Gain insight about how to hire staff through an employer of record (EOR) in Brazil.
Brazil’s large domestic market, strong economy, and geographical advantage offer prime conditions for doing business in Latin America. The country has the ninth-largest economy in the world based on nominal GDP.
Business and investment in Brazil are poised to increase as the government works to develop its economy and attract foreign business activities. However, navigating your business’s expansion into a new country is a complex process. Knowing the business requirements to hire employees is difficult, so it may be wise to engage with and seek guidance from a knowledgeable third party.
If you are considering doing business in this prosperous market, read on to learn about the importance and the benefits of working with an employer of record in Brazil. Or reach out to us now to discuss your market entry options.
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What is an employer of record in Brazil?
An Employer of Record, also known as an EOR, is an external partner of a company that takes responsibility for its formal employment needs. These companies are also known as Professional Employer Organizations, or PEOs.
Through a co-employment model, an employer of record in Brazil can manage your recruiting, hiring, and payroll needs in full compliance with local law. They support companies that need to hire and manage staff in the country, but which aren’t fully aware of their employment obligations in Brazil.
An Employer of Record can also:
- Organize all visas and work permits for the employees, with the purpose to avoid delays or refusals
- Advise on and comply with labor laws in Brazil concerning local employee contracts and worker protections
- Inform the hiring company of required notice periods, rules of termination and compensation pay
- Process, pay and manage benefits for your employees.
How do companies work with an Employer of Record?
Companies looking to hire staff will engage with an employer of record when they need to hire in a country in which they aren’t yet fully incorporated. If an expanding company wants to take a small-scale approach to enter the Brazilian market, then hiring sales executives through an Employer of Record in Brazil is an attractive option.
A hiring company will sign a contract with a third-party organization agreeing to list them as the employer of record for the staff members they wish to hire in Brazil. This designation means that, on official documentation in Brazil, the third-party company (the PEO) is considered responsible for meeting all employment regulations for that staff member.
The foreign company is therefore free from the burden of understanding and complying with employment law in Brazil on their own. As a result, the foreign company is at a reduced risk of non-compliance, and can let its executives focus on business development and growth in their new market.
The key steps to engage with an employer of record in Brazil include:
- Signing a Services Agreement with the third party (PEO)
- Confirming the employment offer for the candidate
- Sending the employment offer to the candidate
- Once accepted, the PEO will prepare an employment contract, for which the company will act as the Employer of Record
- The candidate approves and signs the employment contract
- As the Employer of Record, the PEO then completes all mandatory registrations for a new employee in Brazil
- Employee starts work and reports to the hiring foreign company.
Why use an employer of record?
Legal Advice and Representation: Aside from saving a foreign company time with hiring employees, an employer of record in Brazil will also mitigate the risk of non-compliance. Any changes to relevant laws and regulations in Brazil will be noticed by the PEO, allowing you to stay compliant. A PEO can also deal with and resolve many claims made against your employees.
Employee Benefits: Another advantage of using large employment services providers is that they can offer attractive benefits for the hired staff. This is an added bonus for smaller companies working through an Employer of Record, as they may not necessarily have been able to offer those benefits themselves. Additionally, a PEO pays and processes benefits for a foreign company’s employees, saving time that could be spent elsewhere.
Enhanced Hiring: An employer of record can inform its partner’s hiring decisions in light of more extensive knowledge about the region. The PEO can use its experience to hire the most qualified and best-suited candidates. If necessary, your employer of record can even acquire business visas or residency permits for any foreign employees.
Time-saving: Due to the employer of record’s expert management of bureaucratic processes, optimized hiring practices, and negation of the need for the lengthy procedure of company formation, allowing foreign companies to begin operating in Brazil far quicker than they may otherwise be able.
Language Familiarity: If you opt for an employer of record specialized in Latin America, you can expect all documents and contracts to be drawn up in both Portuguese and English, or even Spanish if necessary. Your PEO can offer additional assistance in translating as well.
Market Familiarity: working with an employer of record in Brazil is also a good way to begin to form your own impression of the Brazilian market, informing your decision into further investment in Brazil. The reduced initial investment compared to company formation in Brazil lets foreign companies test the waters before fully committing.
In summary, a PEO can release foreign companies from the obligation of learning all the nuances of laws and regulations in Brazil, while also dramatically speeding up the hiring process, bypassing the need for company formation.
There are many advantages to employing an EOR. However, although an EOR can help guide you through the nuances of laws and regulations in Brazil, it may still prove useful for you to learn more about the important points of Brazilian labor and employment law.
