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 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.
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.
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.
In Brazil, employers can choose between four contracts employees can sign:
Depending on the contract type, certain policies should be included such as:
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.
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:
Companies have a few options for operating in Brazil, some options riskier or costlier than the rest.
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.
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.
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.
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.