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As South America's largest country, Brazil is among one of the best regions in the world for global business expansion. It boasts an impressive economy, with a GDP of $1.61 trillion, and sits comfortably as the world’s 12th largest economy. Brazil's diverse economy and workforce, and its robust agriculture, mining, and manufacturing sectors, contribute to its appeal as a country to invest and hire in.
The Brazilian economy has overcome many hurdles recently, including a recession in 2017 and severe corruption scandals. However, it has bounced back with impressive economic reforms to help with public spending and debt, investments in energy infrastructures, and an improvement in labor market conditions. With these reforms in place, Brazil's economy has stabilized and grown.
However, before hiring talent in Brazil, there are a few things employers need to understand, including how to set up a business in Brazil, how to hire Brazilian employees, and more.
Hiring Employees in Brazil
Hiring employees in Brazil can present unique challenges for businesses. For those new to the market, it can be hard to learn the ins and outs of local compliance laws, including those regarding labor, taxes, employee policies and contracts, and permanent establishment.
Labor and employment laws
As part of Brazil's economic reform, several changes have been made to Brazil's labor laws, many of which lawmakers will help attract foreign investors. Employers hiring talent in Brazil must stay up to date with these laws to remain legally compliant, including recent minimum wage updates.
As of May 1, 2023, employers must pay Brazilian workers the minimum wage of 1,320 reais, paid out in monthly or bi-monthly increments. Employers must also pay their employees a 13th-month payment equal to a full month's salary, paid in two installments, once in November and once in December.
Workweeks consist of 40 to 44 hours, which translates to eight-hour work days, five days a week, with the option to work four hours overtime on Saturdays. Normal working hours are 8:00 a.m. to 5:00 p.m. or 9:00 a.m. to 6:00 p.m.
Tax regulations
Employers are required to contribute an equal payment of 26.8% of an employee's salary plus an additional 8% for the government's indemnity fund, paid to the Brazilian Social Security Institute (INSS). Employees can choose to have their income tax and social security deducted from their salaries.
Employee policies and contracts
In Brazil, employers can choose between four contracts employees can sign:
- Indefinite contract: This type of contract is the most commonly used in Brazil. Indefinite contracts have no fixed work periods. When an employee's indefinite contract is terminated, the employee is afforded indemnification payment equal to a full month's salary.
- Definite contracts: This contract typically lasts for two years or less and must meet specific criteria, including probation agreements, temporary or transitory activity, or a predetermined employment period. When this contract ends, no indemnified notice is required.
- Temporary contracts: As the name implies, temporary contracts are those used for temporary work, such as seasonal and other part-time work.
- Intermittent contracts: The final contract, intermittent contracts, are used when an irregular working schedule is warranted. Employees on intermittent contracts are paid on an hourly basis.
Depending on the contract type, certain policies should be included such as:
- Benefits: Brazilian employees are entitled to special benefits that go beyond health and life insurance, including having their employers cover costs for lunch and transportation.
- Vacation time: Once an employee has been with the company for 12 months, they are afforded 30 days of leave during the next year. The days can be split into three vacation periods but must be confirmed by the employer. Laws state that at least one vacation period must last 14 consecutive calendar days. Vacation time is paid at an increased rate to the normal salary.
- Absences: Apart from vacation days, Brazilian employees are allowed 14 days of sick leave, up to 180 days of maternity leave, up to 20 days of paternity leave, two days of bereavement, three days of marriage leave, and one day of leave to donate blood.
Permanent establishment laws
Brazil has no permanent establishment laws in place for foreign entities or employers. However, employers must obtain approval from the federal government before establishing their business in Brazil.
Cost of Hiring Employees in Brazil
Hiring employees in Brazil can be costly, with expenses beyond wages and salaries quickly adding up. Businesses need to account for benefits, including health and life insurance, paid time off, retirement and pension plans, and more.
Aside from these expenses, businesses will likely incur additional fees, which can add up to $4,000, though this varies across industries. These fees can include:
- Hiring costs: Hiring costs can include planning, advertising, recruiting, screening, and interviewing applicants.
- Training costs: New hires require training. You'll need to put another employee in charge of training, which can take away from their daily operations. You'll also have to pay your new hires during their training period.
- Background checks: Background checks include criminal history, credit checks, and references. While U.S.-based businesses may not experience issues when performing a background check on U.S.-based employees, they should anticipate additional time when hiring a Brazilian background check company for a Brazilian candidate.
What a Company Needs to Hire in Brazil
Companies have a few options for operating in Brazil, some options riskier or costlier than the rest.
Establish a legal entity
Entities are legal establishments that enable businesses to operate outside of their country of origin. They allow companies to conduct business, trade, and perform other activities in those countries while meeting all country-specific labor and tax requirements.
While entities provide the in-country presence many businesses prefer, they can cost hundreds of thousands of dollars, take months to establish, and are a financial and operational headache to maintain.
Hire independent contractors
Hiring independent contractors is an alternative to hiring full-time employees. Because they work as freelancers, employers don’t have to provide benefits or withhold taxes on their behalf. However, independent contractors come with some risks, including misclassification, which happens when an employer wrongly classifies an employee and denies them certain benefits. This can come with severe penalties and fines.
Utilize an Employer of Record (EOR)
The easiest way to hire Brazilian employees is through an Employer of Record (EOR). EORs assume the role of legal employers and handle all aspects of compliance and employment in Brazil. They take care of things like payroll, taxes, benefits, contracts, and more, to help businesses align with all country-specific compliance.
When you use an EOR, you'll enter into a co-employment contract that must be signed by the parent company, the employee, and the EOR. Though the EOR will handle the daily operations of the expanded company, the parent company will still retain direct relationships with its employees. This means they'll be in charge of assigning work tasks and will monitor performance.
Hire Employees in Brazil with Global Expansion
Hiring talent overseas offers many benefits, but it's not without its challenges.
Entering a new market means that you need to learn and stay up to date with labor and employment laws and ensure that your organization remains legally compliant. Plus, hiring foreign workers can be an overwhelming task. Fortunately, you don't have to handle these issues on your own.
Partnering with an EOR provider, such as Global Expansion, makes expanding into Brazil much easier—and mitigates unnecessary risks.
Global Expansion handles all the details in onboarding the best Brazilian talent for your business, including hiring and onboarding. Finally, our platform streamline HR processes, including payroll and benefits.
Reach out to us to learn more about how Global Expansion can help you build, support, and pay your employee(s) in Brazil.
