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Minimum wage in Brazil

Brazil payroll

Social security in Brazil

Other employee benefits in Brazil

Partner with a reputable global payroll service provider

Payroll in Brazil

Due to the complexities of the country’s many regulatory, tax, and labour rules, companies must exercise extreme caution when managing payroll in Brazil.

Without enough knowledge and expertise about Brazil’s payroll landscape, you could expose your companies to fines, litigation, and other non-compliance penalties.

Here are some factors that contribute to the complexities of handling payroll in Brazil:

Labour laws: Brazil has a comprehensive set of laws that protect employee rights. The “Consolidação das Leis do Trabalho” (CLT) defines strict rules regarding working hours, mandatory benefits, severance, and more. It is crucial for international companies to meticulously adhere to these regulations to avoid legal repercussions.
Multilayered tax system: Brazil’s tax system involves federal, state, and municipal levels, each with its own set of obligations. The complexity of navigating these layers can be a significant challenge. Companies unfamiliar with the market may need expertise in the country’s tax law to ensure accurate payroll processing and compliance.
Frequent legislative changes: Brazil’s statutory requirements are subject to change, and these changes can impact payroll calculations. Thus, companies must have a system in place to adapt promptly to maintain compliance.
Social charges and benefits: Employers in Brazil are liable for multiple social charges, such as contributions to the Social Security Administration and the Severance Pay Indemnity Fund, among others. Correctly calculating and disbursing these charges is a critical yet complex aspect of the payroll process.
Localised payroll requirements: Varying regulations across Brazil’s 26 states and federal district mean that payroll compliance is not uniform across the country. Companies must consider regional differences when managing payroll to ensure full regulatory adherence.
Language and cultural barriers: For international companies, the language barrier can be a major obstacle, as all documentation and legal requirements are in Portuguese. Additionally, understanding cultural nuances can play a role in effectively managing and executing payroll operations.

Given the intricacies involved, it’s advisable for companies to seek partnership with a reliable global payroll provider like CXC that can help mitigate risks and ensure compliance with evolving labour laws and regulations.

Payroll outsourcing in Brazil

Modern companies are increasingly opting to outsource their payroll operations when hiring talent in Brazil due to the complexities inherent to the country’s regulatory and economic environment. Payroll outsourcing provides companies with the expertise needed to stay in line with all local regulations, minimising the risk of non-compliance and associated penalties.

Outsourcing payroll operations can also be more cost-effective than maintaining an in-house team, especially considering the need for ongoing training and updates to stay compliant with Brazil’s labour laws and regulation. This allows companies to reduce operational costs and allocate resources more efficiently.

By outsourcing to experts, companies can ensure accurate and efficient payroll processing, leading to higher employee satisfaction. This is particularly important in Brazil, where complex calculations are required for benefits, taxes, and the 13th-month salary.

Minimum wage in Brazil

The minimum wage in Brazil stands at 1,412 BRL per month as of January 2024. This national baseline applicable to all industries and regions across the country.

However, the regional minimum wages and those set out in collective bargaining agreements can be higher and often are. Employers must be aware of and comply with these distinctions, as the applicable minimum salary for their employees might exceed the national minimum depending on the location and sector of employment. These regional discrepancies are influenced by negotiations and agreements that take into account the cost of living, economic conditions, and other local factors.

Meanwhile, companies hiring in Brazil often offer salaries that are higher than the minimum wage and provide attractive compensation packages, especially for skilled positions or in competitive industries. This practice aligns with maintaining a competitive advantage in attracting and retaining talent, as well as considering the cost of living and market standards, which can vary significantly across different regions and cities in Brazil.

For instance, the average salary in Brazil across all sectors can vary significantly. Salaries can go from a minimum of 1,412 BRL up to 38,200 BRL, depending on the position, industry, and other factors. This indicates a wide margin above the minimum wage that companies might offer to stay competitive and attractive as employers in Brazil’s diverse job market.

