Benefits & Compensation in Brazil

Employee benefits are the additional perks employers offer their employees apart from their standard salaries. It can be insurance, transportation allowance, reimbursements, and other compensations that companies offer.

A competitive benefits and compensation package in Brazil helps you enrich workplace morale, establish a reputation as a reliable employer, and attract more applicants to fill available job positions in your company. 

The employees in Brazil attain mandatory protections as agreed in their employment contracts. Such benefits cover statutory minimum wage, working hour limits, overtime compensation, annual leave, severance fund, medical care, sickness, maternity, paternity, leave entitlements, disability benefits, and more. All these statutory minimum benefits must be incorporated when charting a Brazil benefit management plan.

Typically, Brazil is viewed as a country with strict labor laws supporting employers and employees. The below guide discusses the setup process of compensation and benefits policy in Brazil and lets the employees work more efficiently.

Compensation Laws in Brazil

Various compensation laws in Brazil govern employee benefits in the country. They are discussed below:

1. The Consolidation of Labour Laws (Consolidação das Leis do Trabalho – CLT): This key legislation oversees labor relations in Brazil.
2. The Brazilian Social Security Law: INSS (Instituto Nacional do Seguro Social) is accountable for collecting contributions to uphold the Brazilian Social Security law. The law oversees paying retirements and pensions due to illness, death, aids, disability, and more.

iii. The Brazilian Government Severance Indemnity Fund Law (Fundo de Garantia por Tempo de Serviço – FGTS): It protects the following types of employees dismissed without just cause by providing a capital resource:

• Employees administered by the CLT (Consolidação das Leis de Trabalho)
• Rural employees
• Freelance employees
• Temporary employees
• Diretor não empregado
• Domestic maids
• Professional athlete

The Brazilian consolidation of labor laws: It is administered by the [CLT] 1964 (last revised in 2021). The law directs the employment’s terms and conditions like working hours, wages, rest periods, holidays, and other employment conditions.

How to Design an Employee Benefits Program for Employees in Brazil?

Before designing a compensation package in Brazil, it is imperative to note several considerations. They are discussed below.

Step 1: State your business goals and budget

Before formulating the compensation policy, you must state the objectives you anticipate from the compensation structure in Brazil. You must evaluate employment contracts or collective bargaining agreements to clarify employment relationships and the rights related to employees’ benefits. 

You must also consider your company’s budget, size, commercial environment, and economic sector before creating the benefits policy in Brazil. 

Step 2: Decipher employee requirements

After defining your business goals and budget, you must identify your employees’ requirements. Based on these requirements, you can create a compensation and benefits policy in Brazil that guarantees employees satisfaction. Certain benefits may be more valuable to employees. You can determine employees’ needs & expectations, the benefits they use the most, and those they don’t need. This is possible by conducting interviews with employees or sending questionnaires.

You must perform detailed research to learn the existing industry standards and the benefits your competitors offer their employees. The corresponding findings and internal survey suggest areas for improvement. Moreover, they suggest that required changes be employed in the compensation and benefits policy in Brazil. Based on these outcomes, you can dismiss some extra benefits and control company costs.  

Step 3: Formulate your benefits plan

Once you determine the employees’ needs and expectations, you must conduct a gap analysis. This approach mentions the existing picture of the benefits plan. 

Create a flexible framework for worker’s compensation in Brazil to uphold the business’ dynamic nature and perform market research. The flexible benefits structure allows employees to select the necessary benefit. When preparing a workers’ compensation benefits plan in Brazil, you must cover employee contributions, organizational costs, and outsourcing needs.

Step 4: Instruct the benefits to the stakeholders and obtain feedback

You must convey the advantages of your created benefits plan to all the employees and stakeholders. They will provide feedback when you share the plan’s draft. You can incorporate any valuable feedback into your compensation policy. If the feedback states that a particular benefit is unnecessary,  you can modify or dismiss it.

