Employment trends and job market analysis for Brazil

Brazil is the largest country in South America, both geographically and demographically. With more than 8.5 million square kilometers, Brazil occupies almost 50% of South American territory and has an extensive coast, with more than 9,200 kilometers.

The country is extremely diverse, with different regionalisations within states and its people. Although the primary language spoken is Portuguese, the new generation of Brazilian English speakers is growing by the minute. According to a British Council study, the percentage of English speakers in the Brazilian market between 18-24 years old is double the country’s average.

The main strengths of Brazil are its agriculture, construction, hospitality, and tech sectors. As an emerging market, Brazil has a Human Development Index (HDI) of 0,754 (87th in the world) and a Gross Domestic Product (GDP) of USD$1.445 trillion as of 2020. With a large employee population of almost 80 million workers, Brazil is seen worldwide and by foreign companies as a country with great potential to grow and develop.

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Capital                                                       Brasília

Languages spoken                                   Portuguese

Population size                                          212 million

Payroll frequency                                      Monthly

Currency                                                   Brazilian Real (R$)

VAT                                          VAT on Sales and Services are PIS/COFINS                                                         – at 9.25%, & Municipal Service Tax (ISS) with                                                      rates varying from 2 to 5% depending on

                                                the Municipality in which the company is located.

 

For more economical and fiscal information about Brazil, visit the dedicated section.

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Payroll and taxes in Brazil

Brazil is known for having a lot of different taxes and employment laws. In order to stay compliant, companies must make several contributions based on the employees’’ total remuneration, number of contractors, full-time employees and more.

Employer contributions in Brazil

Social Insurance (INSS)

Instituto Nacional do Seguro Social (INSS) is the Brazilian Social Security System. Employers must withhold a part of the workers salary and also make a contribution themselves based on the employees total compensation each month (this includes other benefits such as 13th salary, vacation leaves and other bonuses). The rate is either 20% of INSS, 3,30% for SEBRAE, SESC, SENAC & INCRA, 2,5% for Education Salary, depending on the industry. This tax is paid to fund employee’s pension, compensation, disability retirement, sick pay, unemployment insurance, maternity pay and other allowances.

Pension (FGTS)

Another mandatory contribution is the Fundo de Garantia do Tempo de Serviço (FGTS). The rate is 8% of the employee’s total monthly salary (bonuses, overtime, 13th salary, vacation pay included) each month. FGTS is a fund to cover the severance indemnity that an employee is entitled to after termination without cause. After the end of contract, the contribution ceases and the amounts are retained with the government, until the person is able to withdraw the money due to specific situations such as retirement, sickness or using the money through the state bank to purchase real estate.

Work Accident Insurance (RAT)

RAT is the Risco Ambiental do Trabalho, that corresponds to a tax that varies from 1% to 3% of the total amount received by the employee each month according to the risk taken by workers at their jobs. Most tech companies have a fixed rate of 2% on this tax.

Employee contributions

The workforce is also subject to taxes in Brazil. These rates are collected at the time of payment and go straight to the government.

Personal income tax

The first thing about personal income tax in Brazil depends on whether the employees is a resident or non-resident. The main difference for both categories is that residents/brazilian employees are taxed on their worldwide income while non-residents are only required to pay taxes on income earned within Brazil.

In order to be considered a resident taxpayer, a person has to fit in one of these categories:

• The Individual resides in the country permanently

• The individual is a Foreigner that is naturalised

• The expat employee has a temporary or permanent visa with a local contract

• The expat employee has a temporary visa but no local contract for a 183 days (consecutives or not) in the country within a 12-month period

Other than paying taxes, Brazilian taxpayers have a lot of requirements to fulfil such as submitting tax returns, advanced income tax payments, and more.

Taxable income

Wages, salaries, bonuses, commissions, and dividends are all classified as taxable income in Brazil. Allowances that are connected with employment such as housing and education also fall in the same category.

Income tax withholding

Resident taxpayers are subject to withholding tax for all remuneration earned or paid from local sources (legal entities). This is called Imposto de Renda Retido na Fonte (IRRF). Companies are responsible for the withholding of a percentage of the income of each employee, according to the rate defined previously by Brazilian Law.

Taxes withheld are treated as an in-advance payment and credited against a taxpayer´s final annual tax liability. Sometimes workers are entitled to a tax return after the final income calculations.

See below for the progressive rates along with the deductible portion according to each monthly tax basis.

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Monthly tax basis (R$)                  Rate (%)              Deductible portion (R$)

Up to 1.903,98                                   -                                        -

From 1.903,99 to 2.826,65               7.5                                 142,80

From 2.826,66 to 3.751,05               15                                  354,80

From 3.751,06 to 4.664.68               22.5                               638,13

Over 4.664,68                                  27.5                               869,36

In addition to the above deductible portion, for each legal dependent the employee has, the amount of BRL 189.59 is deducted from Income Tax calculation base.

