Brazil is one of the most difficult countries to do business in especially when it comes to Brazil hiring and employment specifics. Considering the allure that Brazil has (think BRICS, the resources, and opportunity) many companies still set their sites on this South American giant. The question most companies have is, “How can we gain market entry to Brazil while protecting ourselves from the exposure?” We wanted to take the time to help clarify some paths for hiring a team in Brazil from three key circumstance positions: Commitment Length, Headcount, Compliance Needs.
These variables tend to dictate what your hiring or employment vehicle options are, so let’s take a look.
Long-term commitment • High headcount (100+) • Highest compliance
Although it’s expensive and time-consuming, setting up a Brazilian company may be the best option with these circumstances. There are limited companies and corporations, just like the United States, so it’s important to know which is best for your goals.
If you are planning on “testing the market” note that the company creation route can be overly heavy and incredibly difficult to tear down. Here is another post about foreign subsidiaries that outlines some of those challenges. A Limitada can take 10-12 months and costs up to $40K to be fully operational. The bookkeeping and annual compliance requirements are also rather involved, so be prepared to spend a bit more to keep your entity compliant. S.A.’s are most often reserved for larger companies and Branch offices are very rarely used. So if you’re entering the market for the first time, most scenarios suggest the Limitada is the way to go.
Brazil is particularly sensitive to employment regulation compliance and the higher your headcount, the more likely you are to trigger an investigation. According to the Brazilian Superior Labor Court, there are currently 2.9 million labor suits at implementation stage in the country.
Unclear commitment OR short-term • Low to medium headcount (1-100) • Flexibility over compliance
Utilizing an outsourced employment model is an optimal solution for many companies in Brazil. An International PEO can not be used forever at some point, you may need to set up a Limitada or S.A. to satisfy taxable nexus regulations. An employer of record approach can be the perfect bridge solution to stay flexible while remaining compliant. If the strategy is taking off after 6-12 months, then you can start setting up your Limitada and transfer the employment compliantly once the process is complete. This works for both local nationals and expats, and culturally is a generally accepted way of entering a market.
Other Brazil hiring and employment considerations
Even if the employees aren’t “unionized”, they’re unionized
- One of the most important elements is the redundancy withholdings, which is currently set at 8% of salary per month. This is in place for when an employee terminates and is required by law. We most often see companies shirking this responsibility but Brazilian court favors the employee. Be sure to withhold this monthly and you’ll be in a better place at the culmination of the employment relationship.
Be aware of contractor misclassification
- To get around employment laws, some companies have asked their employees to effectively form their own companies and “contract” the work to those “companies”. This has become prevalent enough that the local authorities tend to seek out such arrangements and see right through them. We don’t advise this approach given the focus on such alternate vehicles and increased scrutiny.
Please feel free to contact us with any questions you have around Brazil hiring, employment, or business best practices.