If your business is looking to expand into Brazil’s market, there are several factors you should take into account when hiring employees in Latin America’s largest and most populous country.
Whether you’re looking to establish an office in Brazil, hire remote employees, or work with international contractors, the following guide explains your options, the risks involved, and how to compliantly expand your global workforce.
Can I Hire Employees in Brazil From Another Country?
Yes, you can hire employees in Brazil from another country. Hiring employees in a foreign market may seem like an overwhelming and unfamiliar process, but it can also be beneficial if you acknowledge and stay in compliance with local laws.
As with any foreign market, Brazil's labor laws vary from other countries, so it’s important to understand the local regulations before starting the hiring process and doing business in Brazil.
How Do I Hire and Pay Employees in Brazil?
There are several ways to hire employees compliantly in Brazil. How you do so depends on many factors, including the number of employees you plan to hire, time, cost, and overall global expansion goals.
1. Set Up a Legal Entity
Setting up a legal entity in Brazil allows you to establish a local branch or foreign subsidiary and hire employees directly. This is a savvy option if you plan to hire a large team or would like to establish a long-term presence in Brazil because you can handle employee logistics internally and cut down employment costs in the long run.
However, establishing an entity is costly and time-consuming. Your team must have extensive knowledge of Brazil’s labor laws and must manage complicated HR processes and payroll. If done incorrectly, your business risks noncompliance. Consider partnering with an employer of record instead if you only plan to hire a small number of employees in Brazil.
2. Use an Employer of Record
Partnering with an employer of record (EOR) allows you to quickly hire employees in Brazil without having to go through the complex process of establishing a foreign entity. An EOR handles all risk mitigation and taxes to ensure local compliance with Brazil’s employment laws.
An EOR partner also handles onboarding, payroll, benefits administration, and support for your distributed workforce while you manage day-to-day management tasks and focus on your business goals.
Learn more: What Is an Employer of Record?
Can I Hire a Contractor in Brazil From Another Country?
Instead of setting up an entity or partnering with an EOR, companies may consider targeting Brazilian talent by engaging them as international contractors.
Hiring contractors offers flexibility to work with talent for short-term or specialized projects. It can also save companies time and money since they don't have to onboard and pay contractors as employees—so long as they comply with Brazil's worker classification laws.
Unfortunately, engaging international contractors opens companies up to misclassification risks. If local authorities classify your contractors as full-time employees, you risk facing financial and legal penalties. We discuss misclassification in more detail below.
Compliance Risks When Hiring Employees and Contractors in Brazil
While hiring employees and contractors in Brazil can be beneficial for your long-term global expansion goals, there are still compliance risks when hiring talent in an unfamiliar market. Because employment laws and regulations differ in each country, it’s important to understand the risks involved and how to avoid them.
Misclassification
Misclassification is a possible risk when engaging international contractors. If misclassified, even if unintentionally, a contractor could claim they are entitled to employee benefits, and your company could face fines, legal issues, reputational damage, and employee entitlement back pay obligations.
Learn more: How to Avoid the Risks of Independent Contractor Misclassification
Unfamiliar Employment Laws in Brazil
Even though Brazil’s employment laws may seem unfamiliar to companies based in another country, they should still be regarded with the utmost importance. Some of Brazil’s employee entitlements are very generous and may exceed the benefits that your business is used to providing.
Employees also receive 30 days of paid vacation after every 12 months of employment, 15 days of sick leave, and 120 days of paid maternity leave. Terminating an employee requires 30 days' notice for the first year of employment and three days extra for each additional year up to 90 days.
Read more about Brazil's employment laws here.
Incorrect Payroll Contributions and Payments
All employees enroll in Brazil’s social security system, and contributions and tax withholdings are factored into payroll. Employer contribution rates depend on the industry and are based on an employee’s monthly salary.
One employer requirement in Brazil that may be unfamiliar to foreign companies is 13th-month pay. In Brazil, this mandatory payment is paid to the employee in two installments–one payment by November 30 and the other by December 20. The amount is typically equivalent to one month’s pay or 1/12th of the employee’s annual salary.
Your business should verify accurate employer payroll contributions when hiring and paying Brazilian employees. If not, you could face fines and penalties. Partnering with a global employer of record ensures that you accurately calculate payroll contributions for your Brazilian employees and adhere to the country's payroll compliance laws.
Immigration and Visa Requirements
You may encounter a scenario where you need to hire talent in Brazil that are not residents or citizens of the country. Or, perhaps you have employees that are interested in moving to and working abroad in Brazil as part of your global mobility policy. Either way, it's important to know which visa or permit your talent needs to ensure they are correctly employed.
For remote teams, it’s worth noting Brazil’s digital nomad visa, which allows foreign workers to live, travel, and work in Brazil. Anyone who can prove they are able to work remotely can apply, and the visa is valid for one year with the possibility of extending for another year.
Permanent Establishment
A company triggers permanent establishment when it has a fixed location and generates revenue in Brazil. When you have a permanent establishment, your business is liable for Brazil’s corporate taxes. Failure to uphold those obligations results in legal issues such as interest fees, penalties, and employer liabilities.
Easily Hire in Brazil With Velocity Global
Hiring employees in Brazil can feel like an unfamiliar and foreign process, but when done compliantly, it can lead to promising opportunities on your path to global expansion. A knowledgeable and experienced partner like Velocity Global can help you get there successfully.
Our Employer of Record (EOR) solution helps companies easily hire and pay top talent in Brazil and 185+ countries without having to set up foreign entities. We handle onboarding, payroll, benefits administration, compliance, and HR support on your behalf so you can focus on running your business.
Contact us today to start hiring top talent in Brazil quickly and compliantly.