Another tax withheld is for INSS. The Social Security System demands a payment according to monthly pay, the higher the salary, the greater the contribution up to 14%. See the rates below:

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Monthly tax basis (R$)                                          Rate (%)

Up to 1.903,98                                                           -

From 1.903,99 to 2.826,65                                       7.5

From 2.826,66 to 3.751,05                                       15

From 3.751,06 to 4.664.68                                       22.5

 

Minimum wage in Brazil

Minimum wage in Brazil is currently R$1,212 monthly, approximately U$D228,30 or U$D2,693 in annual average salary . The amount is revised every year. In 2021, the rate went up by 10.18% which has been the average in the last few years. For 2023, the Trading Economics projection evaluates that this rate will continue in the same range, and the minimum wage will fall between R$1,300 and R$1,400.

Labour laws and employee rights in Brazil

Labor laws in any country, including Brazil, can be intricate and nuanced. Global companies planning to expand to Brazil face the additional challenge of navigating differences in labour laws between countries. Staying compliant with Brazilian labour and employment laws is a complex task.
The Brazilian Labour Law, also known as the Consolidation of Labour Laws (CLT), outlines most of the rules employers must follow. However, some regulations are mandated by Brazil's constitution, while others are covered by collective bargaining agreements with trade unions. Violating labour laws and regulations can lead to fines, penalties, or costly legal consequences.

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Here are some factors related to labour law that you need to be aware of:

At-will employment

At-will employment allows employers to terminate employees at any time, with or without cause. However, employees are still entitled to notice periods, severance pay, accrued benefits, and other entitlements. It's important to note that various types of employees and reasons for termination can have different rules and regulations. (We'll cover termination of employment later on in the guide). 

Labour claims

Employment-related disputes are common in Brazil and are typically brought before labor courts. Some of the most common types of disputes heard in labor courts include:

• Worker misclassification claims

• Defamation

• Breaks and overtime

• Invasion of privacy 

• Wrongful termination (with cause)

• Harassment

• Hostile work environment

• Fringe benefits

• Moral damages and intentional infliction of moral distress

• Severance payments

Misclassification 

Brazil distinguishes between employees, who work under the direction and supervision of an employer in exchange for remuneration, and independent contractors, who are self-employed individuals providing services to one or more clients without an employment relationship or subordination.
Misclassifying workers in Brazil may lead to fines, back wages and benefits, back taxes, legal and administrative costs, and other penalties.

Personal data protection

Brazil has recently implemented the LGPD (General Data Protection Law or Law nº 13.709/2018). This data privacy law regulates the usage of personal data by companies, including employment background checks.
Employers are now required to conduct a Legitimate Interest Assessment (LIA) to ensure that background checks are necessary and that they only collect essential employee data. Consequently, this restricts employers from accessing employees' social media profiles, among other things.

Anti-discrimination protection

Anti-discrimination laws in Brazil prohibit employers from discriminating based on certain characteristics, including gender, race, place of origin, marital status, age, family status, certain medical conditions like pregnancy, or criminal history.

In many countries, a background check on a potential new hire's criminal history is standard practice, but in Brazil, this is considered discriminatory unless it's for specific roles such as domestic employees, caregivers of minors, the elderly, or the disabled, road transport drivers, agricultural sector workers handling sharp tools, bankers, employees working with toxic substances, narcotic substances, or weapons, and employees with access to confidential information.

Collective bargaining agreements

In Brazil, trade unions represent various industries and engage in negotiations with employers every two years on behalf of employees. Collective bargaining agreements (CBAs) commonly encompass aspects like annual salary increments, additional benefits beyond legal requirements, and working conditions, including allowed working hours and days.

Union involvement 

Employees' rights to associate with a union are protected by the Federal Constitution in Brazil. Previously, union membership was mandatory for all employees, but now it is optional. However, unions still play a significant role in Brazil's employment landscape.
This has a few important implications. For example, employers cannot refuse, impose, or discriminate based on an employee's union membership status.
Unions engage in collective bargaining agreements with employers every two years. These agreements may include mandatory benefits and work standards that go beyond what is stipulated in employment agreements and Brazil's labour laws.

Workplace health and safety

The Federal Constitution, Brazilian labor legislation, and CBAs establish minimum working conditions in Brazil. Most employees have an 8-hour work day limit and are eligible for overtime if they work over 44 hours per week. Full-time employees must have mandatory rest and meal breaks and are entitled to a weekly rest period, typically on Sundays.
Employers are responsible for ensuring a safe and healthy workplace, which includes establishing and maintaining an internal Commission for Accident Prevention (CIPA). However, there are exceptions for remote work and other off-site work situations.

