In today’s competitive job market, finding the right talent for your organization can be a daunting task. For companies looking to hire abroad, recruiting employees from a foreign country like Brazil can be challenging. As an employer, you have to contend with language barriers and the unfamiliar nuances of local employment laws. A cost-effective and quick solution that can help streamline the hiring process for companies looking to expand their business into Latin America is an Employer of Record (EOR).
In this article, we will go over the roles and responsibilities of an Employer of Record Brazil (EOR Brazil), the benefits of working with an EOR when hiring Brazilian workers, what the process will look like when partnering with an EOR, and more.
Why Hire Talent in Brazil?
Brazil is home to a population of highly skilled workers. Many Brazilians are expert negotiators, building working relationships with people, not just companies. These strong interpersonal skills can be a great asset to your distributed team.
It's important to note that language can be a barrier when you bring Brazilian workers on board your team. Brazil’s national language is Portuguese, and only around 5% of Brazilians speak English. Among those that do, many are not fluent. However, the highest English proficiency can be found in major cities like Rio de Janeiro or São Paulo.
In meetings, you should greet Brazilians warmly with “bom dia” and address colleagues with the proper titles “Senhor” or “Senhora” when you first meet. Brazilians also have a unique naming culture, often taking the surnames of both parents, so make sure you’re using the correct names for your Brazilian workers.
What is an Employer of Record (EOR)?
When a business hires employees in a foreign country where they lack a physical presence, it is necessary to establish a legal entity. This can be a lengthy and complex process given the many legal intricacies involved. For many companies, the process of setting up operations in a new country may not be justified, especially if they intend to hire only a limited number of employees. This is where an Employer of Record comes in.
An Employer of Record (EOR) is a legal entity located in the country where you intend to engage or hire workers. The EOR serves as a representative for your business and takes on the formal role of the "employer" on official documents. Its primary responsibility lies in ensuring that your company is compliant with the tax and employment regulations of the respective country, such as Brazil in this instance.
How Can I Legally Hire Employees from Brazil?
Establish a Local Entity in Brazil
Navigating the process of legally hiring employees in Brazil can be quite complex. To hire from Brazil, your company needs to have a legal entity operating in the country.
Creating an entity in Brazil provides companies the opportunity to form a branch or subsidiary for the direct recruitment of workers. This grants foreign companies full autonomy in hiring local staff, managing payroll, and establishing a local presence.
Opting to establish a foreign entity may be a good fit for companies intending to hire multiple workers or establish a long-term presence. It's essential to note that this path is both expensive and time-intensive, requiring a thorough understanding of Brazil’s federal labor, corporate, and payroll laws, as well as local regulations such as registering your business with the Brazil Business Registry. The efforts are only worth it if you intend to dramatically expand your business into the Brazilian market for the long term.
Partner with an Employer of Record Brazil
An Employer of Record (EOR) acts as an intermediary for hiring talent in a country where you don't have a legal presence. An Employer of Record Brazil will already have an established entity and the necessary legal framework to handle the hiring process on your behalf. Because the EOR partner is already legally registered in Brazil, they will ensure that the client company complies with local labor laws and regulations. Your role, in turn, will be focused on managing the relationship with your employees.
Not only can an EOR help you navigate complex labor laws and regulations, but it can also offer a range of services to support your business operations. From payroll and tax management to onboarding and offboarding processes, an EOR service can help streamline your business operations, making it simple and straightforward to grow your business in new markets.
Another viable option for companies is to engage with a Brazil PEO. PEO stands for Professional Employer Organization and is similar to an EOR in the sense that they act as a co-employer who provides services for you and your employees. When looking for a trusted EOR to partner with, look for someone who provides both EOR and PEO services, such as Borderless, as they can provide the most options when it comes to hiring and managing employees in Brazil.
The Benefits of Partnering with an EOR in Brazil
For companies that are looking to hire in Brazil, a legal Employer of Record (EOR Brazil) offers many benefits. Firstly, an EOR can fast-track the hiring process as they already have an established legal and administrative framework in place. Companies that use an EOR in Brazil can confidently rely on a team of experienced professionals who understand local laws to handle their documentation, ensuring that compliance is met.
Compliance is particularly important in Brazil, where labor laws are strictly enforced. Employers who violate employment laws can face serious financial penalties and business disruptions. Using an EOR ensures that your company is legally compliant, avoiding any unexpected surprises and negative impacts to your reputation.
Areas an Employer of Record Can Help With
Below, we have listed some of the specific tasks an EOR Brazil will be responsible for handling.
Employment Documents
A Brazilian employment agreement usually lasts for an indefinite term. Although Brazilian workers can be hired in a variety of different ways, it is most common for workers to be brought on board as employees rather than as independent contractors.
Workers in Brazil are generally subject to a trial period of work, up to 90 days, after which an employer can cut short or extend the working agreement.
The employment contract should also outline terms of termination and associated notice periods. Brazilian employment law permits the termination of the contract of employment by either the employer or employee.
Employees are required to give their employers 30 days’ notice before terminating their employment. If an employer terminates an employee, there is a statutory notice period depending on the length of their service:
- Any employee who has been continuously employed for one year must receive 30 days’ notice.
- The notice period increases by three days for each subsequent year
- The maximum notice period required is 90 days.
If an agreement is terminated at any time after the probation period, any outstanding salary must be paid out upon the last day of employment.
This encompasses instances where employees have been dismissed for misconduct. In scenarios where exceptional circumstances complicate the settlement of termination pay, employers must resolve any outstanding payroll matters within three business days. If an employee resigns abruptly without giving notice, employers have a seven-day window to issue final outstanding payments.
