Brazil has quickly become one of the most popular countries to hire skilled remote workers worldwide. With a sizable population of 216 million people, it makes sense that Brazilians are increasingly becoming a big part of the global remote workforce.
When sourcing talent from Brazil, there are two options: hiring an employee or hiring an independent contractor. Hiring an independent contractor is often the route most employers choose.
While both the independent contractor and the employee work for the business, it's important to ensure that the lines between the two are clearly defined. Otherwise, employers put themselves at risk of misclassification.
Here’s a guide to get a solid grasp of the differences between independent contractors and employees in Brazil.
Independent Contractors in Brazil
In Brazil, independent contractors are defined as those who work independently of a company and are not subordinate to company regulations or employee benefits, such as working hours, supervision or sick leaves.
If employers plan to hire independent contractors, they must ensure they are compliant with local laws and employment regulations. With the right EOR platform, like Borderless, hiring independent contractors in Brazil can be a breeze.
Advantages of Hiring Brazil Contractors
When it comes to picking between hiring an independent contractor vs employee from Brazil, it is important to consider what benefits each employment type is entitled to.
Contracts
According to Brazilian employment laws, it is recommended that a written contract be signed when entering any work relationship. However, since it is only recommended, both the contractor and employer are not bound to create and sign legal contracts.
Subordination
Independent contractors are not subject to subordination during their work day. They have flexibility in their hours of work and can also provide their services to other clients while working for your business.
Salary
Independent contractors can determine their salary and remuneration paid for a specific project or role. The contractor and the hiring party agree to payment. Typically, independent contractors submit invoices on a monthly or project basis to the hiring party, however, some may opt for a bi-weekly payment system.
Benefits
Independent contractors are not protected under Brazilian labor laws and do not receive any benefits, such as sick pay, vacation pay, overtime pay, or social security benefits. Employers have no obligation to give benefits to their contractors.
Taxes
Employers do not have to deduct any amount of money for taxes and contributions when paying independent contractors. Independent contractors are responsible for filing their income tax. They’re also required to make contributions to Brazil's social security system, which can equate to 5%, 11%, or 20 % of the maximum salary contribution. The specifics depend on the independent contractor's circumstances and provided services.
When hiring an independent contractor, businesses can sign agreements with contractors overseas. When a business does this, the tax must also be declared in the country the contractor operates in.
For example, if a Brazilian company’s contractor is operating remotely from the United States, then all the income received should be filed in the United States.
Tax forms such as the W8BEN and W9 are a few examples of forms that must be submitted to legally partner up with contractors overseas.
Termination and Severance
When it comes to terminating an independent contractor, the conditions of the termination can be negotiated by both parties. The Brazilian Civil Code states that termination can be initiated by either party as long as they meet the following notice periods:
- Eight days: for monthly remuneration
- Four days: for bi-weekly remuneration
- One day: if the contract is valid for less than seven days.
Employees in Brazil
According to Brazilian employment regulations, a person is considered an employee when they work under the direction of the employer, they receive a salary for their work, and they provide services for an employer regularly. Additionally, employees are unable to hire a subcontractor to complete their work.
Advantages of Hiring Employees
Whether you are a Canadian company with a legal entity set up in Brazil or are simply planning to expand your global workforce, there are many advantages of hiring local employees in Brazil.
Contracts
A written contract is not a prerequisite for entering into an employment relationship, according to the Brazilian labor law. While verbal agreements are legally valid, it’s common and best for the basic terms of employment to be outlined in a written contract.
Employment contracts include, but are not limited to, the date of commencement, the duration for temporary contracts, the job description, working hours, overtime, holidays, sick leaves, termination conditions, and base salary.
Most contracts in Brazil are to be considered indefinite, but fixed-term contracts can be drawn up in certain circumstances. Fixed-term contracts, however, cannot be longer than two years.
Subordination
One of the primary differences between an employee and an independent contractor is subordination. Employees are subjected to Brazil’s standard working hours, which is not to exceed 44 hours a week. Employees are to work a maximum of eight hours a day; if they are to work on a Saturday, they are only eligible to work four hours. For those who work more than six hours a day, they must have a break of one to two hours. For shifts between four and six hours, they receive at least a 15-minute break.
Salary, Overtime, and Bonuses
Employees in Brazil are paid once or twice a month. Brazilian law requires employees to be paid on the 30th of the month or by the 5th of the following month. As of January 1, 2023, the Brazilian minimum wage is BRL 1,320.00 per month. However, this can be set regionally, and many regions’ minimum wage is higher than the national minimum wage.
Much like in other countries, an employee’s daily schedule is not to exceed eight hours. If they do work overtime, they are not allowed to surpass two hours. For any hours that are considered overtime, an employee must be paid 150% of their wages.
