South America is a hot target for companies looking to expand their international business locations. In particular, companies are looking at Brazil; which eventually leads them to investigate the Brazil employment differences. Brazil has been of particular interest since Jim O’Neill of Goldman Sachs coined the acronym BRIC (Brazil, Russia, India, China) in 2001. His analysis points to these four countries being wealthier than most of today’s economic powerhouses by the year 2050.
If your international strategy lands on Brazil as a target and you are looking to hire there, here are some of the big Brazilian employment differences you can expect when compared to employing in the USA. Visit our Brazil International PEO page for a more thorough explanation of hiring considerations.
1. Nationality Restrictions
Brazilian employment law requires that at least 66% or two thirds of your company’s employees MUST be Brazilian. This hits many companies hard who are expecting to be able to import all of their key player expats. There are some exceptions but they are rare; it varies depending on your permit from the Ministério da Justica (Ministry of Justice). As a general rule, expect at least two thirds.
2. 13th month
Each Brazilian employee receives a “13th salary” as a Christmas bonus; this means your employee will receive the equivalent of one months pay extra around Christmas time. The “13th salary” was introduced in 1942 and must be paid in two installments; one in November and one in December and it is illegal to pay in one installment. To learn more detail about 13th salary you can go to The Brazil Business.
3. Severance Pay
There are a few different reasons that employees may be entitled to severance pay and each of them have elements that are unique to Brazil, terminations have a minimum mandatory 30 days with three days added for each year the employee worked for the company.
Termination without cause or constructive dismissal. Employees must receive:
- The balance of their wages.
- A proportional payment for untaken holidays, plus one-third of the holiday remuneration.
- A proportional 13th-month salary (Christmas bonus).
- Access to the funds deposited in a severance fund called the Brazilian Government Severance Indemnity Fund Law (FGTS).
- The FGTS contains monthly deposits of 8% of an employee’s gross compensation. Deposits are made by the employer into an escrow account with a governmental bank, in the name of the employee. The employer must also pay a 40% penalty on the balance in the account.
- Any payments due under collective agreements.
- Any other benefit provided under the employer’s policies or the employment contract.
Termination with cause:
- Employees must receive only the balance of their wages, an unused holiday payment, and a proportional 13th-month salary.
- Employees are entitled to all funds that are due in the case of a termination without cause (see above), except for the FGTS penalty and the indemnification for not having received the advance notice period.
4. Employer Contributions are Typically at Least 68%
There are tons of various taxes and fees to have an employee in Brazil, this article lists all of them and tells you to expect at least 68% on top of employee salary. We tend to say expect a rough 70%.
5. Paid Vacation
Every employee in Brazil must receive 30 days of paid vacation after their first 12 months of employment.
6. Paid Maternity Leave and Job Stability
A pregnant employee must receive 120 days of paid maternity leave paid by the employer, but reimbursed by Brazilian National Security. A pregnant employee cannot be made redundant after confirmation of pregnancy and for at least five months after the delivery.
The cost of maintaining a company in Brazil adds a whole other layer of complications and costs, so if you do need to hire in Brazil we off the Foreign Subsidiary as a Service (FSaaS) as an alternative to keeping a company there. As always, let us know if you have any questions about Brazil employment.