Question 1

How much is the VAT tax?

Accepted Answer

The Amount Payable for the Vat tax is 16.33% above the Total Outsourced Cost.

Question 2

Does the Brazilian Labor law recognizes a Fixed Employment agreement?

Accepted Answer

The main difference between the Fixed-term Employment Contract and the Indefinite Duration Employment Contracts is, in the first situation the employment relationship is intended to last for only a specific and definite length of time or until a specific project is completed, therefore once the term or project is finished the fixed-term employment relationship ends. Now, in a contract of an Indefinite Duration, the employment is one of continuous service and it is intended to last for an indefinite period of time, with no specified or foreseeable end to the relationship.   Thus, it is important to note the Brazilian labor law only recognize the employment contract with an Indefinite duration, where the company is not allowed to hire an employee for a specific period of time and it is mandatory to provide the notice upon termination on the dismissal within 30 days.

Question 3

What are the cost savings in using a PEO?

Accepted Answer

The cost savings in using a PEO service arise at every stage including: - No need to set up, register and meet capital requirements for a local legal entity – we are already in place. - No requirement to engage the full suite of host country advisors: tax advisors, employment lawyers, immigration specialists, payroll providers, incorporation advisors, etc. - Minimizing the potential for permanent establishment and corporate taxation. - No corporate tax or social security filing requirements – all covered by us. - Simple closure of employment free from the requirement to close down the entity.

Question 4

Are they employed on local employment contracts?

Accepted Answer

Yes. The local employment contract is required to comply with Brazilian labor and employment laws. We will work with you to draft an employment agreement that meets the regulations and also incorporates, where possible, any additional terms you may wish to include. For example, your corporate policies on confidentiality or annual leave policies.

Question 5

Is there a minimum or maximum period we can engage "Setup Global" as a PEO service provider?"

Accepted Answer

We have different situations where clients engaged us for 3 to 6  months whilst their local entities were being established. Concurrently we do have clients who have been with us form many years.   However, according to the Brazilian legislation law the legal notice period for termination of employee contract is a minimum of 30 days, or longer if the agreement states this specifically, up to a maximum of 90 days - as Brazil largely follows the ‘employment-at-will’ model, meaning any party may terminate the employment agreement without cause upon providing sufficient notice and severance payment -.   Thus, in case of a desire to end the service contract, the final employe has the duty to inform us at least 30 days upfront, as well to provide payment in lieu of notice for the employee.

Question 6

How do we manage leave requests and tracking leave consumption?

Accepted Answer

Leave requests are controlled by you, the client. The employee will request leave directly to their line manager or HR as normal and you will review/approve it. But we need you to report any leave consumed (annual leave, sick leave and unpaid leave) each month before the day 27. This allows us to track against the overall accruals. If you are in any doubt whether a leave request is in line with the statutory allowance please talk to your account manager

Question 7

How are taxes and social security contributions paid?

Accepted Answer

Employer and employee taxes are handled according to the requirements of the Brazilian regulations. These will be clearly outlined in your initial proclaim along with an explanation of how they are calculated. Each month we’ll invoice you, in advance of the payroll date, for what we call the Total Cost of Employment.   Total Cost of Employment is the gross salary, bonus payment or allowances to the employee, employer contributions like tax or social security, expense reimbursements and our monthly management fee. Employer taxes (e.g. payroll taxes) and social security contributions are shown as itemized inputs on the monthly invoice and included in our client reporting. When we run our monthly payroll process these amounts are paid to the local authorities as required.   Employee individual income tax and social security are deducted (withheld) from the gross salary in the monthly payroll process and then paid to the local authorities as required. These deductions are reported on the employee payslips and their summary reports.

Question 8

Who pays the taxes?

Accepted Answer

"Setup Global" handles payment of income taxes and employer taxes to the host country tax authorities as part of the payroll process.

Question 9

Who pays the employee?   Who calculates payroll?

Accepted Answer

Setup Global, as the Employer of Record, will pay the employee their net salary through the local payroll.   Setup Global calculates the payroll in advance of each payment date and invoices you for the “Total Cost of Employment”. Total Cost of Employment is the gross salary, bonus payment or allowances to the employee, employer contributions like tax or social security, expense reimbursements and our monthly management fee.   Setup Global payroll invoice will show all these amounts as separate itemized inputs. This is also supported by our payslips and monthly reports. Payslips will be issued as per the statutory requirements of Brazilian Labor Law and tax regulations.

Question 10

Why use a PEO service?

Accepted Answer

PEO can furnish a cost-effective and secure method of quickly employing staff into new or existing international market by saving time and expense of incorporating a local entity. The main concern for companies with effective global mobility programs is compliance with employment and tax regulations.   Thus, a PEO company is already established in the host country and takes on the responsibility of making sure all legal, employment, tax and immigration requirements are met.

Question 11

Can we set the local salary in a foreign currency?

Accepted Answer

Not possible. The client and employee must agree what the salary should be in local currency and this becomes their fixed salary. However, the salary can be adjusted, but typically it can only be increased as lowering the salary requires agreement from the employee and may also raise red flags with tax and labor authorities. Nonetheless, the client can pay Setup Global in USD without any additional tax and even so we will grant the employees payment in BRL currency.

Question 12

What are the advantages of using Setup Global as an Employer of Record?

Accepted Answer

The leading asset is that it makes international employment easier and cheaper. Having Setup Global handling the administration and compliance of their overseas staff, with a single point of contact and consistent service has been life-changing for the clients.   It has become much straightforward to meet their business expansion goals. The other benefits include:   - Cost savings - Speed of deployment - Full compliance with immigration and labor laws - Flexible payroll approaches - Price match guarantee

Question 13

Can we still reimburse employee expenses directly when using an employer of record service?

Accepted Answer

We recommend expenses be paid through us. Just to be clear if expenses are reimbursed by the client directly to the employee, Setup Global will not be responsible for ensuring it is done compliantly. There are three risks. It is for the client and employee to assess the risk and decide their actions.   1. Without the local employer of record reviewing the expenses, it is possible that the client may reimburse something that should actually be treated as a taxable benefit. 2. During an audit, the employee may be required to justify why payments they received from a foreign entity are not income. 3. The tax authorities may become alerted to the client having business activities in the country.

Question 14

Who manages the employees?

Accepted Answer

The client maintains primary responsibility for the employee’s activity and conduct in Brazil, however as the Employer of Record, Setup Global is directly responsible to the authorities for the employment.   Specially as concerns immigration, tax or labor issues related to the employment. We’ll work with you to make sure that you and the employee understand any Brazilian unique statutory requirements such as working hours restrictions, annual leave entitlements and so on.

Outsourcing, PEO & Single Point of Management (SPM)

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Outsourcing of Human Resources (PEO)

FAQ's on Outsourcing HR