payroll in brazil

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FAQ

Payroll in Brazil

FAQ about payroll in Brazil

Is there any additional benefits that required from work union SEPROSP? ( like commercial insurance and allowance)


There is a list of benefits and allowances to be provided to employees, based on the SEPROSP Union agreement: besides the salary increase of 3.43% (retroactive to January 2019), the companies must provide (1) Extraordinary overtime of 75% (for first 2 overtime hours) and 100% (after 2 overtime hours); (2) “PLR” or Annual Profit Sharing Program for all employees and to be presented and approved by SEPROSP up to 120 days; (3) Meal voucher of R$ 18.62 for 22 days a month; (4) Health plan to employee and dependents; (5) Corporate Life Insurance for all employees of 20x the salary base; (6) Supplementary Social Security, if Private Pension Plan is not offered; (7) Work Travel Reimbursement. This list is added to the Brazilian Labor law obligations (13th salary, vacations, etc).




Client knows very detailed information required when register income tax and social insurance for employee, she cannot access to work union website in China to check the checklist, as a result she cannot tell what’s mandatory what’s not, could you please share the mandatory information from work union to register income tax and social insurance to us?


The employee registration occurs directly at Federal Treasury Department (for Income Tax) and Social Security authority (for Social Security Insurance). It is not a matter treated by the Union legislation. DBS will take care of the company registration at eSocial (reminding that the company already has its tax or CNPJ ID in Brazil), sending the employer first table of information to eSocial environment. It takes around 5 days for this step, and involves the company name, company tax ID, company address, company social object, company key contacts, etc. If the company already has employees in place, also DBS will need to send the employee first table of information to eSocial environment. It takes another 5 days, and involves employee personal (full name, CPF ID, RG ID, PIS ID, home address, etc) and payroll information (CTPS ID, salary, working hours, job function, working address, etc). When occurs a new hire, the employee registration happens at the payroll level, and the information is shared to eSocial automatically. This information needs to be sent to eSocial environment 24 hours before the new employee starting date. All this information delivered to eSocial is shared with Federal Treasury Department and Social Security Authority also automatically (each Brazilian authority picks what information is required directly at eSocial environment). This is how the employer and its employees are officially registered. Remember that DBS is responsible for all eSocial registration process and with no extra charge to the client. It is part of the payroll standard process.




Is there any requirements on attendance sheets from work union?


The Union states the Brazilian Labor law for T&A frequency control.




Will work union audit the attendance sheets?


The audit is done through Brazilian Ministry of Labor fiscals. Eventually it can occur a personal visit to the company, but normally it happens in larger companies.




If no specific requirement they can stick to their original practice to manage time and attednace


The company may continue with the T&A practice, considering that companies with more than 20 employees must have some kind of T&A frequency control. The T&A information of this client will be uploaded to DBS payroll as a matter of paying overtime for employees on a monthly basis (together with the salary payroll) or for bank hours control (paid by quarters in a year, as per the Union agreement).




Client doubted the period of e-social registry, it may take more time to registry e-social for employer and employees as the work union can be very bureaucratic. Could you please confirm again what’s the estimated time to register e-social?


The employer register and the employee register takes around 5 days for each process.




Client would also like to know if you have any reference client in network-technology industry that belongs to the same work union i SEPROSP? Client prefers a qualified payroll provider that has experience to handle payroll for clients under familiar background.


Historically DBS has been working with IT companies, same as your client. Currently we have 03 clients under the same Union agreement (FICO/Fair Isaac an USA based company, Gold360 an Brazilian based company, and AUWE/SIWI and Brazilian based company). All of them have the same size of your client – around 30 to 100 employees.




Benefit Interface


It is an optional HR module to client (full integrated to payroll system), if the client wishes to automatize the employee benefits purchase done on a monthly basis. It is related to automatic purchase of meal and transportation vouchers (by Brazilian labor law, it is mandatory to provide both benefits to employees). If the process is not automatic, the clients expends efforts in doing it manually with the internal team. The benefits interface is developed according to benefits vendor layout in Brazil. DBS already works with the top benefit vendors.




And please tell me how the whole process is arranged, like, how long it will take, and what materials the client needs to prepare?


The full process to open a company in Brazil takes around 45 to 60 days, and includes the company registration at Commercial Board (“Junta Comercial”), Treasury Department Income Tax Authority (for CNPJ ID purposes), City Mayor (depending on the services rendered), Sate Treasury (for Invoice purpose), Social Security Authority (for payroll purpose), Severance Funds Authority (“Caixa Economica Federal”, also for payroll purpose) and finally the registration at eSocial for payroll monthly obligations. Documents from the client to do the process: current Social Agreement (“Contrato Social”), and CNPJ ID Card (if already provided), and the registration at Commercial Board. I understand he has this steps done.




According to the “CBA”, the payday must be before the 25th of each month. Is it right?


It is incorrect. By Brazilian law and also according to the Union Collective Agreement, the company can pay the salary up to the 5th working day of the following month (related to the payroll of the previous month). If the company wants to anticipate the monthly salary, it is allowed. It is also important to mention that by the same Union Collective Agreement, the company must pay an advance salary of 40% up to the day 20 of the current month.




