Complying with Brazil’s payroll laws is essential for any U.S. company that wants to hire and retain talent in Brazil. From mandatory benefits to complex tax structures, employers must navigate strict regulations that can be difficult to manage without in-country expertise.

For companies without a legal entity in Brazil, partnering with an Employer of Record (EOR) is recommended. An EOR, like Payoneer Workforce Management, helps handle the payroll processing in Brazil on your behalf, so you can focus on building your team.

Payroll in Brazil: Wages and other payments

Brazil’s payroll laws go far beyond just the monthly salary. Employers must also be aware of several mandatory payments and entitlements to stay compliant with local laws. 

Brazil’s payroll cycle

Employees are paid twice a month in Brazilian reals (BRL) and deposited directly into the employee’s local bank account.

Timely and accurate pay is essential to both staying compliant and keeping employees satisfied.

Minimum wage

Employers must pay employees in Brazil at least the national minimum wage, set at BRL 1,518 per month. This equates to approximately BRL 50.60 per day. However, minimum wages may vary by region.

Standard working hours in Brazil are 44 hours per week. Any work beyond that must be compensated at 1.5 times on weekdays and 2x on weekends.

Sick pay

All employees on your Brazil payroll can take paid sick leave with a valid medical certificate. The employer is responsible for paying their full salary for up to 15 consecutive days. After that, payment is handled by the National Institute of Social Security (INSS).

Maternity pay

Female employees are entitled to 120 days of paid maternity leave, which can begin up to 28 days before the expected due date. This leave is fully paid and funded by the INSS.

Some companies can offer an extra 60 days of paid leave as part of the optional Empresa Cidadã (Citizen Company) program. The employer pays the employee’s full salary and can claim the payment as a tax deduction.

Severance packages

According to Brazil’s payroll laws, terminated employees are entitled to various severance payments. The exact package depends on the reason for termination and the employee’s length of service. However, here’s a common scenario:

• Notice period: 30 days plus 3 additional days per year of service up to a maximum of 90 days (note: employers can provide payment instead of notice) 
• Benefits: Unused vacation leave and pro-rated 13th salary must be paid out
• FGTS: Employees can withdraw the balance of their FGTS

13th-month salary

Employers must pay employees in Brazil a 13th-month salary. This is a legal requirement and not optional under local law. 

The 13th-month salary, also known as the “Christmas bonus,” is 1 extra month’s salary paid in 2 installments across November and December. 

Vacation bonus

Employees are entitled to 30 days of paid leave after 12 months of work. They are also paid an additional ⅓ of their monthly salary (on top of their usual pay) as a vacation bonus. 

Brazil payroll: Taxes, contributions, and deductions

Brazil’s payroll taxes include multiple layers of deductions. Both employees and employers are responsible for various contributions. 

Income tax

Employers are responsible for withholding income taxes from employees’ salaries, based on the applicable income tax brackets. The tax rate ranges from 0% to 27.5%, depending on the employee’s monthly income.

Social security contributions

Social security contributions (INSS) are withheld from employees’ monthly salaries to fund public benefits like pensions, sick leave, and maternity pay. Employee contributions depend on their income bracket. 

Brazil payroll compliance best practices

Here are some key best practices for businesses undergoing payroll processing in Brazil.

• Meet tax deadlines: Brazil’s payroll taxes and social security contributions must be reported and paid as per the deadlines. 
• Stay updated on legal changes: Brazil’s payroll laws are frequently updated. Businesses should actively monitor changes to payroll tax rates and laws to remain compliant.
• Conduct regular payroll audits: Keep an eye on your tax withholding, contributions, and employee payments to catch and fix any errors before they escalate.
• Train payroll and HR teams: Mitigate risk by keeping payroll staff up-to-date on Brazil’s payroll laws and compliance requirements.

Or, you can use Payoneer Workforce Management for global payroll support, along with managing onboarding, taxes, benefits, and more. 

For companies wondering how to pay employees in Brazil without a local entity, partnering with a trusted EOR offers a seamless way. As a part of EOR, Payoneer Workforce Management offers payroll services in Brazil, handling payroll calculations, tax filings, and legal reporting on your behalf. 

How to pay employees in Brazil

For global companies, there are three main ways to pay employees in Brazil.

1. Set up a local entity: This involves registering a business in Brazil, opening local bank accounts, and managing local laws. It’s expensive, time-consuming, and best suited for companies with long-term expansion plans.
2. Engage workers as contractors: This offers flexibility, but comes with risk; misclassifying full-time employees as contractors can lead to huge penalties.
3. Use an Employer of Record: A streamlined option, an EOR like Payoneer Workforce Management supports hiring, payroll, taxes, and compliance on your behalf, while you still manage employees’ day-to-day work. 

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FAQs

1) What is the payroll system in Brazil?

Employees typically receive two payouts per month in BRL. Employers must withhold IRRF and INSS and remit to government agencies. Additional employer contributions include FGTS.

2) What is the 13th salary in Brazil?

The 13th-month salary is a mandatory annual bonus for all full-time employees, equal to 1 month’s pay, paid in 2 installments in November and December.

3) What is the salary tax in Brazil?

All employees on your Brazil payroll must pay a progressive income tax ranging from 0% to 27.5%, and social security contributions depending on income.