Vacation, Paid Leave, and Holidays
On the cultural front, Brazil observes a number of national and civic holidays you should consider when building your distributed team. Holidays that Brazilians celebrate include:
- January 1: New Year’s Day
- April 21: Tiradentes’ Day
- May 1: Labor Day
- September 7: Independence Day
- October 12: Our Lady of Aparecida
- November 2: All Souls’ Day
- November 15: Republic Proclamation Day
- December 25: Christmas
Although Carnival, which occurs in February and extends into March, is not considered a national Brazilian holiday, it is the country’s most popular celebration. Most sectors see some reduction in services, except for retail, manufacturing, and Carnival-related businesses, while the country comes together to celebrate.
Employers in Brazil are responsible for providing several types of paid leave to their staff. These include:
- Statutory holidays: As mentioned above, these include national holidays like Good Friday and Christmas.
- Paid time off: Employees receive 30 days of annual leave after one year of service.
- Sick leave: Employers must pay during the first 15 days of sick leave.
- Other leaves: There are also other types of leave, including parental, marriage, and bereavement leave, to which employees are entitled.
Taxes and Mandatory Benefits
Brazil’s minimum wage is 1302 reais per month. Tax residents in Brazil are subject to federal income tax. Brazil uses a system of progressive taxation, ranging from 7.5% to 27.5%, depending on income level.
According to Brazilian law, employers in Brazil pay a range of taxes or social security contributions. Payroll taxes in Brazil are relatively high compared to other countries and include contributions such as:
- 20.00%: Public Pension Fund (INSS)
- 8.0%: Severance Fund (FGTS)
- 5.8%: Additional Contributions
- 1-3%: Accident Insurance
Employers must also withhold income taxes and social security contributions from their employees’ salaries.
Additionally, in Brazil, collective bargaining agreements are protected under the Consolidation of Labor Laws (CLT) and the Brazilian Constitution. A collective bargaining agreement is a legal document that upholds the rights of workers to organize and negotiate better terms of employment relationships. This can include things like negotiating employee benefits such as mandatory employee health benefits. In Brazil, it is customary for most employers to also provide private health insurance for their staff.
Managing Payroll
Employee payments will be made in equal, bi-weekly installments by the EOR. This includes the 13th-month payment, as mandated by Brazilian law, that is equivalent to one month's salary and is paid to employees in two installments. The first installment must be paid by November 20 and the second by the end of the year.
Terminated employees are entitled to receive a pro-rata 13th-month payment. It is crucial for employers to explicitly communicate whether the stated salary includes or excludes this payment while negotiating with potential hires.
Additionally, employees are entitled to at least one-third of a month's payment as a holiday bonus or 2.77% of their annual salary.
EORs will also handle the distribution of any overtime pay. Standard working hours in Brazil are eight-hours per day, 40 hours per week. Employees can also work for eight-hours per day, 44 hours per week from Monday to Saturday, with four hours of overtime allowed on Saturdays. Any hours beyond 44 that are worked are eligible for overtime pay.
It’s important to remember that an EOR simply handles administrative and HR-related tasks involved in managing a team of employees overseas. They will not be responsible for:
- Managing or overseeing day-to-day operations
- Onboarding and training employees
- Managing employee communications
- Assigning projects
- Hosting team meetings
- Overseeing employee progress
What to Look For in an EOR
Now that you know the basics of Brazilian labor customs, employment standards, and lifestyle, keep reading for a step-by-step for bringing your new Brazilian team on board.
Step 1: Determine Your Hiring Needs
It is essential to start with a clear idea of the positions you need to fill, the skills required, and the type of employment contracts to ensure a successful hiring process in Brazil with the assistance of an EOR. This will guide the rest of the process and ensure that you are identifying candidates that meet your business needs.
Step 2: Choose an EOR Service Provider
It is crucial to research the EOR service providers available in Brazil and select one that meets your company’s specific needs. Look for a provider who offers comprehensive services, pricing transparency, and a proven track record of compliance. Additional PEO survived are also a bonus for added flexibility.
Step 3: Define Employee Onboarding and Management Process
Once your EOR is in place, establish a streamlined onboarding process for your new hires that includes employee management policies, job performance standards, and disciplinary procedures. Ensure that all practices are legally compliant.
Step 4: Jointly Select and Hire Qualified Candidates
Collaborate with your EOR in the recruitment process and conduct interviews to ensure that you are selecting the most qualified candidates for your organization. Ensure that all employment laws and regulations are adhered to in the hiring process.
Step 5: Maintain Effective Communication and Record-Keeping
Maintain clear communication with your EOR and your new hires and keep accurate records of all employment-related data and transactions.
How Borderless Can Help
Borderless is an excellent solution for companies looking to hire in Brazil. By outsourcing your hiring administration tasks to a third-party Employer of Record service provider like Borderless, your company can save time and money and focus on your core business objectives.
Borderless is an Employer of Record that is set up to help manage employees in over 170 countries, including Brazil. Our platform is designed to help companies like yours grow their team and hire, pay, and manage Brazilian workers while ensuring you are fully compliant with local tax and employment laws.
If your business is looking to hire workers in Brazil and requires the services of an Employer of Record, speak with our team today to book a demo.
Disclaimer: Borderless does not provide legal services or legal advice to anyone. This includes customers, contractors, employees, partners, and the general public. We are not lawyers or paralegals. Please read our full disclaimer here.
