Payroll system in Brazil: Understanding the processes

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eduardo SEO Specialist and content production, I have worked in several renowned companies in Brazil and abroad. I write about money, technology and more!
payroll-brazil

The home office became part of our daily life after the digitalization wave that affected the entire world. It brought not only more time to find a balance between your personal and professional routine, but it also opened new job opportunities.

If you want to hire talents in Brazil or from around the globe, it’s easier now than it was before. For Brazilian workers, you should learn more about the payroll in Brazil to make the process smooth.

After all, the country is known for its high tax rate, which makes both employers and employees feel the pinch.

As a company, your contribution to social security or benefits on top of your staff’s income can reach 80%. If we bring it to numbers, a salary of USD 100,000 per year would actually cost about USD 180,000, adding Brazilian taxes. As a worker, there is a contribution to the National Social Security Institute (INSS), according to the salary.

If you are willing to hire talents in Brazil to increase cultural diversity and bring innovation to your company, here you will find all you need to know about the Brazilian payroll system. This article covers the key points, so keep reading to find out.

First things first, what is a payroll?

In a few words, payroll is the name given to the document that gathers data about all the employees’ payments in a company. It includes mandatory contributions, benefits, overtime, discounts, and bonus besides the salary.

Plus, it helps the Human Resources (HR) team calculate the value of the gross paycheck and the net income based on the Brazilian labor laws. After all, payroll in Brazil is a legal obligation. Among the information:

  • Employee’s role;
  • Work hours, overtime, paid rest, absences;
  • Social charges — such as the discounts from the National Institute of Social Security (INSS) and the retirement benefits from the The Federal Severance Pay Fund (Fundo de Garantia por Tempo de Serviço);
  • Income tax;
  • Meal and transportation vouchers, health care plans, among other benefits available.

Knowing how the system works is essential to avoid unpleasant surprises or penalties. Not to mention that it helps your company to keep a record of all workers — role, income, contributions. Due to the responsibility and as a legal obligation, many organizations choose to outsource the service.

So how is the payroll system in Brazil?

Now that you have an overview of the payroll in Brazil, let’s check all items in detail for a deep understanding about the different tax rates.

The Consolidation of Labor Laws (Consolidação das Leis Trabalhistas), also known as CLT, is the most common bond with an employer. It provides data about payroll, salary, benefits, and social security contributions.

Salary and 13th Salary

The Brazilian laws stipulate a minimum monthly wage, which is adjusted annually. According to the Senate, it matches the amount of 1,212 BRL. It’s important to highlight that the payment cycle can be either bi-weekly or monthly.

Generally speaking, employees receive their payment on the 15th and 30th of each month. However, the dates may change from company to company. Plus, all transactions must follow Brazilian currency (BRL).

There are 12 pay cycles and a 13th mandatory cycle that works as an extra salary or a Christmas bonus. It’s usually paid in two parcels — the first in November and the second in December.

All employees can receive it. Those who have worked for 12 months earn the full payment, while those who have worked for less time achieve a proportional amount.

Work hours, overtime, paid rest, and abscenses

According to the labor laws, working hours can’t pass 44 hours weekly. It can be distributed throughout eight hours per day, from Monday to Friday, and four hours on Saturday. Some companies assign a bit more time daily to avoid work on Saturdays. As long as it reaches 220 hours a month, it’s ok.

More than this leads to overtime — an additional 50% of the regular rate is paid, which can include collective agreements.

The payroll in Brazil also predicts paid rest. So what is taken into account? Some public holidays, a 30-day vacation, a day off for birthdays, maternity (up to six months), and paternity leave ( about five days). If the employees feel sick, some companies give them a few days off. Through a medical certificate, they can still receive payment despite their absence.

Social charges and income tax

Social charges apply to both employers and employees. The Federal Severance Pay Fund (Fundo de Garantia por Tempo de Serviço), also known as FGTS, is like a fund that the company sends to an account in the Caixa Econômica Federal (CEF).

In case of unfair dismissal, the bank gives the amount to the workers when they leave. Usually, it’s equivalent to 8% of the employee’s salary.

Another social contribution is the National Institute of Social Security (Instituto Nacional do Seguro Social), also known as INSS. It brings retirement benefits in the future. Besides paying taxes, Brazilian talents also need to submit the income tax (Imposto de Renda) annually, depending on their income.

Most common benefits

Contracts based on CLT standards and collective agreements also include some universal benefits: meal vouchers (for restaurants or supermarkets), transportation vouchers, health care plans (complete or with co-participation), mental health stimulus, and life insurance.

Employees can find one or many of them in most organizations. Some offer a percentage of the company’s profit to be shared with the employees based on the team’s performance.

How can you pay your employees in Brazil?

Understanding the processes behind the payroll in Brazil is essential to running your business, but you don’t need to set up everything by yourself. Whenever you need to send payments to your Brazilian talents, you can count on Husky to automate your routine.

While we rely on technology to make multiple payments at a glance and smoothly, all you need to do is a single wire transfer.

Whether it’s a single payment or batches, Husky is the brighter way for international transfers, following Brazilian regulations. Why? Because by leaving it to us, you can achieve scale and efficiency, besides reducing delays or any chance for errors.

Husky also covers all documentation asked by the local labor laws. There are no hidden fees, and the money reaches your employees’ account within one business day.

So if you are looking for new talents to enhance your teams and bring more results, leave the payment to Husky. There is no need anymore to keep it manual or send remittance files to different banks, while you spend time doing it. The payroll in Brazil is already complex, so let it be easy, simple, and fast when sending money to workers, parent companies, subsidiaries, or suppliers.

How about reaching the next level to send batch payments for Brazilian workers? Join other companies and entrepreneurs to make your life easier!

eduardo SEO Specialist and content production, I have worked in several renowned companies in Brazil and abroad. I write about money, technology and more!

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