PEO meeting.jpg

PEO & EOR Services in Brazil

Setup Global PEO delivers a top tier employer of record service for clients that are looking to recruit, hire, and operate payroll services without first setting up their own subsidiary in Brazil.

How it Works: Our Brazil PEO hires your candidate while abiding by local labor laws and cultural customs. The newly hired employee will communicate directly with your company and perform all job functions as if they were your own employee.

We act as your in-country HR department and handle the entire onboarding, payroll, and benefits process in strict accordance with Brazil’s regulations.

 

Why Choose Us for your PEO Brazil Needs

PEO EOR services.png

Without needing to set up a local entity in Brazil, companies save thousands when expanding with our PEO/EOR Services.

Scale and onboard your workforce in days, not months by using our local entity and experts in Brazil.

Minimize risk by ensuring your company is compliant with local laws and cultural customs and protecting your business from potential fines and legal fees.

A streamlined process for managing your payroll, benefits, and HR responsibilities with full flexibility to make changes at any time.

 

PEO & EOR Explained

PEO & EOR

General

 

Hire, onboard, and manage employees in Brazil quickly and easily with Setup Global.

Working with our Brazil PEO and Employer of Record solution eliminates the headaches that come with establishing a foreign legal entity and guarantees full compliance with local regulations.

Local Employer of Record

Your employees based in Brazil will sign a local employment contract with Setup Global in-country entity. Labor contracts are available in English and Portuguese, with employee payments processed in the local Brazilian Real currency.

As the local Employer of Record, Setup Global operates with full compliance to the laws and regulations of Brazil's Bureau of Labor.

Payroll

Processing

Setup Global complete payroll processing includes:

- New employee setup
- Social Insurance contributions
- Individual income tax declaration
- Expenses declaration
- Payslip provision
- Dedicated payroll officer
- Support for standard employment documents

Employee

Onboarding

After officially hiring your local candidate, our Brazil HR team will schedule an onboarding conference call with both the candidate and client.

 

The onboarding process typically takes between 3-5 days.

Legal Liability

Coverage

 

Our PEO solution covers the following functions to take legal liability as the local employer of record:

- Obligatory social and pension insurance enrollment.
-Employee income tax withholding
- Liabilities of early-termination, including severance calculation and mediation.
- Onsite health and safety liability coverage, which is shared with the client

Termination

Guidelines

In the event a client decides to pause or end their presence in Brazil when employing staff through our PEO and Employer of Records service, there are no termination fees to be paid as long as the client adheres to the 60-day termination notice period.

Termination clauses will be included in the Employee's contract, based on which type of contract was signed.

 

Full Entity Lifecycle Support

LifeCycle Support.png
 

Summary of Key HR Topics for Brazil

Hiring, Negotiating and Doing Business in BR

The gross salary amount must be verbally agreed with the candidate and paid in the local currency. This is important to avoid questions about personal income tax deduction down the line. Offer letters or similar documents should be provided to candidates when offering employment via a PEO or employment secondment company, as these are considered contractual documents in Brazil.

When negotiating salary, we instruct customers to discuss whether the employee will qualify for a ‘position of trust’ increase. If so, the salary should be broken down into 60% as the base plus 40% “position of trust” increase. A ‘position of trust’ essentially pertains to employees who are exempt from overtime as they are empowered with managerial authority. Tactically, most employers discuss the total amount which is inclusive of “position of trust” compensation.

It’s important to note this at the outset so that you don’t have to go back to the negotiating table with your candidate, who might have thought he or she would be eligible for overtime if it has not been previously discussed. Employees’ salaries increase automatically each year in accordance with rates negotiated by unions. Most of the time the adjustment is done accordingly to the inflation rate.

Employment Contracts in Brazil

In Brazil, employment contracts can be oral or written, but it best practice to put a strong, written contract in place, in Portuguese, which spells out the terms of the employee’s compensation, benefits, and termination requirements.

An offer letter and employment contract in Brazil should always state the salary and any compensation amounts in Brazilian Real rather than a foreign currency. The employment contract template is part of the service we offer; no need to draft a separate template if you use our employer of record and PEO service in Brazil.

Working Hours in Brazil

The Brazil workweek is 44 hours, ideally eight hours per day (plus one hour for lunch) during the week and four hours on Saturday. Companies can choose to have longer workdays during the week and remain closed on Saturday.

The number of workweek hours is set by the government, and a major source of litigation in Brazil is over-compensation for overtime. Additionally, while you may have an agreed on a contract, the Brazilian courts tend to rule in a narrow fashion, usually on the side of the employee.

Vacation Leave in Brazil

Professionals in Brazil are entitled to 30 calendar days of vacation per year after every 12 months of service. The vacation period is typically taken in one block (or split 20 days and 10 days).

In addition, the employee must be paid 1/3rd of a month’s salary as a holiday bonus.

Holiday pay and holiday bonus payments are due pro-rated upon termination in Brazil.

Sick Leave in Brazil

If an employee is sick and provides a medical note, the first 15 days of absence must be paid. Any further days off are paid through the National Institute of Social Security (INSS), at fixed rates. Thereafter, benefits must continue to be paid until work is resumed or employment is ended.

Maternity / Paternity Leave in Brazil

  • Women are entitled to 4 months’ maternity leave and may not be dismissed during pregnancy or during the 12 months after birth.

  • Private companies have the option to extend an additional 60 days of maternity leave and can deduct the additional salary paid to the employee during this time from their income taxes, not as an operational expense. The employee must request the additional 60-day increase before the end of the first month following the birth, the employee cannot render services or take part in any remunerated activity during this time, and the newborn child cannot be enrolled in a daycare center.

