In Brazil, employment can be terminated without cause at any time, provided the notice period is respected (or paid in lieu) and severance is paid. In addition, some categories of employees enjoy additional protection against dismissal. Termination must be written, signed, and dated.
Upon termination without cause, employees are entitled to receiving accrued benefits. Those consist of their salary for the unpaid time worked, unused and accrued vacation and vacation bonus, the appropriate portion of the 13th month salary, FGTS, and an additional 40% on the balance of their FGTS fund. (FGTS and the penalty are not applicable if the termination is with cause).
The Brazilian legislation recognizes some reasons that lead to termination with cause. However, employers must have a legitimate and recognized reason and must prove the misconduct. Employees are entitled to neither notice period nor pay in these circumstances:
Termination by mutual agreement signed by both parties reduces the notice period to 15 days and lowers the FGTS penalty by 20%. Employees get access to only 80% of the funds in their FGTS account.
Employees who lost employment with or without cause must receive their salary and any outstanding payments on their last day of employment. If the employee resigns, the deadline for the payment is increased to ten days from the last day of employment. If the employee works through their notice period, the payment must be made on the last day of employment. If the employee doesn’t work through their notice period, payment can be made within ten days of termination.
Employers must fill out and get employees to sign the following documents upon termination:
Employers must notify the authorities mentioned above (FGTS, CAGED) about the termination.
There is no legal disciplinary procedure that companies need to follow in Brazil. However, in some circumstances involving just cause for dismissal, employers should be keeping proof that they have done their part and tried to help the employee before making the decision to terminate the contract. It is very common for companies to be taken to court by current or former employees in Brazil, so the more evidence employers have to back up their actions, the less likely they are to lose the case.
There are no rules on the number of warnings an employee must receive before dismissal in case of insubordination, poor performance, or constant lateness for work and missed deadlines. The company’s actions may depend on its policy and tolerance. However, it’s standard to give employees three warnings — the first verbally, the second in writing, and the third in the form of actual temporary employment suspension.
The first warning is a way of alerting an employee that such behaviour will have consequences to their employment status and should be duly documented. The second warning, which is in writing, requires it to be delivered to the employee in the presence of two witnesses. If the employee works remotely, the warning can be emailed and the two witnesses need to be CCed. The third warning leads to temporary suspension from work. If the employee doesn’t improve or change their behaviour, employers can terminate them with cause.
Employees can resign at any time, without cause, as long as they respect the notice period. In case of resignation, the notice period is 30 days and doesn’t require the additional 3 days per year of service. Employees who resign are entitled to their accrued benefits, except for the FGTS (there is no 40% penalty for the employer to pay either) and unemployment funds. If the employee doesn’t serve their notice, the employer has the right to deduct one month’s wage from the employee’s final pay.
Employees should present their desire to resign in writing to their employer. The letter must be signed and dated. Employees serving their probationary period may request to be released before the 30 days of notice expire.
The concept of redundancy doesn’t exist in Brazil; therefore, such dismissal is treated as termination without cause. There is no legal distinction between being dismissed and made redundant.
The minimum statutory notice period is 30 days, but some agreements may include longer notices, capped at 90 days. For every year of employment, there is an additional 3 days’ notice added to the 30 days. Employers may choose to pay employees in lieu of notice. Termination with cause, such as gross misconduct, don’t require a notice. Termination by mutual agreement allows the notice period to be cut in half if the parties agree to it.
Employees who work through their notice period are entitled to a work schedule shortened by two hours daily or seven days in total while receiving their full remuneration to look for work. The employee must have been employed for at least 12 months to be entitled to this right.
Employees who are terminated without cause are entitled to severance pay, which consists of the funds employers put aside monthly for employees on their Time of Service Guaranteed Fund (FGTS). Additionally, employers must pay 40% of the balance of the employees’ FGTS as compensation.
If the employer and employee agree to the termination, the 40% FGTS penalty is reduced to 20%. Fixed-term employment that gets terminated without cause requires compensation of 50% of the remaining pay.
As mentioned previously, some categories of employees benefit from protection against dismissal for a defined period, as follows:
If any of these employees are dismissed without cause, they can take the company to court and be reinstated.
Employees are entitled to unemployment funds if their employment is terminated without cause. The government allowance varies depending on the employee’s salary in the preceding three months and cannot be lower than the minimum wage. The period an individual is entitled to receive the benefit for depends on their tenure.
To be entitled to the benefit, an employee must meet the following criteria:
Employees who worked from 6 to 11 months are entitled to 3 months of allowance; one year to one year and 11 months, 4 months of allowance; two or more years, 5 months of allowance. If the individual finds a job while they are still receiving the benefit, they must inform the Ministry of Labour so that the benefit can be suspended.
After being employed for 12 months, employees are entitled to 30 paid days off a year. At least one of the vacation periods needs to be 14 days long, and two at least 5 days long. On top of the regular wage during the time off, employers must also give employees a vacation bonus, which equals one-third of their monthly salary. This bonus must be paid at least two days preceding the date the employee goes on vacation. The vacation bonus is paid separately from the regular payroll but may be recorded and reported along with the monthly payroll. Employees may request that their employers convert one-third of their unused vacation to the equivalent in cash. Unused annual leave cannot be carried over to the following year.
