Learning how to do payroll in Brazil starts with registering your business, understanding Brazil’s tax law, managing social insurance taxes, and withholding taxes. The country’s business registration process is complex—but because it’s consistently rated in the top 10 largest economies, expanding business operations in Brazil can be prudent for certain businesses.
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A note about currency: Brazil’s currency is the Brazilian Real (BRL / R$). For comparison purposes, we’ll note the equivalent US Dollar ($) figure, where applicable, using the conversion amount relevant at the time of writing this article. The conversion rate used is 1 BRL = $0.19. Make sure you check current conversion rates to ensure accurate calculations.
Use these seven steps as a guide on how to do payroll in Brazil. We’ve found that Papaya Global is the best overall option for international payroll services.
Step 1: Set Up Your Business as an Employer
To register a business in Brazil, you’ll need to consider some things about your business and take certain steps to ensure full compliance with the law.
To begin, it’s essential to appoint a legal representative who is either Brazilian or has a permanent visa and an established residence in the country. This person should have a background in law or accounting and experience with Brazil’s local market.
Any documents issued outside Brazil that are submitted to government agencies must be legalized by a notary public from the place of origin. Documents may also need to be translated into Portuguese, the official language of Brazil.
Contact the State Board of Commerce (Junta Comercial) or the National Companies Registry Office (Cartorio de Registro de Pessoa Juridica) to get your business registration. This is where you’ll need to submit your documentation in Portuguese.
You’ll also need to file your articles of incorporation, a certified copy of the General Registrar number (RG), Individual Tax Registration (CPF), the National Registration Form (FCN), and pay a fee. Once this documentation has been filed and approved, you’ll receive the Numero de Identificacao do Registro de Empresa (NIRE), which is your company identification number. With your NIRE, you can receive the CNPJ number for your company and CPF number for individuals. The CNPJ is like a US Employer Identification Number (EIN) and the CPF is a number for authorized individuals in your company.
After you’ve completed these steps, you’ll need to register in the state where your business is located. This must happen with the State Department of Finance. Once approved, you’ll receive a copy of the license to operate your business.
You’ll also need to register with the Social Security Institute (INSS) within 30 days and request authorization to print tax invoices and authenticate fiscal records.
Once all of this is complete, you can open a Brazilian bank account. It’s a requirement that you have a bank account in the country to pay your employees.
Tip Box: Setting up a business in Brazil can be complicated and time-consuming—and might not be worth attempting on your own. Simple mistakes could lead to extra costs and delays before starting business operations. While costly, it’s recommended to work with a suitable operational representative in Brazil that can manage your employee base for you. Consider Papaya Global, as it has the experience and administrative support to manage this complex and time-consuming process for you.
Step 2: Establish Your Payroll Process & Policies
You’ll want to create a structured process so you don’t miss any vital payroll steps. Consider the following:
- Pay schedule: How frequently will you pay employees? Monthly is the most common in Brazil, but you can also pay weekly, every other week, or twice monthly.
- Type of employees: Full- vs part-time?
- Tracking time: How will you track employee hours, and how will it be reported to you?
- Benefits: What benefits will you offer beyond the required benefits? Who pays for them? How will you manage the payroll deductions?
- Taxes: How often will you need to pay taxes? What tax rates will you pay? How often do you need to remit taxes, and to what agencies?
- Payroll processing and calculations: Will you calculate payroll by hand, Excel, or use a payroll service or software?
- Paychecks: Will you write manual checks, use pay cards, pay via direct deposit, or pay in cash?
The typical Brazilian workweek is Monday through Friday, 44 hours per week. The number of hours each employee works is also stipulated in their employment agreement or collective bargaining agreement. Any hours worked beyond what’s agreed to in the employment agreement is considered overtime—as is any work over 44 hours in a single workweek. Employees are generally allowed to work a maximum of two overtime hours per day and are paid at one and a half times their regular pay rate. Work on a holiday is paid at double time.