  • Salary and benefits must be paid throughout the employment protection period.

  • Men are entitled to 5 days of paid paternity leave, which they must request in advance.

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

  • prorated 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 variance includes 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 the 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 a 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.

Employment Taxes in Brazil

Employer’s portion of social security or statutory benefits cost on top of salary in Brazil can be estimated as roughly 80% on top of the total salary costs for the average employee. To provide an example, a company hiring an employee at the USD equivalent of $100,000 per year will end up paying at least $180,000 when required employer taxes are added on top of the payroll.

FGTS (pension) accrual is payable at the end of the period of employment unless a worker resigns.

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 the benefits described in other sections, there are heavy levies for various social charges that cover medical 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.

Additional Benefits in Brazil

Local employees’ basic monthly benefits are mandatory and include a meal voucher, transportation voucher, life insurance, dental insurance, and private medical insurance at a standard rate for a family of 3; in case we have larger families, or family members with pre-existing serious illness, private medical insurance value may suffer an increase.

 

Frequently provided benefits:

  • Daycare assistance

  • Tuition assistance

Variable Compensation

Rather than paying monthly commissions, an annual bonus payout is a norm in Brazil. As long as initial negotiations do not suggest monthly or quarterly bonus payouts, then the candidate will usually be amenable to annual payouts. The reason behind this is a quirk in the requirements around the assessment of social charges on commissions with those paid throughout the year carrying a very high social charge of 80% and those paid as an annual bonus being assessed at just 40%. However, the annual bonus should generally be limited to 50% of the base salary as the government will deem amounts over this to be regular salary.

 

For positions in which the pay structure is heavily dependent on commissions, the compensation can be structured to pay a monthly non-recoverable draw, which would be assessed for the full social charges amount of 80%, and then a reduced annual bonus, which would be taxed at a lower amount. SG recommends avoiding this if possible because it is much more expensive for the client and solely benefits the employee – the commission cannot be reclaimed by the client once paid. GP can assist its customers with negotiating variable payout structures as needed.

Bonus in 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. The 13th-month payment is a legally mandated benefit and not part of the base salary. During negotiations with candidates, it is important to clearly state what salary is being offered and whether it is inclusive or exclusive of the 13th-month payment.

Pension Plan Contribution

Employers are required to contribute to a seniority payment/retirement savings fund known as Fundo de Garantia por Tempo de Serviço (FGTS), which is 8% of the remuneration paid in a special account (fund), which will be released to the employee if terminated without cause.

 

In addition to the monthly contribution, in case of termination without cause, the company must pay a fine of 40% of all the amounts deposited during the length of the contract existing in the employee’s FGTS account on the termination date, plus another 10% over the FGTS balance to the Brazilian government.

Probation Period in Brazil

The maximum probationary period allowed in Brazil is 90 days (two terms of 45 days). If the initial trial period is 45 days, it may be renewed but only for an additional term of 45 days. A contract may be terminated at the end of the probation period with final pay including normal pay up to the date of termination as well as untaken vacation pay and prorated 13th salary.

Non-Compete Clauses in Brazil

Most of our customers request that we add non-compete clauses into the contract which we will do upon request to the maximum extent permitted by law.

Non-compete clauses are not recognized by the Brazilian Labor law, and not well seen by labor courts as a judge will view such a clause as hurting the employee’s basic right to work.

 

However, it is possible to insert a non-competitive clause in the labor contract, considering that:

  1. The clauses must be limited to a certain period of time (some of our judges understand that 2 years is the maximum period of time;

  2. The restriction must be strictly related to the activities performed by the Employee during the Employment Contract;

  3. The Employer must fix a certain geographic area (reasonable) for the applicability of the clause (State of Sao Paulo, for example)

  4. The Employee must be indemnified for the whole period she will be prohibited to be hired by other Employers (it is recommended that this indemnification is at least equivalent to her salary during the period of the Employment Contract). This amount will suffer the incurrence of the statutory costs and benefits as does the normal monthly salary.

 

It is possible to add a sentence in the contract stating that the non-competition clause may be applied or not at the end of the employment contract according to the employer’s discretionary need and convenience. The employer would be required to give written notice to the employee in case the clause is waived.

  • Fast market entry to get you up and running in a new country in as little as 48 hours

  • Cost savings of 60% when compared to establishing a foreign entity and ongoing maintenance costs in-country

  • Risk mitigation by ensuring your company, intellectual property, and employees are protected

  • Streamlined process with a provider that manages compliance, payroll, and benefits, simplifying your international invoicing

PEO 2.jpg
 

Frequently Asked Questions

How much is the VAT tax?


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




Does the Brazilian Labor law recognizes a Fixed Employment agreement?


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.




What are the cost savings in using a PEO?


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.




Are they employed on local employment contracts?


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.




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


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.




How do we manage leave requests and tracking leave consumption?


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




How are taxes and social security contributions paid?


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.




Who pays the taxes?


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




Who pays the employee? Who calculates payroll?


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.




Why use a PEO service?


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.




Can we set the local salary in a foreign currency?


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.




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


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




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


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.




Who manages the employees?


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.





 

Pricing Guidelines

PEO

Employer of Record

We serve as Employer of Record and assume responsibility for payroll, management, benefits, compliance, etc.

                       PRICING

10% over Total Employment Costs

             No additional costs!

Payroll

Management

We run and manage your entire payroll process. One all-inclusive fee, per employee, per month

                      PRICING

10% over Total Employment Costs

             No additional costs!

Independent

Contractor

Outsource services to a domestic or foreign contractor. The best alternative for labor costs reduction.

                      PRICING

10% over Total Employment Costs

             No additional costs!

 

Next Suggested Steps

PEO Next Steps.png