Can you share the relevant legal provisions with us?


Yes, the provision reports (vacations and 13th salary) are part of the payroll monthly reports.




You mentioned before you can substitute for clients to do salary payout, but there will be additional costs. We can accept the fee, but is this operation legal and compliant in Brazil? Is there a risk of employee complaints? This is very important..


There is no risk for the client as it is a legal procedure in Brazil. We have other multinational companies in the same situation and we do the salary payments on there behalf.




What do we need to prepare or provide in the early stage to kick-off payroll service?


Please see attached the first documents to share with the client for payroll setup. The first attachment (Payroll and Benefits questionnaire) requests the main rules that the client applies today on its payroll calculation. The second attachment (Data Import) shows the table of data and information we will migrate from the current payroll provider. The client will need to request the tables to the current provider. If you can anticipate and ask what is the name of the current payroll system used by the client nowadays, it will be very helpful.




What is INSS tax in Brazil?


The INSS (National Institute of Social Security) manages the pension system and social security. Compulsory Contributions: Social Security (INSS): 20% FGTS: 8% Financing of Training: 2.5% Accidents (average): 2%




What is Dissidio in Brazil?


Dissidio means a JCJ labor arbitration court ruling and o dissidio also refers to an annual increase.




What is 13th salary Brazil?


A 13th-month salary is required in Brazil and is an amount equal to one month's salary which is paid out to employees in two parts in November and December. The pro-rated 13th-month salary is also due upon termination.




Does Brazil have Social Security?


Brazil has an extensive social security system to which everyone working in Brazil is obligated to contribute, including expats. Social security contributions are paid by both employee and employer. Between 8 and 11% of the employee’s pre-tax salary is deducted for social security by the Ministry of Social Affairs (Ministério da Previdência Social). All employees, self-employed and employers in Brazil are required to make contributions to the social security system. The Social welfare (Previdência Social) covers illness, disability, maternity, unemployment pensions and death.




What percentage of gross earnings do Brazilian employees put towards social insurance?


The employer contribution usually ranges from 26.8 percent to 28.8 percent (20 percent are allocated to the National Social Security Institute, or INSS, and up to 8.8 percent to other social security taxes), depending on the type of activity, calculated on each employee's monthly salary.




What is the retirement age in Brazil?





Does the US have a totalization agreement with Brazil?





Does the US and Brazil have a tax treaty?


The United States has a lot of bilateral DTTs signed, comprehending negotiations with more than 65 countries. Brazil is actually the only BRICS country that did not sign a double tax treaty with the US: China did it in 1984, India, in 1989, Russia, in 1992 and South Africa in 1997.10 de se




Does Brazil have paid maternity leave?


A pregnant employee is entitled to 120 days of paid maternity leave. This payment is made by the employer and reimbursed by the National Social Security. An employer can grant an additional 60 days of paid maternity leave and recover that payment from tax benefits granted by the federal government.




Business Banking in Brazil


It is mandatory to make payments to both employees and the authorities from an in-country bank account. Generally, banks are open to the public from 10:00AM to 4:00PM, and closed on Saturdays.

The Supreme Court has decided that the Brazilian IRS has the right to access confidential bank information of both legal entities and individuals independently of justice authorisation. The RFB can extend control over financial transactions. The RFB will receive information on monthly transactions that exceed R$6,000.00 for legal entities and R$2,000.00 for individuals.




Working Days in Brazil


The working days in Brazil are Monday to Friday. The working day for commercial offices is usually eight hours, typically from 8:30AM or 9:00AM to 5:50PM or 6:00PM. Lunch breaks range from one hour to one and a half hours.




Income Tax & Social Security in Brazil


The tax year runs from 1st January to 31st December.

All companies are required to register with tax/social security authorities and obtain CPNJ (federal tax ID number). The incorporation process takes from three to four months to be completed.

There is no requirement for a third party to be licensed in order to make any tax and/or social security filings on the behalf of a client.

Further information can be found via the following governmental websites:

  • Government Pension – http://www.previdencisocial.gov.br
  • Labour Laws – http://portal.mte.gov.br/portal-mte
  • Income Tax – http://www.receita.fazenda.gov.br




New Employees in Brazil


When an employee is hired, the Labour Ministry must be informed following the specific procedure (CAGED) in the following month. This procedure requires registering with the authorities until the 7th working day of the next month and within the 24 hours of contracting.

Expat new starts are required to provide the following documentation:

  • CPF
  • Work Visa
  • Copy of Passport
  • Contract
  • Local Bank Account




Payroll in Brazil


Brazilian payroll involves withholding obligations on the part of employers, during each pay cycle - principally income tax and social security which are deducted at source and paid to authorities.

Employees in Brazil are taxed at a progressive rate of 7.5-27.5%, depending on their salary amount. Residency status is relevant to income tax in Brazil: residents of Brazil are taxed on all worldwide income, while non-residents are taxed only on income sourced from within the country.