Brazil payroll

Payroll taxes in Brazil

Employers in Brazil are responsible for the following main payroll taxes and contributions:

Social security (INSS – Instituto Nacional do Seguro Social): The national social security contribution, which covers pensions, sickness, and maternity benefits. The rates for contributions vary depending on the employee’s salary and are shared between the employer and the employee, but they can be up to 20% of the payroll.
Severance pay fund (FGTS – Fundo de Garantia do Tempo de Serviço): Employers contribute 8% of each employee’s monthly salary to this fund, which is managed by the government. It serves as a form of severance payment in case of employee termination without just cause, as well as other circumstances such as home purchase and retirement.
Salary education (Salário Educação): A social contribution that funds basic education, where employers contribute a percentage of their total payroll costs. The current rate for this contribution is set at 2.5% of the payroll.
Labour accident insurance (RAT – Riscos Ambientais do Trabalho): This insurance protects employees against work-related accidents or occupational diseases. The rate varies according to the risk level of the company’s activities and can range from 1% to 3% of the payroll.
System S (Sistema S): Contributions to social service entities such as SESC, SENAI, etc., which vary depending on the entity and can range from 0.2% to 6.8% of the payroll.

Payroll benefits in Brazil

The following are some of the payroll benefits typically offered to employees in Brazil:

Vacation bonus: After 12 months of service, employees are entitled to 30 days of paid vacation, plus a vacation bonus equivalent to one-third of their regular monthly salary.
Social Security Contributions (INSS): This provides benefits to employees like retirement, pensions, and health insurance.
Unemployment Insurance: This offers financial assistance for eligible workers who are unemployed.
FGTS (Severance Indemnity Fund): A fund that employers must contribute to, and which employees can access under certain circumstances, such as retirement or involuntary unemployment.

Payroll cycle in Brazil

The payroll cycle in Brazil is generally monthly, with employers required to pay wages on the last working day of the month. However, employers and employees can agree to a bi-weekly payment schedule, with payments typically made on the 15th and 30th of each month.

13th-month salary in Brazil

The 13th-month salary, also known as “Gratificação de Natal,” is a mandatory benefit provided to employees. Instituted by law in 1962, it was designed to help workers by supplementing their income with an additional monthly payment at the end of the year.

Typically, this mandatory payment equals one month’s salary and is paid in two instalments; the first instalment is paid between February 1 and November 30, and the second by December 20.

Offering a range of benefits, including retirement, pensions, health coverage, support for unemployment, disability, and maternity, the social security system in Brazil is a key part of the country’s welfare system.

By contributing to social security, employers in Brazil ensure that their employees have access to essential protections throughout their working lives and into retirement.

Brazil’s social security system

Known as the Instituto Nacional do Seguro Social (INSS), it’s essential to comply with the country’s social security legislation, which mandates contributions from both employers and employees to the INSS. These contributions are used to fund pensions and other benefits for the workforce.

The social security system covers taxes and benefits under two branches: the General Regime of Social Security (RGPS), which applies to the majority of private-sector workers, and the Regime of Social Security of Public Servants (RPPS), which pertains to federal, state, and municipal civil servants. It’s important to understand the differences between these systems, as they entail different contribution rates and conditions.

Employer’s social security contributions in Brazil

In Brazil, the employer’s contributions to social security cover a substantial part of the employee’s protection against various social risks and are crucial for ensuring workers’ rights to benefits such as retirement, healthcare, and unemployment. The employer’s contribution usually ranges from 26.8 percent to 28.8 percent of each employee’s monthly salary. This is composed of a 20 percent allocation to the National Social Security Institute (INSS), with an additional up to 8.8 percent directed towards other social security taxes. These contributions are mandatory and do not have a cap on the employer’s contribution. This rate is applied on the total remuneration of the employee for the month.