Non-disclosure agreements (NDAs)

NDAs are enforceable in Brazil when certain requirements are met:

1. Compliance with Brazilian contract law is crucial. This entails ensuring specificity in the NDA terms, including consequences for breaching the agreement such as arbitration and indemnification.

2. In the event of NDA violation, the aggrieved party must provide evidence of damages.

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Statutory benefits

Employees in Brazil have significant statutory benefits that must be provided (the complete list can be found further down in the guide). Non-compliance with these mandatory minimum benefits may result in government fines.

Additionally, if a collective bargaining agreement negotiated by employees' unions stipulates benefits beyond the statutory requirements, it is crucial to provide them to all covered employees. Failure to do so may result in legal action taken by the union.

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Working hours in Brazil

All Brazilian labor regulations and employment laws are in the Consolidação das Leis Trabalhistas (CLT). According to this system, standard working days in Brazil are eight hours long, with a two hours per day limit of overtime. In total, the number comes down to 44 hours per work week. Brazillian employees are also entitled to one unpaid hour per day for their lunch break.

Overtime in Brazil

After reaching the amount of hours agreed within their contract for the week, the regulation triggers the overtime hourly rate, which is 1.5 times the regular pay. According to Brazilian law, overtime hours cannot exceed two hours a day.

It’s important to highlight that overtime pay doesn’t apply to a few categories including:

• external employees;

• employees working from home

• employees in positions of trust, such as managers and directors

Employee benefits in Brazil

13th-month salary

In Brazil, employers are entitled to an additional salary payment at the end of the year. Employees that have worked the whole 12 month period get the full extra payment. If someone has been admitted after the year has started, they’re 13th-month earnings will be proportional to the time worked. For example, if someone starts at the company on April 1st, by the end of year, they will receive three quarters of a full 13th-month salary.

This extra payment is made in two parts: the first one in November, with 50% of the amount and without INSS deductions or taxation. The second in December, with the full deductions and taxation.

Vacation bonus

There’s a mandatory cash bonus equal to a third of a month-salary to be paid in addition to the regular pay during the vacation leave. All these bonuses plus the salary have to be paid at least two days before the vacation starts.

 

Types of leave available in Brazil

There are a few types of leave available in Brazil, and they differ from each other.

Annual leave

After a whole year of service, workers get 30 days of paid time off. It can be divided into shorter periods of time, with at least one of the vacation periods 15 days long, and two at least 5 days long.

Sick leave

Upon getting sick or injured, workers are entitled to a totol of 15 days regular paid sick leave. This time off is prescribed by a medical professional and afterwards employees need to present a verified note to their company stating the time and reason they were unable to work. Employers are obligated to pay 100% of the salary for a maximum of 15 days. If the employee requires additional time off beyond the 15 days, the Social Security (INSS) will pay for the leave. It's important to mention that the INSS will pay for this time only if the employee is working at the company for at least a full year. If an employee receives sick pay from the INSS, they cannot be fired for up to one year after returning to work.

Maternity leave

Pregnant employees who have been working in the same company for more than three months are eligible for paid maternity leave. This time consists of 120 days of maternity leave from the day the child is born (or 28 days prior child's birth) or adopted. The allowance is equal to the employee's salary, with no reduction on the amount whatsoever.

During pregnancy, workers can take days off for doctor visits, medical exams or other related appointments. It's important to mention that employees on maternity leave cannot be fired or dismissed without a cause for whole leave and during the first five months after birth.

In recent news, the Brazilian government has created an optional program to give an additional 60 days on top of the 120 from maternity leave that can be paid or financed with the company's tax deductions and contributions.

Paternity leave

Fathers are entitled to guaranteed five days paternity leave after the birth of each child. Depending on the state, new fathers may have up to 15 days total.

Bereavement leave

Employees are entitled to two days off in case of death of family members.

Public holidays in Brazil

Besides all the types of leave, there are also the National Holidays listed below. Theres a few extra public holidays depending on the state your organisation is in.

• New Year's Day - 1 January

• Carnival (2 days) - 47 days before Easter

• Good Friday * - Last Friday before Easter

• Tiradentes Day - 21 April

• Labour Day - 1 May

• Corpus Christi * Exactly 60 days after Easter

• Independence Day - 7 September

• Our Lady of Aparecida - 12 October

• All Souls' Day - 2 November

• Republic Day - 15 November

• Christmas Day - 25 December

The dates marked with an asterisk are Ponto Facultativos which means that they are optional holidays, with the employer making the decision whether to respect the holiday or not.

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Do you need to hire employees in Brazil?

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Talk to us

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Contact

Mrs. Emanuela Ferina

Head of Global Payroll

emanuela.ferina@studio-bcs.com

Phone 0039 0 363 360254

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