensation level.

Tax Residency

There is a fairly restrictive approach to tax residency in Brazil. Any expats working under an employment contract and holding a temporary work visa, are automatically considered a tax resident from the first day.  Those without an employment contract and who stay less than 183 days in a 12-month period are considered non-residents.

Naturally, Brazilian citizens are considered tax residents, and pay tax on worldwide income.

13th Month Salary

There is a mandatory 13th month salary paid out at the end of the year and funded in the monthly payroll taxes by the employer (1/12 of monthly salary).

How to hire your employees in Brazil

To hire employees in Brazil, you will need some type of entity, as you can’t put them on your home country payroll.  You have a few choices to accomplish this:

Set up your own entity in Brazil

Employers that are planning on entering the Brazilian market, or who want to hire a remote team in Brazil, might decide to incorporate their own entity.  With this approach, the company has a direct relationship with its local employees, which can increase accountability and ease management tasks.

However, it can be costly and time consuming to incorporate, and if you are only hiring one or two employees, there are better options.

Hire the employee through an employer of record

Employers entering Brazil only for hiring purposes, can be well served to use a GEO employer of record (EOR), who are already set up and ready to run a local payroll for you.  This ensures compliance with employment laws and saves the employer-client the burden of learning an entire new set of labor, tax and payroll rules.

It is both a cost-effective and quick way to hire remote employees, but it does remove your company from the direct, DIY employment administration that you are used to at home.

Hire them as a contractor instead

Startups and smaller companies may prefer to hire Brazilians as contractors, as there is lower cost and commitment compared to an employee.  This can work well for short term projects or if there is a need for flexibility in case of economic or workload fluctuations.

The main risk of hiring a contractor is that Brazil will have criteria that determine if a worker is a contractor or employee.  If you pay your contractor a fixed amount at regular intervals, or offer benefits and allowances, they could be re-classified as an employee under local laws.

How to stay compliant in Brazil

As you enter the Brazilian labor market, your number one concern should be compliance with employment regulations and labor laws.  Outside of incorporating with a Brazilian legal and accounting team, your best choice for staying in compliance is using an employer or record who is very familiar with Brazilian employment practices and pitfalls.

Shield GEO has expert employers of record in multiple countries, and our Brazilian EOR is part of our employment service that includes a regional account manager who is dedicated to your meeting your hiring needs.  We will take care of the entire spectrum of Brazilian employment administration, so that you can focus on managing your new remote employees.  We make international employment simple.

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Looking to hire an employee in Brazil? Get in touch.

The information in this article is subject to changes in local legislation.

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