A Postcard from Brazil
In this series of postcards, a member of the Capital GES team will discuss what international businesses may need to know before the hire of staff (local or expat) in a country.
Over the last few months, both Luciana Jablonski and Lucy Peel gave us some relevant points about Chile and Denmark respectively. In our third article of this A Postcard from series, our colleague, Julio Viana will introduce some relevant points about employment in Brazil. Julio is based out of our Latin American Headquarters in Belo Horizonte, Brazil.
Brazil has undergone several changes over the last few years both economically and politically. One of the biggest changes was the introduction of the labour reform in 2017. It is hoped that this labour reform should modernise Brazil’s labour law by reducing lawsuits and labour costs for businesses. According to the 2019 World Bank report, the new labour reform has already started to attract investment and help create new jobs in Brazil. In addition, the Brazilian government continues to encourage and promote foreign direct investment by offering incentives and removing the barriers for foreign investor activity.
Brazil’s diverse market offers plenty of expansion opportunities for businesses in other sectors such as the finance, oil, gas, automobile, technology and telecommunications. Furthermore, Brazil borders ten other countries in the region which offers great potential for companies looking to grow their presence in Latin America.
Julio has plenty of experience in helping Capital’s new clients navigate their way through employment regulations in Brazil. In this post, Julio provides several key points on employment law and statutory benefits that international companies may need to know when considering hiring staff in Brazil.
Below are three important topics that Julio discusses on a regular basis with his clients when advising them about expanding into Brazil.
Julio – One of the main questions‘ clients ask me is: “Can I have a worker on a fixed-term contract as I am not sure whether it will work out long term?”
Fixed-term contracts are only applicable when the nature of services to be provided or the activities of the company are considered as a transitory nature.
Furthermore, fixed term contracts can only be extended once and may not exceed 2 years in total duration.
Julio – Another concern clients’ have that comes up often is around termination and severance pay in Brazil.
Terminations in Brazil are often complex and should be analysed with local experts before any notice is issued. Contracts can be terminated by mutual agreement or unilaterally and a notice period must be considered. This notice can be paid in lieu or worked, and it increases according to the length of service of the employee.
Severance payment depends on the length of employment and notice period given.
Severance indemnification can equal up to 40% penalty on the balance in the employee’s FGTS (federal severance fund savings) account.
Statutory Employee Benefits
Julio – Another common question I get asked by clients is about the Statutory employee benefits, as the benefits differs from country to country especially in Latin America.
Statutory Paid Holiday
In Brazil, employees are entitled to 30 days of holiday leave after 1 year of employment. This does not include public holidays. The 30-days’ holiday leave entitlement can be split into three periods provided it is negotiated with the employer first. One period must be at least 14 calendar days with the remaining two periods no less than 5 calendar days each.
Furthermore, in Brazil employers are required to pay a holiday leave bonus which equals to 1/3 of the vacations.
Maternity and Paternity Leave
Maternity leave in Brazil corresponds to 120 days. During the maternity leave, employees receive an allowance equal 100 % of the average salaries funded by the state. Fathers are entitled to 5 paid days leave funded by the employer.
Probationary period for all employees is for up to 90 days.
In Brazil, the Christmas bonus (or 13th salary) is a mandatory benefit to employees, and the amount is equivalent to one month’s wage. Payments are made annually in two instalments – the first is paid up to the 30th of November and the second paid up to 20th of December. The Christmas bonus is prorated if the worker has worked less than a full year.
Using an international PEO/EOR solution to expand into Brazil and hire staff compliantly
If your business is considering expanding into Brazil or another country in Latin America. Capital GES can help you without the need to immediately establish a corporate entity. By choosing to use our International PEO/EOR services you can expand your business in a fully compliant and cost-effective way. Our in-country experts will be able to help you navigate the different regulations and labour laws and assist you with employing staff legally and compliantly in Brazil. For further information you can contact our LATAM office on + 55 31 3194 8150 or email us at firstname.lastname@example.org to see how you can expand your business and hire staff in Brazil.