If they happen to work overtime on a Sunday or holiday, they must be paid 200% of their wages. However, employers and employees can come to a mutual agreement to give employees a paid day off rather than pay overtime. Certain employees are exempt from overtime regulations, though. If they work with minors, are in charge of the keys to a company, or do not have fixed working hours — and therefore do not follow labor laws for overtime — they do not qualify for overtime pay.
Brazilian employees are entitled to the 13th-month bonus, commonly referred to as el Aguinaldo or the Christmas bonus. An Aguinaldo is an additional month’s salary that’s paid in two installments. The first installment can be paid anywhere from February 1st to November 30th, and the second installment must be paid by December 20th.
Benefits and Statutory Protections
Employees in Brazil are entitled to the following benefits and protections according to the Brazilian Labour Code:
- Paid vacation
- Maternity and paternity leave
- Sick leave
- Bereavement leave
- Pension
- Disability insurance
- Medical and dental care
- Freedom from discrimination and harassment
Vacation
Once an employee has worked for twelve consecutive months for the same organization, they’re entitled to 30 days of paid time off. There are three periods in which the employee must take their time off: one period has to be more than 14 days long, and the other two periods have to be a minimum of five days long. If an employee chooses not to take their annual leave, they can cash it in. When they do, they’ll receive ⅓ of their annual leave compensation as a holiday bonus.
Holidays in Brazil
Brazil observes various civic and statutory holidays throughout the year. Here is a list of the 2024 holidays that are recognized as government or national holidays.
January 1 - New Years
February 12 - Carnival Monday
February 13 - Carnival Tuesday
February 14 - Carnival Ends
March 29 - Good Friday
March 31 - Easter Sunday
April 21 - Tiradentes Day
May 1 - Labor Day/ May Day
May 30 - Corpus Christi
September 7 - Independence Day
October 12 - Our Lady of Aparecida / Children’s Day
October 28 - Public Service Holiday
November 2 - All Souls’ Day
November 15 - Republic Proclamation Day
December 24 - Christmas Eve
December 25 - Christmas Day
December 31 - New Year’s Eve
Maternity and Paternity Leave
For maternity leave, female employees are entitled to 120 days of fully paid leave. More so, if the employee is enrolled in a government program called Empresa Cidadã, they’re entitled to 180 days. In the instance that the employee has a medical condition, they’re able to extend their maternity leave two weeks before and after giving birth. While maternity leave is fully paid, the employer can claim a portion of the compensation and be paid back through social security.
Fathers are entitled to take five days of paid paternity leave; with Empresa Cidadã, they’re able to take an additional 15 days.
Sick Leave
If an employee is sick for 15 days, they are paid in full by the employer, but they must provide a medical certificate. If an employee’s sick leave is more than 15 days, they receive sick pay at a fixed rate from Social Security.
Taxes
Employers pay around 30% of an employee’s salary, which includes a 20% rate for pension insurance, 8% to the Fundo de Garantia sobre Tempo de Serviço (FGTS), and an additional 8.8% for other social contributions. For employees, they pay up to 14% of their salary toward social security contributions.
Termination and Severance
In Brazil, employers can terminate an employee at any point in the employment contract. However, they must give the employee at least a 30-day notice period in writing.
Severance payments are required by Brazilian law. If an employee is terminated with or without cause, they are entitled to receive any unused holiday compensation and a prorated 13th-month bonus.
For every year of their tenure with the company, they are to be paid the equivalent of their monthly salary. For example, if an employee’s monthly salary was BRL 16,000 and they worked eight consecutive years, the employer would have to pay the former employee BRL 128,000 in severance.
The Risk of Misclassification
If independent contractors are misclassified as employees, and vice versa, organizations may face severe penalties. If the Brazilian Ministry of Labour determines that there has been misclassification, the organization is at risk of being fined BRL 400,000. If a relapse occurs, the fine will be doubled.
Independent Contractor Versus Hiring an Employee
When organizations are hiring talent from Brazil, it’s important to consider the key differences between independent contractors and employees. The various benefits and vacation timings are huge factors to consider when deciding whether or not you want to opt for an independent contractor or think about investing in a new full-time or part-time employee.
When businesses opt to hire an employee, they also sign up to provide training, employee benefits, tax compliance and many more advantages.
When you decide to hire an independent contractor, you can ensure you hire top talent from the industry without signing the commitment of employee training and offering various other benefits.
Choose Borderless
Avoid the risk of misclassification and ensure compliance with local Brazilian employment laws when you partner up with an Employer of Record - Brazil.
Borderless is an Employer of Record that helps employers compliantly hire employees and independent contractors all across the globe. Whether you plan on globally hiring in Brazil or the USA, Borderless can onboard, manage and pay your international team with an all-in-one platform. From faster payments and a mobile experience, Borderless has what it takes to provide your business with the right tools to help manage your international team.
To make hiring Brazilian talent seamless, speak with our team today.
Disclaimer: Borderless does not provide legal services or legal advice to anyone. This includes customers, contractors, employees, partners, and the general public. We are not lawyers or paralegals. Please read our full disclaimer here.
