Effortless Hiring in Brazil

Employment Laws

• Written Contracts: While written employment contracts are not mandatory in Brazil, they are highly recommended to formalize key terms such as remuneration, job description, working hours, place of work, probationary period, type of contract (fixed-term or indefinite), company policies, and travel conditions. Having a written contract helps ensure that these terms are legally enforceable.

• Automatically Recognized Terms: Certain terms are automatically recognized by law and do not need to be explicitly stated in a contract. These include:

• Minimum wage

• Annual leave and vacation bonus

• 13th-month salary

• Severance Indemnity Fund (FGTS)

• Weekly paid day off

• Social Security contributions

• Benefits from collective bargaining agreements (CBAs).

Onboarding Process

The onboarding process typically involves:

• Preparing employment contracts (if applicable)
• Registering the employee with social security and tax authorities
• Ensuring compliance with local labor laws and any applicable collective bargaining agreements.

Types of Employment Contracts

Employers in Brazil can use the following types of contracts:

• Fixed-Term Contracts: For specific periods or projects.
• Indefinite-Term Contracts: The most common type, with no predefined end date.
• Probationary Contracts: Up to 90 days, which can be split into two parts and extended once within the limit.

Probationary Period

Brazilian law allows a maximum probationary period of 90 days, which can be divided into two segments. Extensions are permissible only once during this period.

Average Working Hours

The standard working hours in Brazil, as stipulated by the federal constitution, are 44 hours per week, typically divided into eight hours per day from Monday to Friday and four hours on Saturday. Employers may also opt for a 40-hour workweek without reducing employees' salaries.

Payroll Frequency

Employees in Brazil are typically paid on a biweekly or monthly basis.

Minimum Wage

As of January 1, 2024, the national minimum wage is set at R$1,412. Regional variations exist, and employers must comply with higher state-specific minimum wages where applicable.

Payroll Deductions

Common payroll deductions in Brazil include:

• Income Tax: Withheld at progressive rates based on employee earnings.
• Social Security Contributions: Employee contributions to Brazil's National Institute of Social Security (INSS).
• Union Dues: If applicable, based on collective bargaining agreements.

By partnering with Cadana, you can confidently manage payroll while focusing on your business growth.

Employee Income Tax in Brazil

Brazilian income tax applies to residents based on their worldwide income and to non-residents only on Brazil-sourced income. The current income tax brackets for 2023 are as follows:

• Up to BRL 1,903.98: Exempt (0%)
• BRL 1,903.99 to BRL 2,826.65: 7.5% (minus BRL 142.80)
• BRL 2,826.66 to BRL 3,751.05: 15% (minus BRL 370.40)
• BRL 3,751.06 to BRL 4,664.68: 22.5% (minus BRL 651.73)
• Above BRL 4,664.68: 27.5% (minus BRL 884.96)

Taxes are calculated annually, with the tax year following the calendar year. Individual taxes are due by May 31 of the following year.

Employer Contributions

Employers in Brazil contribute to Social Security at rates varying from 26.8% to 28.8% of the total payroll, depending on the business sector. These contributions cover mandatory employee benefits such as pensions and healthcare.

Social Security Contributions

Employees contribute to Social Security based on income brackets for 2023:

• Up to BRL 1,320.00: 7.5%
• BRL 1,320.01 to BRL 2,571.29: 9%
• BRL 2,571.30 to BRL 3,856.94: 12%
• BRL 3,856.95 to BRL 7,507.29: 14%

The annual cap for employee contributions is BRL 7,507.49.

How Cadana Simplifies Tax Compliance in Brazil

Cadana takes the complexity out of tax compliance by managing payroll taxes on your behalf. As a trusted Employer of Record (EOR), Cadana ensures:

• Accurate calculation and withholding of payroll taxes
• Timely filing and remittance to tax authorities
• Issuance of employee tax forms

By handling these responsibilities, Cadana allows businesses to focus on growth while staying compliant with Brazil's tax regulations.

