Understanding the Complexities of Payroll Compliance in Brazil
Brazil is the ninth-largest economy in the world and is growing in appeal for foreign investors. While payroll compliance in Brazil is complex, you can get a good general idea about it after reading this article. The country is among the most populous countries in Latin America, offering a wide consumer base for your products or services.
Establishing a business in Brazil provides you with the advantage of being close to other countries in South America to expand your market in the future. While Brazil enjoys a significant income from agriculture, it has been rapidly industrializing since the mid-20thcentury.
Payroll Compliance in Brazil
The rules regarding labor relations in Brazil are a mixture of federal labor law and agreements made with unions at the local as well as state levels. This results in several types of allowances, deductions, and social benefits on employee pay slips. If business expansion is on your mind, here are the various aspects of payroll compliance in Brazil that you need to know about:
General Employment Considerations
All workers in Brazil are entitled to a minimum wage, a non-decreasing salary, overtime compensation, maternity and paternity leave, family and educational allowances, accident insurance, and the right to strike.
Trade unions are active in Brazil, and workers are free to associate with them as per the country’s federal constitution. Unions have the right to form collective bargaining agreements with companies. The terms agreed to are considered enforceable by law.
The length of the working week in Brazil is 44 hours, with a maximum of 8 hours of work per day, which actually translates to 5.5 days of work each week. Employees can work a maximum of 2 hours daily overtime, as the law prohibits working for more than 10 hours a day.
The overtime rate in the country is calculated at 150% of the regular salary and 200% on public holidays or Sundays. Employees working late at night may also qualify for some additional rates. Moreover, overtime rates can also be negotiated by individual companies on a collective bargaining basis.
There are certain rules in place when it comes to payroll compliance in Brazil, such as registering with tax agencies. Here are the primary payroll options available for doing business in the country:
- Remote payroll: Here, you would enroll your employees in the parent company’s payroll. However, the workers would still have to follow laws, regulations, and tax codes of Brazil.
- Internal payroll: Large companies with a long-term commitment in Brazil can choose to operate their own local payroll for local and foreign employees. For this option, you would need the help of in-country HR personnel to handle the payroll requirements.
- Local payroll administration: You can choose to hire a local Brazilian company to manage your payroll.
- Outsourced payroll: Your staff’s payroll in Brazil can be handed over to a foreign company. This can be done for both Brazilian and foreign workers in your company.
Salaries and Allowances
In Brazil, salaries are calculated and paid out on a monthly basis. Advances are typically given out between the 15th and 20th of every month. Workers are also entitled to the 13th month of salary, which is distributed in 2 installments.
Although federal law decides the minimum wage, it can be higher, depending on local regulations. Moreover, trade unions can also negotiate a different minimum wage.
Cash must comprise a minimum of 30% of the remuneration package of workers in Brazil. They can also be compensated for expenses like housing or travel costs, which can be included with the salary for tax purposes.
Normally, transportation vouchers are given to employees who commute via public transport. Your business is allowed to deduct up to 6% for this purpose, depending on the value of the tickets.
You need to be aware of several types of taxation in order to expand your business to Brazil. The common ones include corporate income tax, social security costs, withholding tax, and sales tax.
- Corporate income tax: As an employer in Brazil, you are required to pay a corporate income tax, which is 15% of the profits your company makes.
- Social security costs: Employer contribution to social security in Brazil ranges from 26.8% to 28.8%.
- Withholding tax: It is applicable to payments of services, interests, and royalties to individuals or non-resident companies, and ranges between 15% and 25%.
- Sales tax: The value-added tax (VAT) and other indirect taxes such as excise tax and service tax may be levied on state, federal, or municipal levels.
Employees in Brazil get 30 calendar days of vacation each year, which is usually taken in one or two turns. They also receive one-third of a month’s salary as a holiday bonus.
Maternity leave in Brazil typically lasts for 4 months, and can be extended to 60 additional days with the employer’s approval. Moreover, women cannot be terminated from employment while they are pregnant or during their first year after giving birth.
If you wish to terminate an employee, make sure you know that the notice period lasts at least 30 days. It can be extended by 3 days per year of service to make the total time up to 90 days. Terminated workers receive their regular salary up to the termination date and pro-rated pay for unused paid leaves.
Payroll compliance in Brazil is complex as the rules keep changing frequently. While Brazil has a single federal labor law, the changing regulations and statutory values and multiple labor union agreements may make it difficult to navigate to the corporate landscape.
Nevertheless, establishing a business in Brazil can be lucrative due to the country’s fast economic growth. As Brazil is strategically located in South America, you can also form agreements with various Latin American countries and gain access to their markets. For further insight about expanding to different markets around the globe, including to Brazil, click here to explore our website.