Payroll in Brazil can be challenging if you are willing to hire local talent without knowing how it works. Since remote work became part of our lives, companies worldwide are expanding their workforce. After all, professionals with different backgrounds boost innovation, cultural diversity, and new perspectives. For freelancers, independent contractors, or full-time employees, it represents an opportunity to find a better work-life balance.
When it comes to Brazilian labor laws, the country is known for its high tax rate and complex system. For companies, taxes for social security contributions, all entitlements, and income can reach 80%. For workers, there is the contribution to the National Social Security Institute (INSS). In this article, we’ll check the key points to create a business-friendly environment and stay up to date with Brazilian labor laws while managing payroll in Brazil. Of course, the following only applies to full-time employees, not independent contractors or freelancers.
How can you manage payroll in Brazil?
Payroll is an accounting document that gathers information regarding everything related to each worker’s activities and payments. It contains income tax, mandatory contributions, work hours, overtime, paid rest, absences, discounts, and bonuses.
Based on this and following Brazilian labor laws, the Human Resources team can come up with the monthly remuneration. The payroll management shows benefits and tax deductions according to the Consolidation of Labor Laws (Consolidação das Leis Trabalhistas), short for CLT.
This knowledge is essential to avoid surprises while ensuring compliance with local labor legislation. It also helps keep a record of your team members' positions, incomes, and contributions. Many organizations outsource the service due to the responsibility involved. This is a great solution if you’re not looking to navigate the pains of Brazilian labor laws yourself.
What is included in the payroll in Brazil?
Each country has its rules, but Brazil's payroll is known for its high tax rate and complexity. So a bold commitment to understanding how it works is the only way to establish a successful payroll operation and ensure compliance with labor legislation. From now on, let's check the key points before you start hiring Brazilian talent.
A contract for each worker
You can deploy three types of employees —full-time, independent contractors, and freelancers. First usually follows the CLT rules, which include: 13th salary, FGTS, minimum wage, specific work hours, paid vacation, profit-sharing, some licenses, remunerated weekly day off, and social security contribution.
Independent contractors are usually long-term team members, just like full-time employees, but without the hassle of dealing with Brazilian labor laws. Freelancers, in turn, have a flexible schedule of work and less bond to the business. It means that not all the entitlements from CLT rules apply. It's up to the agreement settled between employer and worker.
Minimum wage and 13th salary
Brazil's payroll set a minimum wage of 1,212 BRL per month. This amount is adjusted every year. Furthermore, the payment cycle usually is bi-weekly or monthly, always using the Brazilian currency (BRL). Like the months of the year, an employee's income follows 12 regular pay cycles. However, CLT rules added a 13th mandatory cycle.
The 13th salary is an extra income paid at the end of each year as a Christmas bonus, required by the laws of payroll in Brazil. In general, it's split into two installments. The first comes in November, while the second reaches the employees' accounts in December. Those who work for 12 months receive the full payment, otherwise, the amount is proportional to the work time. Of course, all of this applies only if you’re hiring a professional as a full employee.
Working hours and overtime
In Brazil, standard working hours count 44 hours per week —eight hours daily from Monday to Friday, plus four hours on Saturday. It brings a total of 220 hours per month. Every minute exceeding this period is considered overtime and must be paid accordingly. An additional of:
- 50% of the regular rate, plus collective agreements;
- 150% when it reaches the maximum of two more hours per day;
- 200% for holidays.
But, again, this only applies to workers hired as full employees in the country.
Social security and income tax
Social charges include the Federal Severance Pay Fund (Fundo de Garantia por Tempo de Serviço), short for FGTS, and the National Institute of Social Security (Instituto Nacional do Seguro Social), also known as INSS. The first is like a fund used in case of unfair discharge, while the second is a contribution with retirement benefits in the future. Payroll in Brazil also demands an annual income tax (Imposto de Renda) based on each employee’s income.
Vacation, maternity, and paternity leave
For every year of employment, there is a 30-day paid vacation. These days can be divided into three periods maximum and include a bonus (⅓ of the monthly salary). Female workers can take maternity leave for six months, while male employees earn at least five days of absence. The time varies from one company to another. Besides, there are other licenses, such as sick days or national holidays.
Understanding payroll in Brazil is the first step for any company or entrepreneur before moving into a recruitment process. This article shared the bottom line of how the system works, but you can find more if you research further. The Consolidation of Labor Laws also includes some universal benefits, such as meal and transportation vouchers, health care plans, and mental health stimulus.
Are you considering hiring Brazilian talent as full-time employees? Fortunately, there are many resources available online that you can check out to understand more about payroll in Brazil, Brazilian labor laws, sending payments, and more. However, if hiring employees in Brazil seems like a lot of work and your company doesn’t have the resources to explore the complex web of international labor, then you can count on Nexton to be your partner in this, through our Professional Employer Organization services.
