The Federative Republic of Brazil ranks as the third largest economy in South America. Brazil is regarded as the third largest country for which the government has maintained an exceptional 94.30%.
Due to the high abundance of talent, the country has gained the attention of several international companies and employers. Brazil has to offer ease of business, a vast consumer market, and a strong economy.
As Brazil has attracted the attention of several international employers, the government has introduced several reforms to curb typical workplace and business issues. Applicable in most global companies with a diverse workforce, the Brazilian labor law aims to reduce workplace discrimination while determining some ground rules for employment.
As reforms are implemented in all aspects of employment, the labor law in Brazil moderates every aspect of employment, like work hours, minimum wage, holiday entitlements, and more. Employers can refer to the laws in this guide to comply with the labor laws in Brazil to stay compliant with ease. This employment law in Brazil guide is drafted in a certain way to highlight the most crucial aspects of the law in an accessible and digestible format for a quick and easy understanding.
Who is Covered by the Employment Act?
Every working individual is protected under the labor code in Brazil. Some of the most common examples are provided below.
- Employees who are paid by the hour
- Employees with monthly remunerations
- Employees hired for an indefinite period
- Employees hired for a pre-determined period
Independent workers and service providers are excluded from being covered under Brazilian labor law.
Employers must provide a contract to their recruit that highlights all the clauses, remunerations, work hours, holidays, and payments in compliance with the labor act rules in Brazil. Primarily there are four major contract types that the government has sanctioned.
Indefinite term contract
- The most common contract type where the termination date is excluded
- Employers can terminate this contract at any given moment.
- Upon termination, an employee is entitled to indemnification pay equivalent to a month’s salary.
Definite term contract
- This contract has fixed/definite employment terms. It can last up to two years.
- The contract expiry date is often mutually agreed upon by both parties based on negotiations and other employment-related factors.
- The payment of indemnification fees needs to be addressed.
Temporary employment contract
- A short-term contract, mainly used for employment during seasonal work.
- Employers can further renew or terminate this contract upon completion.
Intermittent term contract
- An intermittent contract is used with short work hours.
- The daily minimum working hours rules must suffice. However, this contract allows an employer to moderate the daily, weekly, and monthly work hours in compliance with the CLT.
- Payments are made on an hourly basis. Fixed pay is excluded from such contracts.
Key Provisions of the Act
The labor code in Brazil, Consolidação das Leis do Trabalho (CLT), regulates various facets of employment. These include:
- The labor regulations in Brazil limit the maximum work hour to 44 hours per week. Subsequently, an employee in Brazil’s monthly minimum work hours is limited to 220 hours.
- Employees must be given 11 hours of continuous rest after completing a work shift and before starting the next transition.
- A 24-hour paid rest is mandatory every week. Sundays are usually counted as one such day.
- The 8-hour shift applies to employees on the regular and night shifts.
- The laws highlight an eight-hour-long shift every day. While there is an overtime allowance, the overtime is limited to two hours per day.
- The labor code in Brazil has also sanctioned rest breaks for employees according to their work hours.
- Employees with a 6-hour shift must have a rest break of one to two hours.
- Employees working a 4 to 6-hour shift must be allowed to take a minimum of 15-minute break.
- Employees who have continuously served a company for over a year must be given a 30-day paid leave during the following year.
- Per the labor regulations in Brazil, one of the mentioned leaves should be equal to or more than 14 consecutive days. Furthermore, the subsequent leaves must last a minimum of five consecutive days.
- These leaves have incremental pay, as employees are awarded the regular salary plus an additional one-third of their usual wage.
- Brazilian citizens are entitled to 12 public holidays. However, out of the 26 states, there might be other public holidays.
- New Year, 1st January
- Carnival, February 20-21
- Good Friday, 7th April
- Tiradetes day, 21st April
- Labor day, 1st May
- Corpus Christi, 8th June
- Independence day, 7th September
- Our Lady of Aparecida, 12th October
- All Soul’s day, 2nd November
- Republic day, 15th November
- Black Consciousness day, 20th November
- Christmas day, 25th December
Under Brazilian labor law, employees are granted several leave schemes, applicable in exceptional circumstances.
- The Brazilian paid maternity leave is 120 days for pregnant employees and adoptive mothers.
- The leave tenure can be extended up to 180 days according to the labor act rules in Brazil.
- Employers must pay for the initial 120 days. A Brazilian paid maternity leave surpasses the 120-day mark and is compensated by the INSS.
