Brazil Labor Law Guide for Hiring Employees and Contractors
Brazil, the largest economy in South America, recorded a Gross Domestic Product (GDP) of approximately $2.1 trillion USD in 2023, making it one of the world’s top economies. The country’s economy is diverse, with significant contributions from agriculture, mining, manufacturing, and services. Key sectors include agribusiness, which dominates the export market, the automotive industry, and oil production, especially with the pre-salt oil reserves. The technology and financial sectors are also expanding rapidly.
Brazil’s official currency is the Brazilian Real (BRL).
Minimum Wage
BRL 1,412
Overtime Wage
1.5X of regular hourly rate
Meal Breaks
1 hour
Rest Breaks
15 minutes
Working hours
8 hours per day, 44 hours per week
Salary Payment Cycle
Monthly
Payroll Taxes
Social Security, FGTS, RAT
Paid Vacation
30 days
Overtime Hours
Over 44 hours per week
Night Shift Hours
120% of regular hourly rate
Holidays
13
No Work Days
Sunday
To hire employees in Brazil, businesses need to be registered as legal entities in the country. Setting up a business entity typically costs around BRL 1,000 to BRL 5,000, depending on the complexity of the registration process. It usually takes between 30 to 60 days to establish or incorporate a business entity in Brazil.
Employers must sign a formal employment contract with their employees. This contract should include key clauses such as job description, salary, working hours, leave entitlements, and termination procedures. In Brazil, labor laws treat employees and contractors differently. Contractors are generally governed by civil law, while employees are protected under Brazil’s Consolidation of Labor Laws (CLT).
Brazil has a federal minimum wage law. As of 2023, the minimum wage is set at BRL 1,320 per month. The federal minimum wage is typically reviewed annually. There are no exemptions to the minimum wage, and it applies uniformly across all job types. Some states, however, may set higher minimum wages depending on the cost of living. Employers in Brazil are also required to pay a 13th salary, which is an additional monthly wage paid in December.
The standard working hours in Brazil are 8 hours per day and 44 hours per week. Any work beyond these hours is considered overtime and must be compensated at 150% of the regular hourly rate. Night shift workers (those working between 10 p.m. and 5 a.m.) are entitled to a pay rate of 120% of the regular hourly rate.
The minimum legal working age in Brazil is 16 years, with strict regulations protecting young workers. Child labor is prohibited, and there are severe penalties for employers who violate these laws.
Employers in Brazil must make several payroll deductions:
Social Security (INSS): Employers contribute 20% of the employee’s salary.
Severance Fund (FGTS): Employers must contribute 8% of the employee’s salary to the FGTS.
Work Accident Insurance (RAT): An additional 3% is contributed by the employer, which may vary based on the risk associated with the job.
Brazil follows a progressive income tax regime. The current income tax rates are as follows:
Income Level (BRL per month) | Tax Rate |
Up to 1,903.98 | Exempt |
1,903.99 to 2,826.65 | 7.5% |
2,826.66 to 3,751.05 | 15% |
3,751.06 to 4,664.68 | 22.5% |
Above 4,664.68 | 27.5% |
Brazilian labor laws mandate several types of leave:
Paid Vacation: Employees are entitled to 30 calendar days of paid vacation after completing one year of service.
Maternity Leave: 120 days of paid maternity leave, which can be extended to 180 days if the employer opts into the Citizen Company Program.
Paternity Leave: 5 days of paid paternity leave, extendable to 20 days under the Citizen Company Program.
Sick Leave: The first 15 days are paid by the employer; thereafter, the National Social Security Institute (INSS) takes over.
The following table lists the mandated holidays in Brazil:
Holiday | Date |
New Year’s Day | January 1 |
Carnival | February 12-13 |
Good Friday | Varies |
Tiradentes Day | April 21 |
Labor Day | May 1 |
Independence Day | September 7 |
Our Lady of Aparecida | October 12 |
All Souls’ Day | November 2 |
Republic Proclamation Day | November 15 |
Christmas Day | December 25 |
Other Regional Holidays | Varies by State |
In Brazil, employers are required to provide several benefits, including:
Social Security: Retirement benefits, disability insurance, and survivor benefits.
Healthcare: While Brazil has a public healthcare system, employers may also offer private health insurance as a benefit.
Gratuity: Employees are entitled to a gratuity payment, known as the “13th salary,” which is an additional monthly wage paid in December.
Annual Bonuses: While not mandatory, many employers offer annual bonuses tied to performance.
FGTS: Employers contribute to the Severance Indemnity Fund (FGTS), which is used to compensate employees in cases of unjust termination.
Brazil does not follow At-Will Employment laws. Termination must comply with the country’s labor laws, which require a just cause or proper compensation. The termination process includes the following steps:
Notice Period: Employers must provide a notice period of 30 days. For every year the employee has worked, the notice period is extended by an additional 3 days, up to a maximum of 90 days.
Termination Benefits: If an employee is terminated without just cause, they are entitled to a severance payment that includes the balance of the FGTS account plus a 40% penalty on the total FGTS contributions made during the employment period.
Legal Challenges: Employees or labor unions can challenge terminations they consider unjust in labor courts. If the court rules in favor of the employee, they may be reinstated or awarded additional compensation.
Conditions for Termination: Employers can legally terminate employees for reasons such as poor performance, misconduct, redundancy, or inability to perform the job. However, the employer must provide evidence supporting the reason for termination.
This guide provides a comprehensive overview of the labor laws in Brazil, helping businesses navigate the complexities of hiring and managing employees in the country.