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Hiring in Brazil
Background check in Brazil
Types of employment in Brazil
Language used in Brazil
Payroll system and setup in Brazil
Simplify global expansion with CXC
Employer of Record (EoR) in Brazil
Brazil boasts a vibrant and highly skilled talent pool that companies looking to diversify their workforce can tap into. Its workforce is known for its diverse range of skills across various sectors, including technology, engineering, and agriculture. With a robust educational system, particularly in STEM fields, Brazilian professionals bring a wealth of knowledge and innovation to the table.
However, hiring in Brazil presents unique challenges in terms of local labour laws and regulations. It also requires companies to set up a local entity, which can be costly and time-consuming.
Given these complexities, companies are turning to employer of record (EoR) services to quickly and compliantly hire talent in Brazil. This allows them to bypass the challenges that come with hiring talent in Brazil.
What is an employer of record (EoR)?
An Employer of Record (EoR) is a third-party company that acts as the legal employer of a worker, handling employment, and payroll, and compliance tasks. This approach allows businesses like yours to efficiently and compliantly expand their workforce, enter or test new markets without the burden of setting up a local presence.
Using an EoR in Brazil, can facilitate the following:
- Compliance with local labour laws: An EoR ensures that the employment is compliant with Brazilian labour laws, handling complexities related to taxes, social security, and other statutory benefits, which can be quite intricate due to Brazil’s rigorous employment regulation.
- Payroll administration: The EoR manages the employees’ payroll, which includes calculating appropriate deductions, processing payments, and issuing payslips. By doing so, the EOR simplifies the process for the company that is hiring.
- Benefits management: An EoR also handles the administration of mandatory benefits that may be unfamiliar to foreign companies, such as the 13th salary, vacation pay, and severance fund contributions.
- Risk mitigation: By taking on the legal responsibility for employment-related issues, the EOR mitigates the risk a company might face when hiring in a foreign country like Brazil with different legal systems and employment laws.
- Local expertise: A trusted EoR in Brazil have knowledge of the local job market and can assist with recruiting and retaining the best local talent, providing insights into local best practices and cultural nuance.
By leveraging employer of record services like CXC, you can hire and manage workers in Brazil with full confidence, all while ensuring compliance.
Hiring in Brazil
Here’s a comprehensive overview of hiring practices in Brazil and various key considerations you need to keep in mind to ensure compliance.
Understanding employment laws and regulations in Brazil
To avoid potential legal issues, companies looking to hire in Brazil must familiarize themselves with labour laws and regulations. Brazil’s labour laws are primarily consolidated in the “Consolidação das Leis do Trabalho” (CLT), which provides a structured framework for employment contracts, wages, working hours, and termination practices. Your company must ensure that your HR policies comply with these regulations.
Cultural considerations in Brazil
The Brazilian workforce values personal relationships and face-to-face interactions, which can influence hiring and management processes. It is seen as beneficial to invest time in building relationships with potential hires through multiple interviews or informal meetings. This cultural nuance can be instrumental in hiring the right candidate who aligns with the company culture.
Employment contracts in Brazil
Formal employment contracts in Brazil are mandatory and need to detail all aspects of the employment terms, including salary, benefits, working hours, and termination conditions. These contracts are crucial, as they provide legal security for both the employee and the employer. Employers must also register employees with Brazil’s Ministry of Labour and ensure contributions to various social and benefit funds.
Benefits and social charges in Brazil
Employers are responsible for additional social charges and statutory benefits, which can amount to a significant portion of the payroll expense. These include funding for federal social security, a severance fund (FGTS), and other items as mandated by the CLT. When hiring talent in Brazil, you should factor in these additional costs from the outset to ensure alignment and compliance with the in-country employment laws.
Leveraging Employer of Record services in Brazil
Companies looking to quickly and compliantly hire and secure talent in Brazil can also consider the use of Employer of Record (EoR) services to streamline the hiring process and ensure compliance with Brazil’s labour laws and regulations without the need to establish a legal entity. This is highly beneficial for international companies navigating the Brazilian market for the first time or for those looking to test the market.
Taking these into consideration can help you successfully harness Brazil’s rich talent pool.
Background check in Brazil
Employment background checks must comply with privacy laws and are typically limited to verifications that are relevant to the job. Employers may conduct several types of background checks, including:
- Employment history verification: Past employment details can be verified to confirm a candidate’s work experience and performance in previous positions.