If employees take unjustified absences during the year, their holiday entitlement lowers as follows:
Employees who are absent from work may present a document to their HR department, proving their irrevocable need to miss work for that day, which is then analysed by the company and accepted or not as a justifiable absence.
In Brazil, there are national, regional, and optional holidays. There are nine national holidays that apply to all employees, regional holidays that vary by state, and five optional (i.e., not mandatory) holidays often observed by companies and seen as important celebration dates.
The dates of optional holidays often involve the reduction in volume of public transportation on the streets; for that reason, some employers allow employees to work from home on those dates.
In Rio de Janeiro, the 20th of January (Saint Sebastian's Day), the 23rd of April (Saint George's Day), and the 20th of November (Black Awareness Day) are statutory holidays.
In São Paulo, the 25th of January (São Paulo’s Foundation Day), the 9th of July (Constitutional Revolution), and the 20th of November (Black Awareness Day) are statutory holidays.
When an employee works during a national holiday, they are entitled to either a double pay or an additional day off at a later date. When a holiday falls on a weekend, it doesn't carry over to the next working day.
|1/1/2022||Saturday||New Year’s Day|
|2/3/2022||Wednesday||Carnaval (ends at 2 p.m.)*|
|12/10/2022||Wednesday||Our Lady Aparecida and Children’s Day|
|2/11/2022||Wednesday||All Souls Day|
|15/11/2022||Tuesday||Republic Proclamation Day|
* Optional but very common holidays. Carnaval is a mandatory holiday in Rio de Janeiro, and Corpus Christi is a mandatory holiday in São Paulo.
Most companies observe Christmas holidays starting at 2 p.m. on the 24th of December and New Year’s Eve starting at 2 p.m. on the 31st of December.
In Brazil, employees get sick leave (licença médica) as dictated by the doctor, who prescribes how long they need to be absent from work, not by a pre-established number of days. Employees must present their employers with a doctor’s stamped note stating that the employee was unable to come to work.
Employers are responsible for paying the employee 100% of their salary for the first 15 days of illness. From the 16th day onward, the Social Security (INSS) pays for the leave, capped at BRL 6,433.57 monthly (auxílio doença). The INSS pays the allowance only if the employee has been working for the company for at least 12 months. Employees who receive sick leave pay from the INSS cannot be fired for up to one year after they return to work.
Female employees who have been employed for more than three months are eligible for 120 days of paid maternity leave, including adoptive mothers. The leave may be extended by two weeks with a doctor’s order. The employer pays for the leave, which is equal to the employee’s regular pay, without a cap. However, employers can claim the payment back through deductions on social security contributions.
During the pregnancy, the employee is entitled to time off for hospital visits and sick leave. The maternity leave may start up to 28 days before the child’s birth or on the day of the birth/adoption. Employees on maternity leave are protected from being dismissed without cause for the first five months after the birth.
Recently, the federal government has created an optional program — Empresa Cidadã, using which private companies can give employees an additional 60 days of paid leave financed directly from their corporate tax contributions. This fully paid leave may begin at the eighth month of pregnancy. In case of adoption, the amount of additional leave depends on the child’s age. After one year and up to four, the mother is entitled to 30 additional days; four to eight years, 15 days.
For the first six months after a child is born, biological and adoptive mothers are entitled daily to two paid breastfeeding breaks of 30 minutes each. After that, companies can choose to combine the two breaks and reduce the employee’s daily working hours by one hour or give them an additional 15 days of paid time off, which is the equivalent of the daily breaks for the time.
Fathers are entitled to five days of paid paternity leave after the birth of their child, paid by the employer at the employee’s full salary.
The Empresa Cidadã optional program described above in the “Maternity leave” section is also applicable to fathers, but for a shorter leave of 15 days. The leave is paid by the employer and is deducted from the company’s corporate tax contributions.
Employees are entitled to two paid days in the case of death of an immediate family member such as a parent, spouse, sibling, and child.
Employees are also entitled to paid time off, paid by the employer, in the following situations:
BRL 1,100 per month (around EUR 170) paid 13 times a year
Five states have their own minimum wage; each one must be higher than the federal minimum wage listed above.
There are two different pay frequencies, monthly or bimonthly, that companies adopt in Brazil, depending solely on the company and the CBA applicable.
If paid once a month, employees are usually paid on the 5th day of the following month. If paid twice a month, employees are usually paid on the 5th and 20th of the month.
It’s mandatory to make payments to employees or to the Brazilian authorities from a local bank account.
The Brazilian working hours are typically 8:00 a.m. or 9 a.m. to 5:00 p.m. or 6 p.m., with one hour of an unpaid break for lunch.
The number of weekly working hours is 40–44 (8 hours per day five days a week plus an additional 4 hours for those working on a Saturday). Hours worked beyond this quota must be paid as overtime.