Brazil’s social security system includes pension funds, health and sickness insurance, and unemployment insurance. Monthly contributions to social security are due from both employees and employers:

  • Employees make social security contributions at rate of 7.6-11% of their gross monthly salary
  • Employers make social security contributions at a rate of around 36.3% of an employee's’ gross monthly salary (including an 8.5% contribution to the Brazilian severance fund).




Immigration and Work Permits in Brazil


Foreign workers are required to have the proper visas and work permits in Brazil, as established by immigration laws. Work permits must be secured for employees, and sponsored by a locally licensed and incorporated entity, which can be a problem for companies just entering the Brazilian market. If you have yet to complete the incorporation process you can use an outsourced management company or GEO Employer of Record to sponsor the employee for the necessary permits.




Mandatory Benefits


Pension Fund: Also refered to as FGTS (Fund of Guarantee For The Time in Service). Employers contribute between 26.8% - 28.8% of workers salary. Employees contribute 8% of their wages up to BRL1,659.38. Employees contribute 9% for wages between BRL1,659.39 to BRL2,765.67; and 11% for BRL2,765.68 to BRL5,531.21. Contribution ceiling is at BRL5,531.31.

Social Security: Employers contribution is 28.8%, and Employee contribution is 11% with cap of BRL608.44. Funds are towards health insurance, group life insurance, accident insurance and unemployment insurance.

Vacation Bonus: Mandatory cash bonus equal to one-third of employee's monthly salary. Employees have the right to convert one third (approximately 33%) of their paid vacation (normally up to 10 days) to pay in lieu of vacation. Any unpaid vacation days do not roll over, and employers must pay it out at the end of the calendar year at double time rates.

Severance Pay: Employees are entitled severance payment which includes the balance of their wages, any holiday entitlement they didn’t use, 13th month salary and access to the funds from the Brazilian Government Severance Indemnity Fund Law. The employer contributes 8% of the employee's wages to this account. If the termination is with a cause, the employees do not have an access to the severance account.




Non Mandatory benefits


Retirement: Typically, employees can contribute from 4% to 5% and companies match 100% of employee contributions up to 5%

Life And AD&D: Typically includes death of any cause, accidental death, & total disability of 24X the insured's monthly base salary. The minimum number of employees eligible for this kind of group insurance is 5.

Disability: Employees should provide the following benefit calculated based on the monthly base salary (MBS): * Death: 24X MBS * Accidential Death: 48X MBS * Total or partial Illness Disability: up to 24X MBS




Termination/Severance in Brazil


Either party may terminate the employment contract by giving written notice known as aviso prévio of 30 days or payment in lieu of working the notice period. After one year of service, the employee is entitled to 3 additional days’ notice per completed year of service until 60 days are adding making the total possible prior notice period equivalent to 90 days. The final payment to the employee must include all of the following:

  • normal pay up to the date of termination
  • prorateduntaken vacation pay
  • prorated 13th salary
  • prorated for all bonuses, overtime or benefits calculated up to the date of termination

As mentioned previously, union negotiations take place on May 1 each year. Mandatory salary increases are negotiated during this period and are due to every employee by law. The negotiations start on May 1 but usually last a couple of months, sometimes longer. After union negotiations have ended, it is mandatory that payment of salary increase is made, backdated to May 1. Sometimes employers who have terminated an employee between 1 May and when the union negotiations close have to go back and back-pay previously-terminated employees.

The varianceincludes the difference in the salaries as well as the difference between all employers’ costs which we accrued and paid considering the previous salary and from what is due considering the salary increase (13th salary, vacation, vacation bonus, FGTS, etc.).

Termination by the employer triggers the payment of a penalty premium to the employee´s individual account in the Unemployment Compensation Fund (FGTS) equivalent to 40% of the total of deposits made by the employer to the employee´s individual account. This penalty premium does not apply if termination is for good cause.

Transfers of employment are only legal as a result of a joint venture or acquisition in Brazil.

In Brazil, it is possible to terminate an employee for just cause or without just cause.

  • The law outlines 12 reasons to terminate with cause.
  • Companies try to avoid termination with cause as this can lead to lawsuits.
  • Employees who were fired with cause often have a difficult time finding a new job.

Termination without cause generally requires a minimum of 30 days notice or one month’s salary. The employee is also entitled to an additional three days of salary for every year worked.

Companies must pay the equivalent of 8% of the employee’s monthly salary into a holding account every month. Upon termination, the employee receives the balance of the account. If the termination was without cause, the company has to pay an additional 40% of the value of the account to the employee and 10% of the value of the account to the government.




Health Insurance Benefits in Brazil


Health insurance is provided by the Brazilian government, although private health insurance is an increasingly common employee benefit.

Most benefits in Brazil are prescribed by law and there are very few negotiating points on benefits with the candidate. In addition to benefits described in other sections, there are heavy levies for various social charges that cover medial and other social welfare programs.

A supplementary medical and dental insurance is provided to all of the employees that are leased through GP’s Employer of Record service in Brazil, and required as part of our collective bargaining agreement. The cost is part of the total benefits package offered by GP which is passed through as part of the monthly payroll calculations.





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