Types of Leave in Brazil

1. Annual Leave

• Employees are entitled to 30 days of paid annual leave after completing 12 months of continuous work with the same employer, provided they have minimal unjustified absences.
• If unjustified absences occur, the leave entitlement is adjusted as follows:
• Up to 5 absences: 30 days of leave.
• 6 to 14 absences: 24 days of leave.
• 15 to 23 absences: 18 days of leave.
• 24 to 32 absences: 12 days of leave.
• More than 32 absences: No entitlement to vacation days.
• Annual leave must include payment of the employee’s monthly compensation plus a one-third vacation bonus, which must be paid at least two days before the leave starts.

2. Parental Leave

• Maternity Leave: Employees are entitled to 120 days of paid maternity leave, which is reimbursed to the employer by Brazil’s Social Security (INSS). Employers can extend this to 180 days if they participate in the Citizen Company Program and receive tax benefits.
• Paternity Leave: Employees are entitled to 5 days of fully paid paternity leave, which can be extended by an additional 15 days, also with tax benefits for the employer.

3. Sick Leave

• Employees can take up to 15 consecutive days of paid sick leave, supported by a medical report. During this time, the employer pays the full salary.
• For longer absences, payments are made by Brazil’s National Institute of Social Security (INSS) starting from the 16th day.

4. Public Holidays

• Brazil observes both regional and national holidays, which do not count toward the 30 days of annual leave. National holidays include:
• New Year’s Day (January 1)
• Martyr’s Day (April 21)
• Labor Day (May 1)
• Independence Day (September 7)
• Patron’s Day (October 12)
• All Souls’ Day (November 2)
• Proclamation of the Republic Day (November 15)
• Christmas Day (December 25)
• Movable holidays like Carnival and Good Friday may vary by region.

Mandatory Benefits

The National Institute for Social Security (INSS) oversees Brazil's social security system, which is funded through employer and employee contributions. Mandatory benefits include:

• Retirement Pensions: Old-age pensions for eligible employees.
• Death Benefits: Financial support for dependents.
• Illness and Injury Benefits: Compensation for employees unable to work due to illness or injury.
• Disability Benefits: Long-term support for permanently disabled individuals.
• Parental Leave: Includes maternity and paternity leave.

These benefits are essential for compliance with Brazil’s labor laws and ensure a robust safety net for employees.

Optional (Supplemental) Benefits

Employers often provide additional benefits to enhance their compensation packages, such as:

• Health Insurance: While Brazil's public healthcare system (SUS) is free, many employers offer private insurance for access to better facilities.
• Retirement Contributions: Employers may match up to 5% of employee earnings in private retirement plans.
• Life Insurance: Group life insurance is a common offering.
• Other Perks:
• Profit-sharing plans.
• Food vouchers and free meals.
• Wellness programs.
• Flexible work schedules.
• Home office allowances.

Process

• Termination procedures in Brazil depend on the reason for dismissal:
• Without Cause: Employers can terminate the employment contract without cause but must provide notice and pay severance as required by law.
• With Cause: Dismissal for misconduct or other justified reasons does not require severance payments beyond accrued entitlements.
• Employers must formalize the termination in writing and provide the employee with a termination document outlining reasons and applicable payments.

Notice Period

• The notice period for terminations without cause is 30 days, plus 3 additional days for each year of service, up to a maximum of 90 days.
• Employers can opt for payment in lieu of notice to release the employee immediately.

Severance Pay

• For terminations without cause, the following payments are due:
• 40% of the balance in the employee's FGTS (Government Severance Indemnity Fund for Employees) account, plus a 10% tax paid to the government.
• Pro-rated salary, accrued vacation pay, and the 13th-month salary for the period worked.
• For terminations with cause, severance is limited to accrued entitlements, such as unused vacation and pro-rated 13th-month salary.