Commonly, Sunday is a day off for those who work six days a week.
Forty hours weekly is the maximum for those working five days a week, and 44 for those working six days a week. Employees may not work more than two hours of overtime per day.
Employees cannot opt out of the maximum working hours weekly imposed by the Employment Legislation. However, employees in roles of trust (managers, executives) or working from home are exempt from having their hours tracked.
Working beyond the standard working hours stated on the employment agreement, typically either 40 or 44 hours weekly, triggers overtime compensation equal to 1.5 times the employee’s salary. Instead of monetary compensation for overtime, employers and employees may agree through CBAs to time off in lieu of extended workdays in exchange for a longer weekend.
Working on Sundays or on public holidays triggers double salary for the day.
Overtime pay does not apply to
Employees working for more than four hours but less than six are entitled to a 15-minute break. Those working for more than six hours daily are entitled to a one-hour lunch break.
There should be at least (1) 11 hours between an employee’s working shifts and (2) one full day off weekly.
Employees working between 10 p.m. and 5 a.m. are considered to work night shifts and are entitled to at least 20% more of what they would get while working during the day. Unions and CBAs may impose higher remuneration rates.
The Brazilian Consolidated Labour Laws (CLT) require companies with more than 20 employees to track the employees’ working day and their breaks. Companies are free to decide how to track the worked hours, including agreeing through a written agreement with employees individually about delegating the time-tracking obligation.
In the system mentioned previously, employees are required to input only those working hours that diverge from their standard hours. Through this mechanism, employees are presumed to have worked their regular work hours unless they input that they worked overtime on a given day.
The CLT also lists some employees who are exempt from having their hours tracked, given how difficult it is for employers to control the employees’ working hours.
If employees bring labour lawsuits against their employers regarding overtime hours that they were not paid for (which is very common in Brazil), employers have the burden of proof and will have to pay employees for their claimed hours unless they have documented evidence or witnesses to prove otherwise.
Even before COVID-19, work from home had been growing in Brazil. While many companies now implement a hybrid model with flexible location, including one to three days from home weekly, others have established full remote-first models. The term home office and trabalho a distância are very common in Brazil to describe those working away from the office.
In 2018, the Brazilian Labour Reform recognised remote work, which is defined as services rendered predominantly off the employer’s premises, using information and communication technologies. Although many points are still left to be addressed, such as the financial responsibility for the equipment and the office set-up, the recognition of remote work was a big step in the Brazilian Labour Regulations and has legitimised the path for those who do or would like to work from home.
A right by law to request telework is not extended to employees; however, arrangements can be made if the employer and employee mutually agree. Employers, on the other hand, can impose work from home on employees during emergency cases, such as calamities and pandemics, to guarantee the physical integrity of the employee and also retain the right to require the employee to revert to onsite work. In this context, employers must warn employees of changes at least 48 hours in advance.
The employment agreement must be amended to reflect the new work arrangement within 30 days of being approved. The law doesn’t specify who is responsible for the costs related to the set-up, maintenance of the workspace, and the tools the employee needs for work. Therefore, such agreements must be addressed on the employment contract within 30 days of implementing remote work.
The government is currently analysing the implementation of additional clauses to the telework laws to clarify grey areas, such as placing the burden of the costs of setting up a workstation and providing the necessary work equipment on the employer. However, companies requiring employees to work from home should be providing employees with the necessary tools to perform their work.
Since employers have neither control nor access to an employee’s home the same way they do when it comes to offices, the responsibilities imposed on them by the government in regards to health and safety are lessened. Instead, employers have the obligation of instructing and guiding employees when it comes to creating a safe and ergonomic workspace and avoiding occupational diseases and accidents. Those instructions must also be shared in writing with the employees, who in turn must sign this term of responsibility to acknowledge their own responsibility for their health at home and also to confirm they agree and understand the safety instructions and the risks for working from home.
Workers must inform employers of any work-related incidents or injuries that occur while working at home.
Currently, there are no official regulations regarding privacy, security, and confidentiality of data in the remote workspace. However, in August 2020, the GDPR equivalent came into force in Brazil, known as LGPD (Lei Geral de Proteção de Dados Pessoais). The LGPD requires employers to keep sensitive and personal information (company’s, client’s, and employee’s) secure whether the employee works from an office or home.
Some recommended actions companies can take to keep information securely stored and exchanged are educating and training employees on the importance of handling the data securely, implementing VPN and antivirus, and requiring employees to use only secure and private Wi-Fi networks.
There are no official regulations regarding workspace guidelines for teleworkers. However, it’s good practice for employers to provide guidance on what a safe home office environment is, which includes instructing employees on setting up ergonomic workstations, maintaining good ergonomic practices, and providing a health and safety checklist for those working from home.
An appropriate workstation will include the following:
The Labour Regulations regard all employees as the same regardless of where they work from. Remote workers have the same rights as office employees do in regards to employment. They are entitled to the 13th month salary, vacation and vacation bonus, FGTS contributions, and notice period, amongst others. However, one condition that does change for remote workers is that they are exempt from having their hours tracked and aren’t entitled to overtime, provided that the company hasn’t opted for monitoring working hours.