Step 5: Plan investigation

The dynamic business environment can impact the employee’s benefit plan, and businesses may experience different changes. Hence, you must regularly evaluate the compensation structure in Brazil to learn the benefits plan’s efficiency and feasibility.

Check for any possible errors before implementing the employee compensation policy in Brazil. You can exhaustively evaluate all the elements of the benefit plan and then implement them. Moreover, you can consider a few metrics listed below for the usefulness of the benefit plan for the employees.

• Assessing the employee’s base pay
• Ensuring the benefits plan meets the employees’ individual and family requirements
• To add in relocation expenses
• To ensure that the benefit plan facilitates learning and development
• To ascertain that your benefits plan offers more valuable benefits than those offered by other companies in your industry 

Types of Guaranteed Benefits in Brazil

Employers provide various types of employee benefits in Brazil to their employees. Many of these benefits are mandatory and are discussed below:

Minimum wage

• The minimum monthly wage in Brazil is R$1,302.00.

Working hours and overtime

• The standard working hours in Brazil are 44 hours per week, 8 hours per day.
• All the work exceeding the standard working hours is paid as overtime.
• The overtime maximum limit is 2 hours per day. Generally, it is paid at 150% of the standard pay. The overtime compensation is governed by collective agreements or employment contracts. 

Paid leaves

• Employees who have completed at least one year of employment are entitled to at least 30 days of paid leave.
• The employer must pay the paid leave compensation two business days before the commencement of the leave.
• The Labor Reform permits employees to take the paid leave period in parts. They can take leave for up to three periods. One should be at least 14 days long, and the other should be at least five days each.

Public holidays

• Notwithstanding the industry and sector, public holidays in Brazil are the same for all employees. 
• The employees in Brazil receive 13 public holidays per year. Other additional holidays may apply based on the region. 

Here’s the list of public holidays in Brazil.

Note: Employees working on a public holiday are paid 200% of the regular wages.

Sick leaves

• All employees in Brazil are entitled to paid sick leave of 15 days. They should provide a medical certificate of the first day of sickness within 48 hours. 
• The employers compensate the sick pay for the initial 15 days at the rate of 100% of the standard salary. The Social Security (INSS) pays after that.

Maternity leaves

• All female employees in Brazil are entitled to 120 days of paid maternity benefits. 
• This benefit is also valid when the female employee adopts a child. INSS compensates for maternity pay.  
• If the employer is enrolled under the government scheme (Empresa Cidada), they can prolong the maternity period to 180 days.

Paternity leaves

• Male employees in Brazil are entitled to paid paternity leave of 5 days upon the birth of a child. 
• If the employer is enrolled in the Government Program known as “Empresa Cidadãs,” they can extend the paid paternity leave to 20 days.

Holidays leave

• Employees with less than five unexcused absences per year are entitled to 30 days of paid holidays annually.

Marriage leave

• Employees getting married can request a paid leave of up to three consecutive days.

Bereavement leave

• A paid bereavement leave of two consecutive days is provided to employees if they experience death in the family (child, wife/husband, or direct relatives, including siblings and parents).

Severance pay

• All employers in Brazil should deposit 8% of each employee’s monthly salary. 
• This fund is deposited into a particular account the Federal Savings Bank opened. 
• This account is used to receive the Severance Pay Fund called Fundo de Garantia do Tempo de Serviço (FGTS). 
• The employees will receive the fund at the end of their employment (within ten days of the last working day) except if the employment is terminated with just cause.

Retirement

• Both male and female employees are entitled to this benefit. The male employees’ age must be over 65 years and should have submitted a minimum of 240 monthly contributions to the INSS. 
• The female employees’ age must be over 62 years and should have submitted a minimum of 189 monthly contributions to the INSS.

