A Guide to Brazil Employment Laws for US Companies Hiring Abroad
With its large population and relative proximity to the US, Brazil is a great place for US companies to expand their international team. Read our guide to learn more about Brazil employment laws.
Published on September 4, 2021
The employment relationshipIn employment relationships, the employer decides how the employee will perform their work, and ultimately what the employee's monthly salary or wages will be in a written employment contract. In the US, this is called behavioral control.Behavioral control isn't as overbearing as it may sound: in an employment agreement, it actually just comes down to the right for an employer to determine what their employees' working hours will be, what tools and equipment they will use, and whether they are allowed to work for third party employers. A worker will be classified as either an employee or an independent contractor, depending on how much behavioral control an employer has over them.
Employee vs. Independent ContractorIt's important that your company distinguish your employees from independent workers. Independent workers are workers who work on a project-to-project basis and determine their own working hours. They are not bound by exclusivity to one company, so they can be employed by third parties. It is not possible for an employee to work as a contractor at the same company.Unlike employees, independent contractors are not subject to behavioral control, so not only can contractors work for third parties, but also they can determine the remuneration paid for a specific task. Some examples of independent contractors might be domestic workers, app developers, construction workers, or technicians.While the independent contractor in Brazil may enjoy working their own hours and having many sources of income, on the flip side, they are not protected by labor law. If an employer misclassifies a worker, they may be subject to paying back taxes, backpay, or benefits for any employee that was not compensated properly during their tenure at the company.
Payroll tax, social security tax, and medicare 💵So what are ways your company can ensure it's staying compliant with tax laws in Brazil? Under Brazil law, federal income tax in Brazil for an individual resident taxpayer can range from 7%-27.5%, and the amount of social security tax or medicare contributions they pay depends on their salary, but can range from 7.5%-14%. For an employer, the tax they pay is up to 20%-28% of the company's total payroll.All taxes for employers and employees must be paid to the Brazilian IRS (Receita Federal) by the last business day of April, before the new tax year begins.
Employment contracts and best practices ✍
BenefitsLike employees working in the United States, Brazilian employees are often eligible for benefits. Many international employers with employees in Brazil are familiar with the "13th salary," which is an additional month's salary paid at the end of the year in two installments: the first installment can be paid between February 1st and November 30th, and the second one is due by December 20th. Other benefits paid to the employee are paid time off, maternity leave, and meal and transportation allowances when appropriate. Compensatory time off is often given for overtime.Before you start hiring prospective employees in Brazil, it's important to understand the parts of federal law for labor and employment in Brazil, and some of the particulars in regard to employment relations. This includes the labor laws outlined in the federal constitution, labor courts, collective bargaining, and any benefit paid to an employee in employment agreements and employment contracts in an employment relationship.Let's start with the common aspects of an employment contract and how to follow labor laws.
Overtime in BrazilAn employee's daily working hours should not exceed eight, and they cannot work more than two hours of overtime. Any hours worked after that are considered overtime, and must be paid at 150% of the employee's salary or wages. If they work during a Sunday or a holiday, they must be paid at 200% the rate of the employee's regular pay unless the employer determines another compensatory day off.The exceptions to this rule are if the employee works from home or engages in activities at the physical location of the workplace that do not pertain to their job. If the employee is in a position of trust, meaning they work with minors, or are in charge of cash or keys to a company, they do not have fixed working hours and therefore do not follow the labor laws for overtime; for example, a teacher would not qualify for overtime pay, even if they worked up to six hours of overtime.
Brazil PTO 🏖In an employment contract, if an employee has worked for 12 months, they are entitled to 30 days of paid annual time off. There are up to three periods where they can take their PTO: one has to be no less than 14 days long, and the other two periods have to be at least five days. If an employee prefers not to take their annual leave, they may cash in 1/3 of their leave and receive it as a holiday bonus.
Brazil maternity leaveIn an employment contract, female employees are entitled to 120 days of paid maternity leave, and if the employee is enrolled in the government program known as Empresa Cidadã, they are entitled to up to 180 days. If the female employee has a medical condition, she can extend their leave two weeks before and two weeks after giving birth. A pregnant employee is paid 100% of her wages; however, an employer can claim a portion of those wages to be paid back through social security.Fathers in Brazil are entitled to five days of paternity leave, and they are paid 100% of their wages. With Empresa Cidadã, they can take an additional 15 days of leave.It all sounds pretty generous compared to typical parental leave policies in the US, right? In fact, Brazil ranks fourth in the entire world for the average length of its maternity leave, with Norway, Bulgaria, and Serbia in the lead.
Labor successionWhen hiring potential employees, it's important that you have a labor succession system that supports your employee's promotions to higher positions within your company. This way, there's no hiring crisis when one of your high level employees leave--you will already have trained employees who are ready to fill in.