- Education verification: Employers in Brazil can verify academic credentials to ensure that the candidate has the qualifications they claim to have.
- Professional qualifications: Verification of professional licenses and certifications may be necessary for certain regulated professions.
- Social Security National Registry (Cadastro Nacional da Pessoa Juridica, or CNPJ): Reviewing social security data to confirm a candidate’s legal ability to work in Brazil.
It’s essential for employers to obtain explicit, written consent from job candidates before conducting background checks in accordance with Brazil’s General Data Protection Law (LGPD). Employers should be transparent about the scope and purpose of the checks. Additionally, the principle of “finality” mandates that the information collected must be directly related to the job requirements.
When performing background checks in Brazil, it’s also important to be aware of anti-discrimination laws. These laws prohibit discrimination based on various characteristics, including criminal convictions. Thus, employers must ensure that their hiring practices do not discriminate based on gender, race, place of origin, marital status, colour, age, or family status.
Criminal background check in Brazil
In most cases, employers are restricted from conducting criminal background checks to avoid discrimination. However, exceptions are made for specific job categories that require a high level of trust or involve the safety and security of others. Examples include caregivers, heavy-duty drivers, or other positions deemed sensitive. For such roles, obtaining criminal background checks may be considered permissible, provided there’s a clear and justifiable requirement approved by the Superior Labor Court.
Types of employment in Brazil
There are various employment categories in Brazil, each with its own regulations, benefits, and obligations. Familiarity with these categories can significantly help as you explore the hiring options that match your business needs.
Employees in Brazil
The term “employee” typically refers to individuals engaged in formal employment under a work contract regulated by the Consolidation of Labour Laws (CLT). This form of employment entails a legal and formal agreement between an employer and an employee, where the employee provides their labour services under the employer’s subordination, in exchange for a salary.
Formal employees in Brazil are entitled to various labour rights and protections, including annual leave, 13th month salary, social security benefits, and more.
Part-time employees in Brazil
Part-time employees are defined as workers whose working hours do not exceed 30 hours per week without the possibility of overtime, or up to 26 hours per week with the possibility of overtime, limited to six hours per week.
The compensation for part-time employees must be proportional to that of full-time employees (usually considered to be working 44 hours per week) who perform the same function. This creates an equitable structure ensuring part-time workers receive fair pay relative to their full-time counterparts.
Self-employed in Brazil
A self-employed individual is broadly referred to as a “trabalhador autônomo,” which describes someone offering services independently, without being formally employed by any single company or client. These individuals are not on a company’s payroll, but rather work under their own terms, providing services to clients or companies, and are responsible for managing their own taxes and social contributions.
Companies hiring in Brazil should be mindful that while hiring independent professionals and legal entities (known as “Pessoa Jurídica” or PJ) to perform functions in the company is legal, this cannot simply replace workers with formal employment contracts due to the legal protections offered by the country’s labour laws.
Independent contractors in Brazil
Independent contractors are known as “Pessoa Jurídica”, “prestador de serviços”, or “serviço autônomo” and represent individuals who provide services to clients or companies on a contract basis. Unlike employees, independent contractors in Brazil have a greater degree of control over their work, including the ability to negotiate their rates and select their clients. They are not subjected to the same level of employer subordination as traditional employees, which categorically distinguishes their working relationship from that of an employee under the Brazilian Labour Code.
For companies hiring talent in Brazil, it is crucial to distinguish between employees and independent contractors to avoid misclassification risk. There are a lot of distinctions between employees and independent contractors. One example is that independent contractors do not enjoy the same benefits or legal protections as full-time employees, such as vacation pay, 13th-month salary, and other labour rights protected under the country’s employment laws. Moreover, Brazil’s law stipulates that contracts with independent contractors cannot be indefinite; they should have a specific start and end date or a per-project term to avoid characterisation as an employment relationship.
Agency workers in Brazil
Agency workers, also known as “trabalho temporário,” are individuals hired by temporary work agencies to provide services to their clients. Agency workers are entitled to many employment rights similar to those of regular employees, despite the temporary nature of their assignments. These rights include benefits such as hourly wages commensurate with the job, rest periods, overtime pay, and additional legal protections.
When hiring agency workers in Brazil, companies must ensure that they partner with reputable temporary agencies that comply with local employment laws. These companies must understand the conditions and limitations under which agency workers can be hired. For instance, temporary work contracts are limited in duration, and extending these contracts beyond the legal limits may lead to misclassification, potentially resulting in fines and legal sanctions.
