For companies who are considering expanding into the Latin American region, Brazil may be a market well worth exploring.
In addition to being the world’s number one producer and exporter of agricultural products (coffee, sugar and soybeans), and the largest recipient of foreign direct investment (FDI) in Latin America, the Brazilian government, continues to encourage and promote FDI 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.
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 It is hoped that this labour reform should modernise Brazil’s outdated labour law by reducing lawsuits, labour costs for businesses and providing opportunities for international companies.
It’s important for businesses to understand when expanding into a new country and hiring staff (either local or expats) that there can be many challenges. Each country has unique rules and regulations when it comes to benefits, statutory leave, employee expenses and general taxation. In the following section we have listed below a few items to consider before entering the Brazilian market.
Things to consider when hiring staff in Brazil
1. Fixed-term contracts
Fixed-term contracts are only applicable when the nature of services to be rendered or the activities of the company are considered of transitory nature that could justify the fixed term.
Employment contracts must be in writing and in a local language (Portuguese).
Fixed term contracts may not exceed 2 years in total duration and can only be extended once, not necessarily for an equal period. After extending a fixed-term contract, successive fixed-term contracts are not allowed without observing a 6-month-break period in between.
2. Medical Exams
Medical admission exams are mandatory in Brazil.
3. Annual holiday leave
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.
Holiday leave bonus is a mandatory benefit and equals 1/3 of the vacations due to the employee. Payment of vacations and 1/3 bonus must be made 2 days prior to the date employee will take vacations.
Up to 1/3 of the total period of 30 days of annual holiday leave can be compensated as payment in lieu per year worked.
4. Notice periods and termination
Employers must give 30 days’ notice (plus 3 days per additional year worked) in advance of the termination of the indefinite term contract or make payment in lieu of such days. Severance indemnification equals to 40% penalty on the balance in the employee’s FGTS (federal severance fund savings) account and is due to employees dismissed without cause.
Severance payment depends on the employee’s length of employment and notice period given.
5. Christmas bonus
In Brazil, the christmas bonus 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 December. The Christmas bonus is prorated if the worker has worked less than a full year.
6. Additional benefits
Meal and Health Plan benefits
In Brazil, monthly benefits such as meal voucher and corporate health plan are commonly offered. Public transportation is a mandatory benefit by law.
Use Capital’s GES International PEO/EOR services to expand into Brazil
Capital GES can help you expand into Brazil and other countries in South America 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.