Another right that remote employees lose that is important to highlight is their statutory benefit of transportation allowance. If employees don’t commute to an office, employers aren’t required to provide the benefit. As for the meal and food vouchers, employers must maintain them if they’re part of the applicable collective agreement or the employee’s employment contract before the change from the office to the home office takes place.
In Brazil, companies are allowed to monitor and track the work progress of their remote employees — reviewing websites visited and time spent on them, taking snapshots of employees (with a camera) and their computer screens — by means of surveillance tools. However, companies should be careful, as some surveillance tools are too invasive and violate human and privacy rights and collect personal data of employees, not related to work and go beyond tracking productiveness. Employers should tell employees how they monitor them.
The Brazilian Labour Legislation states that companies with employees doing similar jobs in similar working conditions and locations must pay those employees equally, including expats. Moreover, two-thirds of the company workforce must be reserved for Brazilian employees.
Although this rule is rarely enforced, employees who are contacted by their employers outside working hours, either through a text message or a phone call, are entitled to one-third of their hourly pay if they engage in work.
Employees have the right and the duty to get and to give a notice period. Employees have the right to be served a notice if they are dismissed without cause and must also serve the notice if they resign. Notice period is 30 days, with 3 additional days for every one year of tenure, capped at 90 days.
If the employer doesn’t want the employee to work through their notice period, they must pay them in lieu. If the employee doesn’t want to work through their notice period, the employer has the right to deduct the amount from the employee’s pay.
In Brazil, every working citizen must have a work history booklet called Carteira de Trabalho e Previdência Social(CTPS), which they carry with them throughout their work life. This book retains all the information related to each job the employee ever had and serves as a base for employment rights (such as FGTS, unemployment benefit).
It’s a right of every worker to have their work history booklet duly signed by their employer when onboarded, including all the information regarding the role. Employers must return the document to the employee within 48 hours.
In Brazil, invention ownership varies depending on the circumstances, as follows:
If the invention was done while its inventor (employee) was working under a Brazilian employment contract, and happened as a result of the activities that the employee was hired for, the employer exclusively owns the rights.
If the invention was done as a result of the inventor’s (employee’s) personal efforts but while the employee was using the employer’s premises or equipment, both own the rights equally (unless the contract says differently). If the employer uses the invention, they should pay the employee fair compensation (no rules apply on how to make the calculation).
If the invention has no relation with the employment contract and was created without an employee’s using the employer’s premises or equipment, the employee exclusively owns the rights over it. The employer has no right to exploit the invention unless the employee has previously authorized it.
The legislation doesn’t provide expressly for the obligations or consequences related to restriction of activities. Therefore, employers who would like to impose them should include them in the employment contract.
The following guidelines apply:
(a) Non-compete agreements must be set for a fixed term, usually no longer than 2 (two) years.
(b) Non-compete agreements must also specify a territory (country or region).
(c) Non-compete agreements must also define objectively the industry or activities the employee must not engage in.
(d) More importantly, non-compete agreements must also provide for a consideration. That consideration is usually seen as acceptable by local courts in a range between 50% and 100% of base salary through the whole non-compete term.
The duties of confidentiality and non-disclosure of information are inherent to the employment relationship not only during the contract but also after its term. Employees can also be subject to non-compete obligations during the employment contract simply as a result of receiving salary from the employer.
Breach of these duties authorises the employer to terminate the employment contract with cause. The employee can also be liable for damages caused to the employer.
Brazilian law doesn’t restrict employees from working for a competitor after employment termination and doesn’t recognise such clauses. As a matter of fact, it’s a fundamental right in Brazil for individuals to work freely. Even though such clauses may be common abroad, they can be frowned upon in Brazil. However, employers can still choose to include the clause in the employment agreement. For post-employment restrictive covenants to be valid, they must include a fair indemnification to the employee (usually the employee’s latest base salary) for every month of restriction and be very specific on the scope of restrictions, providing the duration of the restriction (no more than two years), territory limits (such as a state), and the list of activities the employee performed.
Even though the law doesn’t require a written employment agreement, it’s highly recommended and common practice to enter into one specifying the terms and conditions as well as obligations that come with the job. Employment contracts can be in two languages (i.e., dual-language contracts) and must include a Portuguese version. The Portuguese version always prevails over the terms in the employment contract in a different language if the issue ever rises.
An employment contract, including the signature of the employer, must be delivered to the employee within 48 hours of starting a new job. The contract should include the following:
The minimum statutory employee rights are often implied terms that include minimum wage, FGTS entitlement, 13th salary, holiday entitlement, break rights, and any applicable collective bargaining agreements (CBAs).
CBAs with trade unions are automatically binding on all employment contracts. These agreements are valid for a maximum of two years and are negotiated between the employee union and the employer union (or the company itself).
Changes to the terms and conditions of employment are forbidden and void if they are less favourable to the employee.