What is informal employment in Brazil?
Informal employment in Brazil refers to work arrangements that are not formally registered or regulated by the state. This sector includes individuals who are self-employed, work without official contracts, or whose employment is not declared to the government. These arrangements often mean that workers do not have access to the benefits and protections afforded by formal employment, such as healthcare, pensions, and legal recourse for workplace issues.
Engaging with the informal market involves navigating a landscape that may lack the usual protection for both the business and its employees. Engaging informal employees could potentially expose companies to legal and operational risks, including non-compliance with labour laws and potential penalties.
Companies should prioritise maintaining thorough compliance with the country’s employment regulations by ensuring all workers are properly documented and legally recognised. Moreover, leveraging formal employment practices can enhance your business reputation and attract high-quality talent who are seeking stable and secure working conditions.
Language used in Brazil
In the workplace, the predominant language is Portuguese, which is the official language of the country. However, in international or multinational companies where the working environment involves collaboration with teams from different countries, English may also be commonly used, particularly in high-level corporate communication and among employees who work in international trade, finance, IT, or where dealing with global clients and partners is necessary.
On the other hand, while not legally mandated, all employment contracts, agreements, and any formal employment documentation must be in Portuguese.
In cases of disputes where an employment-related document was originally in a foreign language, it must be translated by an official accredited translator. This translation is crucial for the document to be considered valid in any legal proceeding.
For international companies managing a workforce in Brazil, it is advisable to provide language support to employees who are not native Portuguese speakers. Offering language training can be a valuable investment, leading to better integration and enabling clear and effective communication across the organisation.
Payroll system and setup in Brazil
Companies cannot directly hire employees without establishing a local entity and setting up their payroll system. Employers must comply with local laws and make statutory payments such as social security contributions and labour charges to remain compliant.
Here are a few steps to keep in mind when setting up payroll in Brazil:
- Register with the eSocial system: Companies must set up an account with the eSocial system, a digital platform that combines the collection of employment, social security, and tax data, which is transmitted to various government agencies.
- Set up a local bank account: To facilitate payments to employees and authorities, employers should set up a local bank account. Employees typically receive their wages on the last working day of each month, while some collective bargaining agreements allowing bimonthly payments.
- Determine employment status: Employees will generally be entitled to additional labour rights and benefits such as vacation, 13th salary, and notice pay, which contractors do not get.
- Capture payroll information: Capture Brazilian payroll information for new hires, which includes elements such as income tax (Imposto de Renda Pessoa Física – IRPF), the General Social Security System (Instituto Nacional do Seguro Social – INSS), and the Severance Indemnity Fund for employees (Fundo de Garantia do Tempo de Serviço – FGTS)
- Run payroll compliantly: Establish your payroll process by considering all mandatory contributions and taxes, such as the ones mentioned above. Non-residents in Brazil are taxed at a flat rate of 25% on their Brazilian-sourced income only, while residents are taxed on their worldwide income at progressive rates.
Payroll processing in Brazil
Payroll processing in Brazil is a complex task due to the various local tax and benefits regulations companies must comply with. It’s essential to ensure all employees are paid correctly and on time according to these local requirements.
Given the intricacies of Brazil’s tax system, which involve layers of federal and state taxes each with their own sets of rules and rates, maintaining compliance can be challenging. Employers need to navigate these complexities effectively to avoid legal repercussions.
To manage the complexities, some companies resort to outsourcing their payroll operations to a reliable global payroll service provider like CXC to simplify payment processes and help ensure compliance with local labour laws and regulations.
Simplify global expansion with CXC
The opportunities for global growth have never been more promising and exciting. However, we understand the complexities and challenges that come with expanding your business globally can slow down your journey. Setting up an entity in a foreign country can be costly and time-consuming. Taking a do-it-yourself approach may expose you to risks, increased costs, and overwhelming time constraints, particularly if your plan is to start small and gradually grow your business in the new market.
That is where CXC can make all the difference. With our expertise and comprehensive solutions, we can help you navigate the intricacies of global expansion with confidence.
Compliantly hire employees anywhere with CXC
With our EoR solution, you can engage workers anywhere in the world, without putting your business at risk. No more worrying about local labour laws, tax legislation or payroll customs — we’ve got you covered.
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