Overview: employment contracts in Brazil
If you’re considering using an employer of record in Brazil, it may be useful to learn more about the various types of business contracts when hiring staff in Brazil. An employment relation requires services performed on a personal, onerous basis including subordination. Usually, employment contracts in Brazil exist for an unlimited term. However, contracts are not always indefinite. Brazilian law outlines the following contracts:
Fixed-term contracts: In fixed-term contracts, the business activities are temporary. They depend upon the completion of a specified service. They last only up to 2 years. The employment agreement requires a written statement clarifying the terms of employment.
Open-ended contract: A fixed-term contract becomes indefinite-term employment if the reasons for a definite term contract are not sufficient, the information incomplete, or the contract has been extended more than once. These contracts have no set end date, but may end when the employee decides to leave or the employer decides to terminate, in which case the employee is entitled to their rights under Brazilian law.
Intermittent Contracts: Intermittent contracts apply only during specified periods of time. During these periods, the employee may be called upon to work. Outside of these, the employee remains inactive.
Employers of Record in Brazil will advise you on the best type of contract for the type of employees you want and the length of time you will need them.
Employee benefits and rights in Brazil
Brazil’s employment law environment sets a number of benefits and rights for employees. These are written into Brazilian law primarily by the 1943 Consolidation of Labor Laws.
- Minimum wage: In 2021, the minimum wage in Brazil amounts to R$1100 per month according to Trading Economics. This is increased from R$1045 per month in 2020. Brazilian states may maintain their own minimum wage higher than the national.
- Paid vacations: Employees can legally take 30 days off for every year they work. The employer may decide when the employee takes their vacation. At least one of these vacations must be at least 14 days, and the rest must be at least 5. Employees may sell up to 10 of their vacation days for double pay. Vacation pay is equivalent to the normal monthly salary plus an additional ⅓ of the normal monthly salary. Depending on the employees’ unexcused absences, they may have fewer vacation days.
- Holidays: Holidays occur on New Year’s Day (January 1), Good Friday, Tiradentes Day (April 21), Labor Day (May 1), Independence Day (September 7), Our Lady of Aparecida (October 12), All Souls’ Day (November 2), Republic Proclamation Day (November 15), Christmas Day (December 25)
- Social Security: Employers are expected to pay between 8 to 26.7% of an employee’s annual salary to the Nation Institute of Social Security.
- Bonuses: Like in other Latin American countries, employees in Brazil have rewarded a ‘thirteenth salary’, which is one month’s salary paid in two installments – usually in November and December.
- Maternity leave: Women giving birth can take maternity leave of up to 120 days. Fathers are permitted to take 5 days off for the birth of their children. This cost will be reimbursed by the National Social Security. Pregnant women may take an additional 2 months off uncompensated if they choose.
- Sick leave: An employee that is sick gets paid for the first 15 days of sick leave, provided they show a certification from the doctor of their illness. After 15 days, the National Institute of Social Security pays any further day of sickness if properly documented.
- Overtime: Overtime is paid at a minimum rate of 150% of the regular salary. Overtime is limited to only 2hours per day.
- Working Hours: The Federal Constitution states that working hours shouldn’t surpass 44 hours a week, and in most businesses, 8 hours a day.
- Breaks: Employees are entitled to 1 hour breaks overwork periods longer than 6 hours and to 15 minutes break during work periods between 4 and 6 hours long.
- Probation Period: Probation periods are not to exceed 90 days. However, they may be renewed.
- Termination Notice: For termination of employment without cause, the employer must notify the employee of termination at least 30 days prior (or 8 days if working hourly), plus 3 days for each year the employee has worked with the employer (for a maximum of 90 days). If terminated with cause, no notice is required, however, an employee may dispute and sue in labor court.
- Termination Payment: For termination without cause, the employee must additionally be paid severance fund pay equal to 8% of the employee’s compensation, and an additional fine of 40% of the employee’s severance pay fund. Employees must also be paid for all unused vacation days and an annual bonus based on how many days the employee worked that year.
- Termination Special Cases: An employee may not be terminated if the employee is a union representative (including those who have applied, and those who have been a union representative in the past 12 months), a pregnant woman (until 5 months after birth), or has suffered a work-related accident (and has yet to return, or has returned less than 12 months ago).
- Collective Bargaining Agreements: Oftentimes employees will be ensured rights or wages other than those written into law by collective bargaining agreements. Make sure that you are aware of any such relevant agreements.
For many foreign business owners, it can be difficult to understand and fully comply with the local employment laws in Brazil. To save time and avoid issues when hiring employees, it is advised to contact an external Employer of Record partner to help you with these issues.
Biz Latin Hub can be your employer of record in Brazil
At Biz Latin Hub, our team of experienced HR agents in Brazil can support your expansion into the country. We are dedicated to making the hiring process as quick and easy for you as possible. For entry-level positions, we can hire a candidate as little as a week after we’re assigned as your EOR. With our complete portfolio of back-office solutions, including legal and accounting services, we can be your employer of record in Brazil.
Contact us now to discuss your business options.
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