It’s an employee’s right to receive a copy of their pay slip monthly, with a breakdown of all the deductions involved. The payslip can take a physical or an electronic form.
Employers can make deductions from an employee’s pay in the following circumstances:
It’s an employer’s responsibility to care for employees’ health and safety at work. Companies must take measures to prevent job-related accidents and diseases arising out of work conditions and train and educate employees on how to perform work safely.
Employers must provide employees with the appropriate protective equipment, ergonomic workspace, training, medical examinations, and guidance on how to work safely.
Specific rules vary by industry and company size. They are dictated by the Ministry of Labour and Employment (MTE).
Every employee is entitled to 30 days’ paid time off per year after 12 months of service. On top of receiving their regular salary during the holiday, employees are entitled to a holiday bonus equal to one-third of their monthly salary. This bonus must be paid at least two days before the employee goes on vacation.
Holiday entitlement is lowered if the employee has a certain number of unjustified absences yearly. Employees may request their employers to convert one-third of their unused vacation for the equivalent in cash.
Every employee is entitled to unemployment funds — seguro desemprego — if their employment is terminated without cause. The government allowance varies based on the employee’s salary in the preceding three months and cannot be lower than the minimum wage. The period an individual is entitled to receive the benefit for depends on their tenure.
To be entitled to the benefit, employees must meet the following criteria:
In addition, those applying for the benefit for the first time need to have received a salary from a company for at least 12 months during the 18 months immediately preceding the date of dismissal. The benefit is paid out in four instalments if covering 12 – 23 months, and five instalments if covering 24+ months.
Every employee in Brazil is entitled to the FGTS, an unemployment guarantee fund to which employers contribute 8% of the employee’s gross salary monthly, without any discount to their salary. Employers must open a blocked bank account with the national bank for each employee, where they will deposit their contribution monthly.
Employees get access to the funds when they are terminated without cause, retire, buy a house, or suffer a serious illness. In case of an employee’s dismissal without cause, the company must pay an indemnification equivalent to 40% of the employee’s FGTS balance.
Yearly, every employee is entitled to receive an additional month’s wage also called the Christmas bonus. It can be (1) paid in full by the 20th of December or (2) divided in half and paid between February and November and again in December. Employees may request one-half to be paid along with their vacation bonus.
Employers must provide this benefit to all employees who have worked all 12 months of the year. Those who join the company later in the year are entitled to a proportional fraction of the 13th salary (monthly salary divided by 12 and multiplied by months worked in the year).
The 13th salary can be paid as a lump sum at the end of December or divided into two equal payments: (1) between February and November and (2) by the 20th of December. Employees who are dismissed are also entitled to the pro-rated equivalent of their 13th-month salary.
Employees who must commute home from work are entitled to transportation vouchers provided by their employers to cover the costs of the commute. Companies can deduct up to 6% of the employee’s monthly gross salary to cover the costs of the transportation voucher but must top up the remainder without any additional costs to the employee.
Employees who don’t need to commute, such as remote workers, are not entitled to this benefit.
In Brazil, employers cannot discriminate against employees in any stage of employment — from hiring to promoting and dismissing — based on the following grounds:
In Brazil, employers can dismiss employees without cause as long as they respect the notice period and provide the severance pay. However, they would need to pay a 40% penalty of FGTS. Employers need to justify the dismissal in case of termination with cause only.
However, some categories of employees benefit from additional protection against dismissal for a defined period:
In Brazil, a period of continuous employment doesn’t create any statutory rights for employees; however, employees retain their period of continuous work as it applies to holiday rights, notice period, and FGTS entitlement. Employees can be transferred between companies of the same economic groups in a merge and acquisition transaction or as part of an asset purchase. The transfer is automatic if it doesn’t interfere with the employment, and the new employer must comply with the labour obligations that were applicable to the previous employer.
The employment terms and conditions cannot be changed as a result of a transfer unless the employee agrees to the change. If the terms are detrimental to the employment conditions, the terms will be considered void. There is no protection against dismissal on a business transfer.
The Lei Geral de Proteção de Dados Pessoais (LGPD), the equivalent to the EU’s GDPR, has recently taken effect in Brazil. It applies to any business or organisation that processes personal data regardless of where that business or organisation itself may be located. There are nine fundamental rights that data subjects have:
Companies have ten obligations when processing data:
Until recently, union membership was mandatory. However, union memberships are now optional to employees. Those who join a union must pay an annual fee equivalent to one full day of their wage. Unions are a big part of the employment scene in Brazil, and most industries have collective agreements that provide workers with better benefits.
Employers cannot refuse, impose, discriminate, or treat an employee differently because of their union membership status. Employees are free to engage with whichever trade unions they prefer.
In Brazil, it’s mandatory to provide employees with an additional month’s salary at the end of the year, which is called the 13th month salary. Employers must provide this benefit to all employees who have worked all 12 months of the year. Those who join the company later in the year are entitled to a proportional fraction of the 13th salary (monthly salary divided by 12 and multiplied by months worked in the year).