Social security benefits in Brazil

The INSS provides several key benefits funded by contributions from both employers and employees. These benefits aim to provide financial support and protection to workers, their dependents, and individuals facing certain life situations. The main benefits offered include:

Retirement benefits: Workers are entitled to retirement benefits after contributing for a minimum period and reaching the age requirements. There are various types of retirement benefits, including those based on age, contribution time, and special conditions. As per the pension reform, the minimum retirement age is set to 65 for men and 62 for women. However, these ages apply to those who enter the workforce after 12 November 2019. For those individuals, the requirement is to have at least 20 years of contributions if they are men and 15 years if they are women.
Pensions due to death: This benefit is paid to the dependents of a deceased worker who contributed to the social security system, providing financial support during difficult times.
Illness and disability benefits: In the event that a worker is temporarily or permanently unable to work due to illness or disability, the social security system provides benefits to compensate for the loss of income.
Aids and other benefits: These may include assistance for certain family situations, maternity/paternity leave, and other social assistance programs designed to help vulnerable populations and individuals in need.

Pension insurance in Brazil

The pension system is primarily public and based on a pay-as-you-go, or “repatriation,” model under the National Social Security Institute (INSS). For employers, this means they are responsible for deducting the appropriate INSS contribution from employee wages and making a matching contribution. The INSS rates are calculated based on employee wages and are bracketed into several tiers. For example:

Wages up to 1,174.86 BRL carry an INSS rate of 8%.
Wages between 1,174.87 BRL to 1,958.10 BRL carry a 9% rate.
Wages between 1,958.11 BRL to 3,916.20 BRL are at an 11% rate.

When calculating pension contributions, employers also need to take into account the length of employment and the employee’s salary.

In addition to the mandatory contributions to the INSS, employers may also choose to contribute to a private pension plan, offering additional retirement benefits to their employees. Contributions to private pension plans can offer tax benefits under certain conditions and are a way to attract and retain talent.

Other employee benefits in Brazil

Other employee benefits are additional perks offered by employers to employees that are not mandatory under Brazil’s labour laws. Employers provide these benefits at their discretion, which can play a significant role in attracting and retaining talent. Here are some common non-statutory employee benefits in Brazil:

Private health insurance in Brazil

Employers often provide access to private healthcare plans, which can be more comprehensive than the public healthcare system. It may also include dental plans and life insurance to provide more protection and support.

Gas or auto allowance in Brazil

While specific details about the practice of providing gas or auto allowances may vary among employers, it is a common benefit, especially for roles that require to travel. Employers must ensure that such allowances comply with Brazilian labour laws and tax regulations, structuring them in a way that benefits both the employer and employee.

Typically, the allowance is 7% of the monthly salary but may vary depending on the collective agreement term.

Meal vouchers or allowances in Brazil

Many companies choose to supplement the mandatory food allowance for certain sectors with meal vouchers that they can use at restaurants and cafes.

Gym or wellness allowance in Brazil

Some companies offer a gym and wellness allowance as part of their benefits package. The range for this allowance can vary, but it is generally between 100 and 200 USD per month. This is part of a broader approach to employee benefits in the country, where employers may provide various incentives to promote a healthy work-life balance and support employees’ overall wellness.

Home office allowance in Brazil

While there’s no specific mandate on home office allowances, the adaptation of work practices during the pandemic and the subsequent legal updates have led to a more structured approach for remote working or home office policies in Brazil. These policies address matters such as compensation for expenses related to remote work, which may include internet costs, electricity, and equipment necessary to perform work duties.

Some companies offer a home office allowance of around 70 to 100 USD per month to support employees who work from home. These allowances can vary depending on the employer or collective bargaining agreements within specific sectors.

Bonuses and incentive pay in Brazil

Performance-related bonuses, profit-sharing plans, and other incentive-based compensation can be part of an employee’s compensation package in the country.

Phone allowance in Brazil

Some companies do provide a phone allowance for their employees as part of their benefits package. There’s no legal requirement exists for such an allowance, so the details may vary from company to company. A typical phone allowance in Brazil could range from 50 to 100 USD per month.

Partner with a reputable global payroll service provider

At CXC, we understand the challenges involved in managing global payroll. That’s why we’re committed to making international payroll as smooth and seamless as possible. Whether you need to manage your entire workforce across several countries or just a handful of international remote workers, we provide global payroll services tailored to meet your unique needs in 100+ countries.

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