To ensure your company processes payroll in Brazil effectively, you should also have policies on:
- Leaves: What leaves are required to be paid vs unpaid, and at what rates?
- Overtime: At what rate do you need to pay employees overtime, and for how many hours?
- Absences: How do you track absences and know whether they’re paid or unpaid, excused or unexcused?
- Holidays: What holidays are paid and at what rate?
Step 3: Determine Salaries & Ensure Compliance
The cost of living in Brazil is much less than in the US, currently about 69% less expensive. The average annual salary in Brazil is about R$33,696 ($6,381). You may be able to save money by hiring Brazilian employees because of the lower cost of living—but also consider their experience and skills when making salary determinations.
Payroll & Employment Law Compliance
Brazil has similar employment and payroll compliance laws to the US, though employment contracts and collective bargaining agreements are much more common in Brazil. You must understand the differences and nuances of Brazilian employment law so you remain compliant.
While common, employment contracts are not required in Brazil. We recommend that you have a written agreement, however, as it protects your business from potential problems. Unlike in the US, Brazilian employment laws often skew in favor of workers, so having a written agreement can protect your company.
Brazil takes worker misclassification seriously. If challenged, a court will look heavily at what the worker does and how your company interacts with them. If a worker meets the following conditions, they’re likely to be considered an employee in Brazil:
- Has a direct manager at your company
- Provides services to your company only
- Is dependent on your company for salary
- Cannot delegate work to someone of their choosing
- Lack power to decide how, when, and where the work is done
Penalties for misclassification in Brazil are steep. Companies could face fines, back pay, and be barred from conducting business in Brazil. To be clear, you can partner with a Brazilian independent contractor, but just make sure they’re actually a contractor and not an employee.
The current minimum wage in Brazil is R$1,302 per month ($247). A proposal is currently working through the Brazilian bureaucracy to raise the minimum wage to R$1,320 per month.
Brazil bases the workweek on 44 hours over five days. Any work completed over the base hours in a week will be paid at 1.5 times the employee’s regular pay rate. If an employee works a holiday, that is paid at double time.
Brazil takes vacation time seriously. Brazilian employees are entitled to 30 paid vacation days each year after they’ve worked for a company for 12 months. Employees must use at least 14 consecutive days of paid vacation at once and must take two additional vacations of at least five days each. Employees cannot start a vacation on a Friday or within two working days of a paid rest day or a federal public holiday.
When on vacation, employees must receive their regular rate of pay, plus a vacation bonus equal to one-third of their regular monthly earnings. Companies must pay this bonus two days prior to the employee starting their vacation.
Employees must take this vacation time in the calendar year, as it does not roll over into the following year. However, employees may sell back up to 10 days to their employer at their regular rate of pay. If an employee ends the year with vacation time unused, the employer must pay the employee double their regular rate of pay for the accrued and unused vacation time.
Brazil follows the 13th month salary system, requiring companies to pay employees a 13th month salary at the end of the year in two installments: one in November and one in December. Employees who have worked for one year are entitled to receive the payment. Companies must pay out a proportional amount if an employee has worked less than a year.
Brazil has several national holidays, listed below. Note that some states have additional holidays for which your business may be required to close.
- New Year’s Day
- Carnival
- Ash Wednesday
- Good Friday
- Tiradentes Day
- Labor Day
- Corpus Christi
- Independence Day
- Lady of Aparecide
- All Souls’ Day
- Republic Day
- Christmas Day
Maternity leave is a requirement in Brazil. Mothers are entitled to 120 days of paid leave, paid through the INSS. This leave includes adoptions. If employers enroll in a government program called Empresea Cidada, mothers can receive an additional 60 days.
Fathers are entitled to five days of paid leave. If the employer enrolls in Empresea Cidada, that can be extended to a maximum of 20 days.
There is no additional parental leave or program for sharing leave between parents.
