How to run international payroll for employees in Brazil (Updated 2023)
Apr 6, 2023
Running payroll for remote employees in Brazil can be complicated. No matter where your business is based, you have your own labor and employment laws to keep track of—and now that you're hiring employees in Brazil, that's a whole new set of laws and regulations to follow.
And it's crucial to stay on top of labor laws for your employees in Brazil. Violating them could result in costly fines and legal action from Brazilian regulators.
Read on for a step-by-step guide to running payroll in Brazil, with everything you need to stay compliant with Brazilian labor laws while making sure your employees get paid.
Table of Contents
- Step 1: Decide whether or not to create your own entity in Brazil or use an Employer of Record (EOR)
- Step 2: Choose a global payroll software solution
- Step 3: Determine your workers’ employment status
- Step 4: Capture your new hires’ Brazilian payroll information
- Step 5: Run payroll
- Step 6: Document and store your payroll records
- Frequently asked questions about running payroll in Brazil
Step #1: Decide whether or not to create your own entity in Brazil or use an Employer of Record (EOR)
To hire and pay employees in Brazil, you need a business entity in Brazil. There are a few different ways you can do this—you can establish your own local entity, or you can use an Employer of Record (EOR).
EORs allow foreign companies to hire and pay employees through their own entities. They also shoulder the responsibility for calculating and withholding the right taxes, and for paying your taxes to the Brazilian Internal Revenue Service (IRS).
When, why, and how do companies use an EOR?
When smaller companies expand their operations into new countries—including Brazil—they commonly use an EOR to run payroll, issue benefits, and ensure they're compliant with all local laws and regulations in the new country.
This is because setting up a business entity can take a significant amount of time—and effort. The administrative load is significant, and many smaller companies don't have the time or resources to spare. Using an EOR, on the other hand, allows them to hit the ground running in a new country—all while knowing their HR administration is compliant for all their new employees.
When, why, and how do companies create their own entity?
For larger companies, or those that have or plan to hire many employees in Brazil, creating their own entity can be more streamlined and cost-effective than an EOR. When you establish your own entity, that replaces the EOR as the legal entity for hiring employees, running payroll, and ensuring local compliance.
Here's how to set up your own legal entity in Brazil:
- First, appoint a local legal representative. This should be someone who is either Brazilian or has a permanent visa and an established residence in Brazil. They should have experience in Brazil's local market and understand law and/or accounting in Brazil.
- Next, submit notarized business documents to the State Board of Commerce (Junta Comercial) or the National Companies Registry Office (Cartorio de Registro de Pessoa Juridica) to obtain your business registration. You will likely need to translate your documents into Portuguese.
- Next, file your articles of incorporation, along with a certified copy of your General Registrar number (RG), Individual Tax Registration (CPF), and National Registration Form (FCN). You'll also need to pay a fee. Once everything is submitted and approved, you'll receive a Numero de Identificacao do Registro de Empresa (NIRE), which is your company's identification number. With your NIRE, you can receive a CNPJ number for your company (similar to an EIN in the US) and CPF numbers for individuals.
- Register with the local state and INSS. Go to the State Department of Finance to complete your local registration—they will issue your business license once your registration is approved. You must also register with INSS, Brazil's Social Security Institute, within 30 days.
- Finally, open a local business account. Brazil requires a local bank account for paying Brazilian employees.
Step #2: Choose a global payroll software solution
Before choosing a global payroll solution, you'll want to understand their differences:
- Global payroll processors use their own software to process your payroll, transmit funds, and calculate and file taxes in different countries. They allow you to pay local and international employees the same way: quickly, easily, and together in a single pay run.
- Global payroll aggregators aggregate local payroll providers in different countries and manually transmit payroll files to them. This means many limitations: Payroll takes longer to process, you may have to submit it up to 30 days in advance, and you can't track and sync employees' time in the same system where payroll is run.
Learn more about the differences between global payroll processors and global payroll aggregators.
Step #3: Determine your workers’ employment status
Before onboarding your workers, and certainly before you run payroll, it’s crucial to understand who you’re paying in the eyes of Brazilian law: Are your workers employees or contractors?
Brazil takes worker classification seriously. When an independent contractor raises a misclassification claim, Brazilian courts look at the employment agreement and actual circumstances to determine whether there was an employer-employee relationship. Misclassifying an employee as a contractor in Brazil can result in hefty government fines.
Brazil requires independent contractors to:
- Have control over when and how they perform their work.
- Provide their own equipment.
- Submit invoices to receive payment.
- Not be subject to any policies or benefits granted to employees.