The 13th salary can be paid as a lump sum at the end of December or divided into two equal payments: (1) between February and November and (2) by the 20th of December. Employees may request one-half to be paid along with their vacation bonus. Employees who are dismissed are also entitled to the pro-rated equivalent of their 13th month salary.
Every employer must deposit 8% of the monthly salary of each of the employees into a special account opened with the Federal Savings Bank. A new account is added for the employee with every new job. This account is used for the Severance Pay Fund (FGTS), which employees are entitled to at the end of employment unless the employment is terminated with just cause. FGTS income is exempt from tax.
In addition, companies must pay a penalty equal to 40% of the sum already in the fund to employees terminated without a cause.
Employees can withdraw the FGTS when they retire, are terminated without cause, suffer a serious illness, or need money to purchase a home, amongst others.
Along with a generous yearly holiday entitlement of 30 days, employers must also provide employees with a vacation bonus on top of their regular pay. The vacation bonus equals one-third of the employee’s monthly compensation and must be paid two days in advance of the employee’s time off.
Not applicable to remote workers. Available in digital form (pre-paid rechargeable cards). Employees who must commute to and from work by public transport are entitled to a transportation voucher, provided by the company if the cost of transportation surpasses 6% of their monthly wages. The amount beyond 6% is paid by the employer. In certain cases, for instance, when the commute costs are under 6% of the salary, there would be no reason to provide these vouchers.
Mandatory for companies with more than 30 female employees; otherwise, optional
Called auxílio creche in Portuguese. Companies with more than 30 female employees must provide daycare space on their premises for those still breastfeeding (which, in some cases, can be extended until the child turns six) or give the employee an allowance or reimbursement equivalent to the cost of sending the kid to daycare.
The amount of the allowance is negotiated between the employer and the employee, based on the surrounding daycares’ monthly prices. Some CBAs stipulate the amount. If the daycare that the employee wants to send their kid to charges more than the average price, the employer isn’t obliged to pay that difference, allowing the employee to pay for the additional cost.
Employers cannot deduct the daycare allowance from the employee’s pay, as it’s a right of the female employees to get assistance with this cost.
Employee benefits and conditions are vested rights, and employers aren’t allowed to make changes to the employment terms and conditions, which may make the employee worse off, regardless of whether the employee had previously agreed to such changes.
Called vale-refeição in Portuguese. Meal vouchers are very common in Brazil. It’s a special rechargeable card that can be used in most restaurants so the employee doesn’t pay for their meals at work daily. Any unused amount accumulates on the card. Offering meal vouchers to employees gives employers some tax breaks. The amount added to the card varies according to the cost of living in each city (e.g., in São Paulo, it’s BRL 30–50 per day).
Called vale-alimentação in Portuguese. Unlike the meal vouchers, these are used in supermarkets and grocery stores and are also available as rechargeable cards. If a store accepts a card, the funds don’t necessarily have to be spent on food only. Most companies provide employees with either food or meal vouchers. Any amount not used accumulates on the card. Offering food vouchers to employees gives employers some tax breaks. If employers are registered with PAT — the government branch responsible for administering meal and food vouchers — they could claim up to 4% deduction in income tax. The amount added to the card varies according to the cost of living in each city (e.g., in São Paulo, it’s about BRL 500 per month).
It’s very common for tech companies in Brazil to provide employees with health insurance paid by the company. On top of that, dependants are often included and so are vision and dental care.
Some companies deduct a fixed price from the employee’s pay and cover the rest, while others pay the amount in full. If health insurance is made available to all employees, the premium is exempt from social security and income tax.
Under healthcare plan regulations, employees are entitled to be continuously covered by their employer’s plan for up to 24 months if they’re dismissed without cause, or may get lifetime coverage if they retire after being covered by the plan for at least ten years. These regulations apply to the plans where employees are paying part of the premiums. Plans that are fully funded by the employer are not subject to these extension rights.
Larger companies often offer private pensions to their employees, with companies contributing 3% of the employee’s salary. Defined contribution plans are currently the norm. Employees can contribute out of their salaries up to a certain rate, varying on the private pension plan, and employers usually match that contribution up to a certain rate.
If available to all employees, pension plans are qualified (as long as they meet the legal requirements) in Brazil, which means the beneficiary pays no social security and no income tax until they receive the funds.
Company life insurance schemes are very common in Brazil, especially at larger companies. They are often tied to the employee’s role and salary — often three times the employee’s annual salary. Some companies have add-ons to the life insurance to cover travel insurance, funeral assistance, anticipation of the insurance lump sum in case of serious illness, and incapacity caused by an accident.
Most private companies adhere to the government scheme Empresa Cidadã, which gives mothers an additional 60 paid days off and fathers 15 paid days off. Some tech companies go beyond with an additional one or two months paid by the employer, and some even match the paternity to the maternity leave and provide an additional four weeks of fully paid flexible work arrangements to assist with returning to work.
Some tech companies support employees with their fertility, surrogacy, and adoption journeys, regardless of their marital status, gender, or sexual orientation. Usually, the assistance is financial (through an allowance to be used for the benefit, up to 90% and capped at US$20,000) and emotional (giving employees access to professionals to be by their side during the journey). It may also the kind that supports new parents.