Employee Benefits for Expatriates

Brazil invites many expatriates from around the world. Foreign employees in Brazil are entitled to the same benefits as those offered to local employees. The ex-pats are entitled to health insurance, meal allowance, full/part daycare payments (for young children and parents), and travel allowances for their employment service in Brazil. Most employers provide these benefits. Moreover, the ex-pats are eligible for retirement pensions, benefits related to lodging expenses, and benefits of relocation and travel.

How are Employee Benefits Taxed in Brazil?

Apart from determining the benefits to provide to employees, you must also be familiar with how taxes are calculated on the offered benefits in Brazil. The employee’s compensation package in Brazil covers a considerable share of these benefits. The range of Brazil’s income tax rate is 0 to 27.5%. Note that the maximum and minimum of each tax rate level are subject to amendments each year.

Usually, employees can contribute tax from 1% to 5%. The employers match 100% of employee contributions up to 5%. The employee contributions are tax-deductible up to 12% of their total taxable income as stated in the annual income tax return. The payments sent to the PGBL – PLANO GERADOR DE BENEFÍCIO LIVRE plan are deductible. However, they depend on the payment of the official social security.

In addition to paying taxes, employees in Brazil must meet certain tax obligations. These obligations include formulating and submitting tax returns, forwarding the payment of income tax (carnê-leão or withholding), submitting Brazilian Central Bank assets return, etc. 

Restrictions for Brazil Benefits and Compensation

A broad set of benefits conveyed to employees in Brazil are taxable. Hence, you must be accustomed to the monetary worth of these benefits to calculate the tax amount payable by the employer accurately. Additionally, an employer must warrant that all tax payments are punctually released and directed to the respective authorities.

Before preparing an employee benefits plan, you must ascertain that your business is legally operated in Brazil. Besides, the companies must pay the minimum remunerations to the employees according to their sectors. The benefits and compensation package in Brazil should follow all the labor laws regulated by the government.

Supplemental Benefits for Employees in Brazil

In addition to the mandatory benefits, employees in Brazil attain additional benefits during their employment. They are described below.

13th-month pay

Employers must provide an additional month’s salary to employees. It is paid at the year’s end and is known as the 13th-month salary. The same is paid in two equal installments, i.e., the first by November 30th and the second by December 20th.

Employees who have served for at least one year are entitled to the full payment of the 13th month’s salary. Those employees who have worked less than a year will get the payment proportional to the period they have been employed.

Other supplemental benefits:

• Meal voucher: It’s an exclusive rechargeable card that employees can use in most restaurants in Brazil to get free meals during work.
• Food vouchers: The employees can use them in grocery stores and supermarkets.
• Private pension: Certain larger companies in Brazil often provide private pensions to their employees, which can be 3% of the employee’s salary.
• Non-mandatory private health insurance: Some tech companies in Brazil offer employees health insurance that includes dependents.
• Life insurance: Usually, they are tied to the employee’s job role and salary.
• Education and training: Several companies provide education allowance, continuous training, tuition assistance, and annual budgets for professional conferences.
• Flexible work: Certain companies permit employees to work remotely (full-time) or in a hybrid setup.
• Fuel allowance: Certain tech companies provide a fuel allowance to employees who don’t use public transportation.
• Wellness: Companies benefit employees with drinks, breakfast, snacks, video games, no pet days, and a dress code.
• Telephone costs: Many companies reimburse telephone costs to employees who use phones for work.
• Stock options: These options are available in the range of 0.01% to 0.1% to attract a talented workforce and keep them motivated.

How Multiplier Can Help with Benefits Management in Brazil

Complying with local regulations is inevitable in establishing a business abroad and recruiting skilled employees. Employers should abide by local laws and regulations before preparing employment contracts and determining employee benefits to alleviate these challenges. This procedure can be streamlined by contacting a global PEO platform like Multiplier.

Multiplier simplifies compliance with Brazil’s labor rules. We also assist you with hiring proficient employees. Our staff can effectively govern the workforce without setting up a subsidiary in the country. As a result, you can control your employment expenditures and investigate new markets.