Brazil provides sick leaves for when a worker is ill. The employer covers the first 15 days of pay at the employee’s regular rate. INSS covers any additional time. The amount paid out by INSS is calculated based on contributions made and has a maximum payout of R$6,100.
In Brazil, an employee can be terminated with or without cause.
When an employer gives a termination notice to an employee, they must give at least 30 days’ notice if the employee has worked for less than a year. For every year of service beyond one year, employers must give an additional three days’ notice up to a maximum of 60 additional days. If an employee quits, they must give 30 days’ notice, and if the departure is mutual, the notice period may be cut in half.
Severance pay differs based on the type of termination. When an employee is terminated without cause, they’re entitled to severance pay from a tax paid by the employer. The length of service will determine the exact amount of severance paid.
Step 4: Collect Employee Data & Forms
As with US-based employees, you’ll need to collect certain data from your Brazilian employees. This often includes:
- Employee’s full name
- Employee’s permanent address in Brazil
- Employee identification
- Copy of the employee contract or collective bargaining agreement
- Bank account information
Step 5: Collect Time Sheets & Calculate Payroll
When a business first launches, it often uses paper time sheets. We don’t recommend this as it’s ripe for errors and misuse. The best and most effective way to keep track of employee hours is to use time tracking software. Your employees clock in and out electronically, and your managers can review and approve timesheets before they get to your payroll team for processing.
Once payroll gets the time sheets, they should still review them for accuracy. A second set of eyes to spot any glaring errors is crucial to ensuring your company runs payroll correctly each time. It’s easier to fix these errors before running payroll, and it creates a smoother process for everyone involved.
When calculating the payroll, you’ll need to account for the required payroll taxes in Brazil. Missing these will leave you out of compliance and could cause costly fines and penalties from Brazilian government agencies.
Tax | Employer Share | Employee Share |
|---|---|---|
INSS | 20% to 22.5% | 7.5% to 14% |
Employees Severance Indemnity Fund | 8% | 0% |
Family Compensation | 1% to 3% | 0% |
Occupational Accident | 0.17% to 13.5% | 0% |
Non-Occupational Accident | 0% | 1% to 4% |
Besides these payroll taxes, you’ll also need to withhold appropriate income tax from your employee’s paychecks. Brazilian taxes are calculated based on monthly income.
Monthly Income | Tax Rate |
|---|---|
Up to R$1,903.98 | 0% |
R$1,903.99 to R$2,826.65 | 7.5% |
R$2,826.66 to R$3,751.05 | 15% |
R$3,751.06 to R$4,664.68 | 22.5% |
Over R$4,664.68 | 27.5% |
There are no local or state taxes in Brazil.
Step 6: Pay Employees
Now that you’ve reached the point of calculating your payroll, it’s time to pay your employees. Make sure you’re following the pay schedule you’ve previously outlined.
If you have just a single or handful of employees in Brazil, you may want to outsource your payroll to a local provider. They will be licensed and familiar with Brazilian payroll laws and processes. While you’ll pay them a fee, it’ll likely be worth your time for just a few workers.
However, if you have more employees or plan on dramatically expanding your Brazilian workforce, you may want to do payroll in-house. You or your payroll team should be familiar with Brazilian payroll laws and deductions to ensure you make the right deductions from an employee’s paycheck and send tax payments to the right Brazilian government authorities.
For more in-depth information, check out our guide on how to pay international employees.
Step 7: Document & Store Your Payroll Records
Payroll records in Brazil must be kept for at least five years. Your payroll records should include, at a minimum:
- The dates of employment and rate of pay
- The frequency of pay
- Deductions
- Employee’s name and address
- Total regular and overtime pay
- Net employee pay
- Copy of employment contract or collective bargaining agreement
- Leave taken
Bottom Line
Doing payroll in Brazil for the first time is complex—as even just registering can take months to complete. There are high payroll taxes and many mandatory benefits. Make sure you take your time and set everything up correctly from the start, especially classifying your workers appropriately.