- Employers can re-claim the paid maternity wages from the social security contributions.
- A doctor’s order is mandatory for the mentioned extension of the leave.
- Female employees can start maternity leave 28 days before the expected delivery date.
- An employee can take maternity leave 28 days before the adoption date.
- Employers are prohibited from dismissing an employee under maternity leave.
- The Brazilian paternity leave under usual circumstances is five consecutive days.
- Employers must pay for paternity leave.
- Under certain conditions, the leave can be extended for up to 20 days.
- The labor act in Brazil enforces bereavement leave, where employees can take up to two days of paid leave.
- The employee should provide adequate evidence to take such a leave.
- According to Brazilian labor laws, employees can take a three-day holiday during their marriage.
- A citizen under continuous employment for over a year in the same company is entitled to a 30-day leave the following year.
- The mentioned leave is divided into three vacations, one of which should be 14 consecutive days.
- Under this entitlement, sick leave is often calculated within the mentioned tenure.
- No provisions highlight the number of sick leaves an employee can take in a calendar year. However, per the Brazilian labor code, ill leave falls under the 30-day paid holiday.
- Employers must pay for the first 14 days of authorized sick leave. Any justified sick leave that surpasses the mentioned period shall be compensated by the National Institute for Social Security (INSS).
- The coverage from the INSS is up to 2 years, but certification from a registered doctor is mandatory in such cases.
The minimum wage is usually incremented and validated from 1st January every year. As of 2023, the minimum wage for all working Brazilian citizens is R$1302 per month. It approximately sums up to USD$ 249.453.
The pension scheme in Brazil is maintained and regulated by the Brazilian Social Security Institute, commonly known as the Instituto Nacional do Seguro Social or INSS. Employers and employees must contribute to this fund.
- INSS pension scheme
- Any entity covered by employer laws in Brazil must contribute 20% of their employee’s monthly gross salary.
- The mentioned rate is 22.5% for registered financial institutions.
- These are deducted from the payments that are processed through payroll.
- Labor accident insurance
- Labor accident insurance compensates an employee during a workplace accident.
- Employers must pay an additional 6% of an employee’s monthly salary to the INSS.
- The rate might vary according to a job’s workplace risk or threat level.
- Private pension
- Private pension schemes are optional and funded by an employee.
- There are primarily two types of schemes that fall under private pensions.
- Open private pensions are specific schemes where citizens can opt for a pension without the employment requirement.
- Secure private pensions are schemes only granted to citizens a registered company employs.
Payroll tax and employer registration
Taxation in Brazil follows a systemic approach with the inclusion of withholding taxes. Employers are liable to deduct taxes from an employee’s monthly salary and pay them to the concerned authorities and the applicable corporate tax.
- Corporate tax (IRPJ)
- In a fiscal year, the corporate tax is calculated at 15% of the corporate profit (APM) or assumed profit (PPM).
- The tax is levied on a company’s yearly profit.
- The corporate tax is charged at a federal level. There are no regional-level taxes per Brazilian labor law.
- Social contribution
- Legal entities protected by employer’s laws are liable to pay a social contribution on net income (CSLL).
- Most companies must pay a CSLL of 9%.
- Entities such as insurance companies and financial institutes must pay a higher tax for CSLL.
- Capital gains tax
- The capital gains tax is applicable during the sale of an asset, such as real estate, vehicles, or any other asset.
- Employers must pay a flat 15% on the excess amount gained from the asset’s sale.
- Withholding taxes for employees: The withholding tax rate is determined by an employee’s monthly remuneration. The table below highlights the tax cap according to the monthly salary.
up to R$ 1,903.98
R$1903.99 to R$2,826.65
R$2,826.66 to R$3,751.05
R$3,751.06 to R$4,664.68
R$4,664.68 or higher
The Brazilian labor law enforces providing an employee payslip every month. A payslip must be sent before the salary is disbursed, highlighting the following information.
- Basic salary
- Overtime pay, if any
- Additional payable benefits, if any
- Salary date
- Deductions made per the applicable taxes
It is always a good practice to record the issued payslips for every employee.
Under Brazilian labor law, there are no explicit provisions for a probationary period. Employers can enforce a trial period before issuing an offer letter to a Brazilian citizen. Article 445 of CLT states a trial period should be 90 days.
Following the mentioned rule, Brazil has witnessed using the two most common employment models using a trial period.
- A 30-day trial period, with an attached clause, can extend the mentioned tenure by another 60 days.
- A 45-day probationary period can be further increased by another 45 days by the employer.