- Not be subject to disciplinary action for misconduct (instead, their work agreement can be freely terminated).
- Not be engaged exclusively or subject to non-compete agreements.
- Not be engaged for long and continuous periods.
Classify your workers now using Rippling’s Worker Classification Analyzer.
Step #4: Capture your new hires’ Brazilian payroll information
Once you’ve decided whether to use an EOR or your own entity, picked a payroll solution, and ensured that your employees are correctly classified, you need certain data from your employees in Brazil to ensure payments comply with labor and tax regulations.
Here’s the information you need to collect:
- The employee's full name
- Their permanent address in Brazil
- Their CPF number
- A copy of their employment agreement or collective bargaining agreement
- Their bank account information
Step #5: Run payroll
You have an entity (either your own or via an EOR), you’ve set up your global payroll system, and you’ve ensured your employees are correctly classified under Brazilian law.
Time to run payroll!
Here’s a preview of how Rippling’s global payroll system works:
Step #6: Document and store your payroll records
Payroll records must be kept for a minimum of five years in Brazil. At a minimum, payroll records must include:
- Each employee's full name and address
- Their dates of employment and rate of pay
- Total regular and overtime pay
- Net employee pay
- Frequency of pay
- A copy of the employment agreement and/or collective bargaining agreements
- Leave taken
Frequently asked questions about running payroll in Brazil
Can you pay Brazilian employees in your local currency?
No. Brazil requires all payroll transactions to be in Brazilian Real (BRL).
With Rippling, you can pay global employees in their local currency, in minutes, without waiting on transfers or conversion.
What are payroll taxes in Brazil?
Employers in Brazil are responsible for deducting certain costs from their full-time employees’ paychecks, including the public pension fund, severance fund, social security, and accident insurance. For full details, see our employer cost table below.
Rippling can automatically sync tax deductions to payroll, and handles your tax and compliance work for you.
What are the employer costs for full-time employees in Brazil?
Employers are responsible for deducting the following from their full-time employees’ paychecks:
Public pension fund (INSS)
Severance fund (FGTS)
Additional social security contributions
How much is the minimum wage in Brazil?
As of January 1, 2023, Brazil's minimum wage is R$1,302 per month.
Keep in mind that employees in Brazil are entitled to a 13th month employee’s salary, so the minimum yearly wage is 13 times the minimum monthly wage.
How much does it cost to run payroll in Brazil?
- Most payroll software is priced on a per-employee basis, or per pay run. Payroll service pricing varies according to:
- Payroll frequency
- The number of employees on your payroll
- How often you add and remove payees
- Any additional services you need, such as year-end processing or mailing out pay stubs
Can I manually run payroll for workers in Brazil?
Some small business owners choose to manually run payroll for international employees in an attempt to cut costs. While you can use a payroll calculator and make direct deposits to employee accounts in Brazil, keep in mind that running payroll manually can be time-consuming, especially as your business grows and hires more remote employees in Brazil and around the world.
Plus, running payroll manually can put your business at risk in a few ways:
- Compliance. Running payroll manually in Brazil (without using native global payroll software) puts you at risk of making manual errors and omissions. A solution like Rippling helps ensure everything is compliant—from minimum wage to overtime rules—and protects you from fines and penalties.
- Security. Manual payroll processing poses security risks, especially if you use spreadsheets or paper records. Sensitive employee information may be lost, stolen, or misused.
Rippling syncs all your business’s HR data with payroll so you never have to use a calculator or manually enter data, like hours and payroll deductions. Rippling also handles your tax and compliance work.
What are the late tax filing penalties in Brazil?
All employers must remit the taxes they withhold from their employees' pay monthly. They must also submit an annual return by June 30 each year.
The penalty for late tax payment is 0.33% of the outstanding amount per day, capped at 20%.
Tax returns containing errors are fined at a rate of R$20 per 10 errors or omitted fields.
How do you pay contractors in Brazil?
To pay independent contractors in Brazil:
- Ensure they're correctly classified as a contractor with our free Worker Classification Analyzer.
- Agree to payment terms with the contractor: hourly or project rate, pay frequency and cadence, and the method of payment.
- Use your chosen global payroll solution to pay the contractor in Brazilian Real.
The laws around payroll deductions for independent contractors in Brazil are complex. If the contractor is a legal entity, they are responsible for all of their own taxes. However, if the contractor is an individual (for example, a sole proprietorship), their employer must still deduct and remit social security payments on their behalf. Employers must also keep accurate employment and payroll records for independent contractors.
Rippling and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any related activities or transactions.