Brazil has quickly become one of the most popular countries to hire skilled remote workers from worldwide. With a sizable population, it makes sense that Brazilians are looking for remote work across the globe. When sourcing talent from Brazil, there are two options: hiring an employee or an independent contractor, which tends to be the more popular route. It’s important to ensure that the lines between an employee and an independent contractor are clear and defined. If the lines become blurred, employers put themselves at risk of misclassification.
Here’s a guide to get a solid grasp on the difference between independent contractors and employees in Brazil.
Independent Contractors in Brazil
With the right EOR platform, like Borderless, hiring independent contractors compliantly is a seamless process. Brazil defines independent contractors as those who work independently of a company and are not subordinate to company regulations, such as working hours or supervision.
Contracts
Brazilian independent contractors do not have to have a written contract when entering a working relationship, but it is recommended.
Subordination
Independent contractors are not subject to subordination or control during their work day. They have flexibility in their hours of work and other clients they provide services to.
Salary
Independent contractors have the ability to determine their salary and remuneration paid for a specific project or role. The contractor and the hiring party can come to an agreement for payment. Typically, independent contractors submit invoices on a monthly basis to the hiring party, however, some may opt for a bi-weekly payment system.
Benefits
Independent contractors are not protected under Brazilian labor law and do not receive any benefits, such as sick 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 own taxes. 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.
Link to: International Contractors and Taxes: What You Need to Know
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
As stated in the Brazilian Labour Code, 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 on a regular basis. In addition, employees are unable to hire a subcontractor to complete their work.
Contracts
A written contract is not a prerequisite for entering into an employment relationship, according to 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, 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 only 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 fifteen-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 1st, 2023, the Brazilian minimum wage is BRL 1,302.00 per month. However, this can be set regionally, and many regions’ minimum wage is higher than the national minimum.
Much like in other countries, an employee’s daily schedule is not to exceed eight hours. If they do go into 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.
Link to: 13th and 14-Month Bonuses Around the World
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 12 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 have the ability to cash it in. When they do, they’ll receive ⅓ of their annual leave compensation as a holiday bonus.
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 have the ability to terminate an employee at any point in the employment contract. However, they must give the employee at least 30 days notice 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.
Choose Borderless
When organizations are hiring talent from Brazil, it’s important to consider the key differences between independent contractors and employees. Rather than risk misclassification for new employees, let Borderless help. Borderless is a platform and Employer of Record that helps employers compliantly hire employees and independent contractors all across the globe.
To make hiring Brazilian talent seamless, book a demo 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.