Termination of employmentUnder employment law, employers are allowed to terminate an employee at any time during the employment contract period, as long as they give at least 30 days notice in writing. For every year of the employee's job tenure, the employee must be given an additional day of notice, with a limit of 60 days.There are some workers who are exempt from termination, including workers who are pregnant and those with trade union representatives, including employees who are under collective bargaining agreements. You also can't terminate employees hired who have a work-related illness or injury, or one who is a member of the Internal Committee for Accidents Prevention (CIPA).If the employer and the employee mutually agree to end the employee's job tenure, the employer only needs to give the employee 15 days' notice. There can be a probation period of up to 90 days, with the minimum at 45 days under employment law.A former employee may qualify for temporary financial relief in the form of unemployment insurance, but only if their temporary job tenure met or exceeded 12 months of employment.
Severance pay 💰Severance payments are required by Brazilian law. If an employee is terminated with cause, they are entitled to the balance of their wages, any unused holiday compensation, and equal pay to their 13th month salary. Also, for every year of the employee's job tenure, they must be paid the equivalent of their monthly salary. For example, if their monthly salary was 16,000 BRL (roughly $3,000 USD), and they worked for 8 years, they would be entitled to 128,000 BRL of severance pay from their former employer.Under employment law, if an employee is terminated without cause, they are entitled to the balance of their wages, unused holiday compensation, their 13th month salary, payments from collective bargaining agreements, and any other benefit outlined in their contract.While an employee is employed at a company, the company is required to contribute a monthly deposit of 8% of the employee's gross compensation to the Fundo de Garantia sobre Tempo de Serviço (FGTS). If the employee is terminated, 40% of that balance is paid to the former employee as a termination fine.
Labor lawsThe Brazilian Judicial Branch has many different branches that oversee labor laws, but one of the most important ones to learn for the purposes of employing international workers is the Labor Court, a court comprised of labor judges. The Labor Court focuses on labor relations and settling conflicts between workers and employers.A judge from the Labor Court may dismiss a labour claim, but the plaintiff can appeal a judge's decision to the Regional Labor Court, and if that decision is appealed, it lands with the Superior Labor Court, which settles labor claims and considers Brazilian labor legislation in standardizing labor laws.The main employment laws in Brazil come from the "Consolidation of Labor Laws", AKA Labor Code (CLT) and the Brazilian federal constitution. An example of a labor law could be, for instance, one that mandates minimum wage for hourly employees. Here are some other mandates that were passed by employment legislation that benefit union workers:
- Legal services
- Discounts for college tuition
- Discounts for gym memberships, and even resorts and water parks
- Health insurance and dental plan discounts
- Drug stores discounts
Unions 👮Brazil is unique in that individuals and groups do not have the right to form their own unions, due to legislation in 2014, which modified the Brazilian Labor Code established in 1943. Employers lobbied to amend and modify the code after an economic crisis in Brazil, and after the reforms employers faced major backlash from unions; in particular, union representatives protested the elimination of employer union dues, which were a major source of funding for employee unions.Brazilians under labor law are no longer able to form their own unions under the federal supreme court's decision to modify the Brazilian Labor Code. Instead of federal government trade unions, public sector employees are covered under The Global Federation of Public Workers, or PSI, which is an international umbrella organization that represents over 30 million public workers in 154 countries to ensure each public sector employee is protected under a collective bargaining agreement with their employer. The Brazilian unions within PSI will often look to the international organization to lobby their own government to enact legislation that protects more public sector employees, ensure their monthly salary, and provide them with protection from a global legal group.In 2021, workers in the public sector, unhappy with President Jair Bolsanaro's lack of implementing public health safety measures during the COVID-19 pandemic, appealed to PSI to put pressure on the Brazilian government to enforce those measures for employees in the public sector, especially those working within the health system.Outside of the public sector, here are the unions in Brazil with the most members:
- Sindicato dos bancários (banker’s association);
- Sindicato dos metalúrgicos (metal worker’s association);
- Sindicato dos comerciários (commerce worker’s association);
- Sindicato dos professores (teacher’s union).
Collective bargaining agreementA collective bargaining agreement is a mutual agreement that occurs between a federal trade union representing a group of employees within a certain trade or profession, and a union representing their employer. These employment agreements will affect employment contracts in that they determine aspects of the employment, annual salary increases, and benefits for employees. For example, in a remuneration package offered to a potential employee, it's often customary for companies to include profit sharing that's based on terms that labor unions and the employer agreed to.
Groups that are entitled to special representation and protection in collective bargaining agreementsAs mentioned earlier, there are certain groups that are not subject to termination under labor law; these same groups are entitled to special employee representation and collective bargaining agreements under Brazilian law. These groups include:
- pregnant employees
- directors of employee trade unions
- employees who will be retiring in the near future
- employee who has a work-related illness or injury
- who is a member of the Internal Committee for Accidents Prevention (CIPA)
The information contained in this site is provided for informational purposes only, and should not be construed as legal advice on any subject matter.
Navigating labor and employment in your employment relationship abroad 🌍It's hard to navigate this complex system of rules under the employment relationship in Brazil as you're hiring an international team. In labor and employment standards, there are differences between independent contractors or service providers and employees, labor codes, collective bargaining, and contractual obligations to consider.Pilot specializes in remote payroll, benefits, and compliance for US-based companies hiring globally. We can help ensure that you're staying compliant with the federal constitution and any collective bargaining agreements in Brazil. Our team of HR and legal experts is happy to help you navigate any questions as you build your international team.
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