Increasingly, companies allow employees to work remotely full time or on a hybrid setup — with two–three days at the office and the remainder at home.
On top of that, flexibility with working hours has also increased, giving employees more flexibility with when they get work done, especially for days they have other errands (usually respecting the business core hours).
Most tech startups encourage and support employees to keep learning throughout their careers. Many companies offer continuous training, education allowance, tuition assistance, and yearly budgets to be spent on professional conferences.
More importantly, most companies with distributed teams subsidize English, Spanish, Mandarin, or other language relevant to the employee’s role. Language classes are very common in Brazil.
Tech companies whose employees work from home often provide them with monthly stipends or one-off office setup allowances. Some who don’t have offices nearby also allow the possibility of using co-working spaces for those who prefer to work alongside others from time to time.
It’s common to give employees the option of choosing their preferred hardware. Some companies go beyond and provide stipends to cover electricity, Wi-Fi, and office materials.
Some companies match employee’s charity donations (up to 1% of the employee’s salary), while others allocate a certain number of hours yearly (up to 40) that employees can use towards volunteering in projects they care about rather than work.
To those employees who don’t take public transportation to work, some tech companies give a fuel allowance to cover the costs of travelling to and from work.
Certain companies offer various perks for employees when it comes to wellness. Some provide those who go to an office with breakfast, drinks, video games, snacks, no dress code, and even pet days; others provide mid-day meditation sessions, yoga classes, discounted cinema tickets, gym memberships and other cultural attractions (allowance of BRL 50 monthly), Employee Assistance Program, and fertility assistance.
Recently, private pensions have become a very sought-after benefit since the government implemented a pension reform. It’s becoming a common market practice to provide employees with private pension plans in Brazil. Companies can choose to match employees’ contributions, usually about 3% – 6% of their salary, or simply offer a scheme where the employee contributes alone.
Tech startups often offer stock options to employees as a way to attract talent and make them feel empowered. The amount allocated for stock options varies by company but is usually around 0.01% to 0.1%, depending on the employee’s role and tenure.
It’s common for employees in high executive positions to be offered participation in an employee share plan.
Depending on the company’s industry and the employee’s role, some employers provide employees with commissions and yearly or semi-yearly bonuses for hitting targets or bonuses tied to the company's overall performance.
Bonuses are discretionary and don’t need to follow rules in relation to the beneficiaries, value (fixed or variable), and periodicity. However, depending on the manner and the frequency of the payments, this type of benefit may be considered as part of the employee’s compensation, thus becoming subject to payroll taxes and labour charges — INSS, FGTS, IRRF, 13th salary, vacation, overtime, night shift premium, and prior notice.
If employees need to use their phones for work, it’s common for companies to take over that cost and reimburse employees for it.
Although Brazil already has a generous statutory holiday entitlement, some tech companies adhere to the unlimited vacation days rules, with a statutory minimum that must be taken.
Many tech companies offer their employees discounted gym memberships or subsidise other sports activities of their choice.
Although not very common, there are companies that go above and beyond to provide employees undergoing sex change with financial support to be spent on name change, hormones, medication and surgery, along with medical and psychological guidance.
Employers must withhold the employee’s part of the Social Security contributions (INSS) monthly and make contributions themselves based on the employee’s total remuneration for the month. The flat rate is either 20% or 22.5%, depending on the industry, and is without a cap.
The INSS funds employee’s pension, worker’s compensation, disability retirement, accident assistance, sick pay, unemployment, imprisonment allowance (goes to the dependents while the person is in prison), maternity pay, family allowance, and education. It guarantees payments to the employee and their families in the event of illness and death.
Employers must also make a mandatory contribution equivalent to 8% of the employee’s total monthly salary (inclusive of overtime, 13th month salary, vacation pay) into the Brazilian Government Fund for Employees (FGTS). The FGTS (also used as a pension fund) covers the severance indemnity that an employee is entitled to when their employment is terminated without cause. When an employment contract ends, deposits cease and the amounts are retained in the account, which becomes inactive. Thus, professionals can accumulate several FGTS accounts, depending on the jobs they have held, and may be able to cash the amounts in specific situations (e.g., retirement).
The RAT amount depends on the industry and the number of employees, ranging from 1% (used for companies with low accident risk) to 3% (used for companies with high accident risk) of the employee’s monthly salary. Tech companies tend to require a 2% levy.
Employers should keep in mind that, on top of the monthly contributions mentioned above, every employee gets mandatory benefits impacting taxation and increasing the monthly cost for employers.
Residents of Brazil are subject to tax on their worldwide income on a monthly basis, whereas non-residents are subject to tax on the income generated only within the country. To be considered a resident, an individual must spend more than 183 days within any 12-month period in Brazil, be a Brazilian citizen living in Brazil or a naturalized foreigner, or hold a permanent or temporary visa with a local employment contract. Brazilian residents living abroad are also considered residents for the first 12 months after their departure (if no tax clearance certificate is filed).