Companies can terminate their employees without cause until the notice period is served and the severance pay is issued.
- Termination without cause
- Employers can terminate their employees without any reason, but they must pay all the accrued benefits to these employees.
- Even during such termination, employees must serve their notice period.
- Specific categories, such as pregnant employees, are protected from this form of dismissal.
- Termination with cause
- A common form of employment termination is where the severance pay is slightly lower than the other form.
- The notice period is mandatory, and employers must pay the severance accordingly.
Employers are liable to clear the severance pay of their employees under every circumstance, and the payment should be processed within ten working days post-termination. During employment, employers must also pay 8% of their employee’s monthly salary to the Brazilian Government Severance Indemnity Fund Law (FGTS).
- Constructive dismissal: During a constructive dismissal, or a termination without notice, employers must pay a certain amount to the terminated employees. A breakdown of the payment structure has been given below:
- The payable salary balance
- One-third of the holiday payment.
- Payment for every untaken holiday
- Christmas bonus or a payment equal to the 13th month’s salary
- Access to FGTS funds
- Clear pending payments or additional promised benefits for that month
- Dismissal with a valid reason: During a release with a good cause, employers are liable to issue a severance pay. The mentioned pay’s crucial components during this instance are listed below.
- The payable salary balance
- A payment equivalent to the 13th month’s salary
- Payments for every new holiday in the given fiscal year
Employees can also resign from their posts. In such cases, the severance pay is calculated based on all the pending payments and the monthly payable balance.
Data protection and employee privacy
The Brazilian General Data Protection Law protects employees’ data from misuse and exploitation. Law 13.709/2018 and Law 13.853/2019 under the mentioned provision enforce several restrictions in processing, storing, using, and sharing an employee’s data.
Employers are held liable for ensuring the safety of the employee’s data. Failing to uphold the confidentiality of an employee’s data might result in minor warnings, fines, or even employer suspensions.
The Brazilian labor law has introduced several sanctions to moderate and systemize business while protecting its citizens effectively. While the concerned authorities decide the punishment in most cases, some of the most common non-compliance penalties have been listed below.
- Failing to obtain the National Migration Card or the Carteira de Registro Nacional Migratório (CRNM) is also punishable by a fine.
- Improper employee classification might lead to a fine. The Secretary of Labour decides the payable penalty.
- Failing to comply with the minimum wage requirements in Brazil is punishable by a fine of R$ 52,000.
- In the event of constructive termination, employers are liable to pay 40% of an employee’s FGTS account balance.
- The following sanctions compensate for the violation of general data protection.
- Warning with the request to undertake necessary measures for correction
- Daily fines, per the National Authority
- Publication of the mishap
- Temporary suspension of activities that encompass data processing
- Permanent suspension of activities that encompass data processing
Compliance Strategies for Employers
Employers looking to run a payroll in Brazil can follow several compliance strategies to work through the nitty-gritty of the labor act rules in Brazil. Some of the most common compliance strategies used by businesses of different sizes have been listed below.
In-house HR team:
- Medium to large companies with a budget can hire an in-house HR team specializing in CLT compliance.
- An in-house HR team can decrease workplace discrimination through various reforms. Furthermore, according to the Brazilian labor code, the mentioned team can moderate the minimum pay, work hours, holiday entitlements, and more.
- Several third-party HR agencies are well-versed in CLT. Employers can partner with such companies to comply with the labor code in Brazil.
- Like an in-house HR team, these agencies ensure an employer’s compliance by moderating the work hours, salaries, leave, and holiday entitlements.
Employer of Record (EOR) solutions
- Employer of record (EOR) solutions are the neo-compliance strategies for businesses of every size looking to hire international talents.
- An employing company can enjoy high control with the pre-placed rules. It allows an employer to save time, and resources and abide by the labor regulations in Brazil with minimal effort.
How Can Multiplier Help?
Multiplier is a SaaS-based Employer of Record solution that allows employers to stay compliant with the labor regulations in Brazil for a fraction of the outsourcing cost. The centralized platform with pre-placed conditions allows employers to moderate salaries, minimum work hours, rest breaks, and holidays. Any employer can accomplish all this without any knowledge of Brazilian labor law.
Helping employers comply with the labor regulations in Brazil is just the tip of the iceberg. Multiplier also provides one-click payments in multiple currencies, compliant payrolls, and also support for conducting background checks. For a fraction of the required cost to hire an HR team, Multiplier is the one-stop solution for determined employers.