In Brazil, employers are responsible for withholding income tax and social security contributions on behalf of the employees. The income tax rate is broken down monthly rather than yearly, and the tax rate is progressive, as follows:
|GROSS INCOME (MONTHLY)||PROGRESSIVE TAX RATE (%)|
|Up to BRL 1,903.98||0|
|BRL 1,903.99 – BRL 2,826.65||7.5|
|BRL 2,826.66 – BRL 3,751.05||15|
|BRL 3,751.06 – BRL 4,664.68||22.5|
|More than BRL 4,664.69||27.5|
Non-residents are taxed at a rate of 25%, and their offshore income is tax exempt.
Married couples may choose to file tax returns jointly for the household.
Income tax is applicable to base salaries, cost of living (some companies may elect to cover water, electricity, and food expenses), housing, education allowance covered by the employer, vehicle allowances, leave to visit family (usually for expats), reimbursement of work-from-home expenses, personal use of a car provided primarily for business use, company-provided security guards or drivers, interest on below-market-rate loans and free or below-market-value use of accommodation (the subsidized portion of rental costs is considered to be the taxable benefit).
Employees are subject to social security contributions (INSS) withheld monthly by the employer as part of payroll. Social security contributions protect the employee and their family in case of illness, injury, death, accident, and pregnancy.
The contribution rate is based on the employee’s full remuneration for the month, at a rate of 7.5% – 14%, capped at BRL 713.09 monthly (2021).
|GROSS INCOME (MONTHLY)||PROGRESSIVE TAX RATE (%)|
|Up to BRL 1,100||7.5|
|BRL 1,100.01 – BRL 2,203.48||9|
|BRL 2,203.49 – BRL 3,305.22||12|
|BRL 3,305.23 – BRL 6,433.57||14|
In Brazil, taxpayers can choose between two different taxation methods according to their preferences: (1) the simplified version and (2) the complete version. The simplified version requires taxpayers not to itemise the deductions but rather use a standard annual deduction of 20% of their taxable income, capped at BRL 16,754 annually. The complete version itemises each deduction and applies the full taxation from the start for an accurate tax declaration, which doesn’t require additional payments or reimbursements at the end of the year.
Taxpayers with dependants can claim them as a deduction. A dependant can be
The dependant deduction changes every year and requires a Central Provident Fund (CPF) number. For the year 2021, the deduction per dependant is BRL 2,275.08.
Education expenses an employee incurs are deductible for tax reasons, capped at BRL 3,561.50 per student, which is also applicable to those with kids going to school abroad. Child support and alimony are also deductible for tax purposes.
Contributions to the Brazilian Social Security (INSS) are deductible when the monthly tax assessment and the annual tax return are determined.
Contributions to a Brazilian private pension are also deductible, capped at 12% of the employee’s gross income annually.
Medical expenses on behalf of an employee or any of their dependants are also deductible, up to 6%.
Employees don’t pay income tax for some work-related benefits, including meals, transportation, uniform, per diem allowance for work outside their country, certain components of severance pay, contributions made by the employer into private social security programs, FGTS, and relocation costs when moving to a different county at the request of the employer. No caps apply to any of them.
A taxpayer can also deduct the following from the tax they have to pay:
There is no prohibition on the use of genuine independent contractors. However, if the elements listed under what makes someone an employee are present in the relationship, employers can receive hefty fines and the contractor is reclassified as an employee.
Fixed-term contracts are allowed for only those services whose nature justifies the predetermination of the term, never exceeding two years. The contract can be extended for one additional term of up to two years. Further renewal would result in the contract’s becoming effective for an indefinite term.
In Brazil, the principle of “Prevalence of Facts” is applicable when analysing whether someone is an employee. That means that facts and actions prevail over any documents executed by the employer and employee/contractor.
The following characteristics mark an employer and employee relationship:
Employers deduct employees’ social contributions to pay it to the government, while contractors have to be in charge of the deductions themselves. The number of contributions of either an employee or a contractor is the same.
Employers have no obligation to give benefits to contractors but are obliged to provide employees with FGTS (severance fund), 30 days of paid annual vacation, a one-third premium on the vacation pay, 13th month salary, transportation voucher, and overtime pay.
When it comes to termination, employees get a minimum 30 days’ notice plus 3 days per year of work. This can be paid in lieu. Contractors get 8 or 4 days’ notice depending on the frequency with which they are paid for their services; however, their contracts can provide a longer term, with 30 days being the usual notice period. Moreover, employees are entitled to severance pay, pay for unused vacation, and the vested fraction of their 13th month salary, while contractors aren’t entitled to any of these benefits.
Penalties for misclassification are very common, since filing labour claims is free of charge for employees. In the event the Ministry of Labour rules that an employee has been misclassified, the company may be fined BRL 400,000 per employee, with the fine doubling in case of a relapse.
Moreover, the Federal Tax Revenue may force employers to backpay for all the statutory rights that the employee hasn’t received over the years of service, with an interest penalty ranging between 75% and 225%.