Employer of Record in Brazil: Hiring Through an EOR Guide

Brazil is renowned for its diverse and skilled workforce. That’s why companies from different parts of the world constantly visit the region to hire experts. The only problem is hiring full-time employees from Brazil can be quite challenging. To stay compliant with local laws, you’re expected to register as a legal entity. However, this process can take months and requires in-depth familiarity with Brazil’s employment regulations. 

If you make any mistakes during the hiring process in Brazil, you risk fines and legal sanctions by the federal government. Hence, you need an effective way to hire employees without the risk of becoming non-compliant. An effective alternative to hiring yourself is hiring through the employer of record in Brazil. Choosing an employer of record in Brazil will help you streamline the process by handling compliance, tax and payroll. 

Employer of Record (EOR) in Brazil

An Employer of Record (EOR) in Brazil can be defined as the legal employee of a worker who connects them to organizations that need their service. You’d do well to note that small and medium-sized companies often partner with these EORs to fill up their workforce and acquire necessary talent. Take a look at the list of the responsibilities of an Employer of Record in Brazil: 

• Informing employers about pre-employment requirements
• Ensuring that employees hired by clients do so in compliance with local labor laws
• Informing employers about the length of public holidays, sick leave, maternity/paternity leave, and medical benefits
• Creating a legally compliant employment contract 
• Processing employee payroll 
• Filing employing tax returns
• Paying employee salaries and issuing payslips
• Paying statutory fees to local authorities 

Read more: Leave Policies in Brazil

It’s exciting to note that partnering with an employer of record to fill up your workforce doesn’t absolve you of all responsibilities. Here’s a list of your responsibilities to note when working with an EOR: 

• Managing and supervising employee daily workload
• Contributing to employee professional development 
• Paying attention to the best HR practices and legal obligations relating to public holidays, overtime pay, probationary periods, sick leave, annual leave, maternity/paternity benefits, liability insurance, statutory redundancy benefits, etc
• Paying the employer of record in Brazil for the workers hired

Step-by-Step Guide to Hiring Through an EOR in Brazil

You’d do well to note that hiring an employee through an employer of record Brazil is a relatively straightforward process. However, you need to ensure due diligence to avoid costly mistakes. Here’s a list of steps to complete the process: 

Decide Between an Employer of EOR and a Legal Entity

The first thing to do is decide if you need an employer of record Brazil or need to register as a legal entity. Your decision on whether to choose an EOR or legal entity depends on the size of your companies, available resources and any future plans to scale. 

If you wish to set up a legal entity, you’ll need to hire a local attorney. Next, submit the required documents in Portuguese to the National Companies Registry Office. Then, register with the local state and National Institute of National Security. The final stage of the process involves creating a local bank account. However, there may be other steps depending on the nature of the organization. 

On the other hand, hiring through an employer of record Brazil involves using a third-party service provider to hire employees on your behalf. The EOR will be responsible for meeting all legal requirements, payroll and benefits compliance while you focus on other aspects of the business. 

Choosing the Best EOR for Your Business Needs

Brazil has a long list of EORs. However, you need to be able to choose from these multiple alternatives. Factors to consider include the nature of your services and global reach of the service provider. It’s best to choose an employer of record Brazil with a global reach if you plan to expand to other regions in the future. 

Also, ensure that your preferred employer of record in Brazil uses innovative measures to protect your information. You can’t risk losing your personal details to a data breach. Furthermore, opt for a service provider with automated solutions and an active customer support team. 

Onboarding Brazilian Employees Through an EOR

If you’ve picked an EOR that works in Brazil, the next thing to do is onboard your employees with their resources. This process describes how new recruits are integrated into the organization. In certain instances, onboarding may also involve an orientation or training exercise. To onboard Brazilian employees through an EOR, you’ll need the following: 

• The employee’s full name 
• The employee’s Brazilian residential address
• The employee’s employee agreement
• The employee’s account information

The agreement that’ll be created for your new employee should also include: 

• The employee’s position, start date, job description and probation period
• The employee’s working hours 
• The employee’s compensation, including salary and other benefits
• The employee’s working conditions
• The termination terms and notice period for the contractual agreement 
• The employer and employee contact information 

Managing Payroll with EOR

When you’re done creating your employee agreement and have gained all the necessary details from your new employee, you can assign an employer of record in Brazil to pay them in Brazilian Real (BRL). The employer of record will also be responsible for deducting payroll and income tax from the salary of each employee. In Brazil, the payroll and income tax for employees include: 

• Severance Fund (INSS)
• Public Pension Fund (FGTS)
• Accident insurance 
• Social security contributions

Read more: Payroll Taxes for Employers in Brazil

How Hiring Agency Can Recommend Your Business the Right EOR Provider

No doubt, running a business is challenging. You’ll have to focus on different crucial aspects of the organization at the same time. As a result, it may be a hassle to identify and partner with an employer of record in Brazil.  

The next best alternative for your business would be to hire a reliable third party to recommend the right EOR provider for you. By partnering with a reliable hiring agency like Globy to work with you, it’s possible to access a vast network of Employer of Records. 

If you partner with a hiring agency to recommend an employer of record in Brazil, they will assess your business’s needs and identify service providers that suit you best from their pool of EORs. The hiring agency will create a pool of Employer of Records by reviewing the level of expertise of each company. The hiring agency also determines EOR’s familiarity with local laws and analyze their track record based on past performances. Furthermore, a reliable service provider also highlights employers of record in Brazil that fall within your budget. 

Further reading: How to Hire Software Developers in Brazil and Hiring Remote Employees in Brazil

Costs Involved in Hiring Through an EOR

An employer of record Brazil is a third-party service provider that connects you with a vast network of employees. However, it’ll come at an additional cost. If you choose to work with an employer of record in Brazil to hire an employee, you’ll be subject to either of these pricing systems: 

• A monthly fee for each employee hired. 
• A percentage of the employee’s payroll including applicable taxes 

It’s best to settle on a payment structure, depending on your available financial resources. However, you should note that there are additional fees that may increase the cost of your initial agreement with the service provider. These fees may include: onboarding charges, administrative fees, costs for supplemental features, etc. 

If you want to hire workers with Brazil employer of record, you should focus their efforts on senior positions or expert teams that require the best talent. Using an employer of record in Brazil for your entire workforce may be far too costly than an in-house recruitment process. 

Assistance with Payroll Records

One of the benefits of hiring an employer of record in Brazil is that the service provider can also aid your payroll management, especially with employees they’ve helped you hire. If you’ve employed your entire workforce with an EOR, they can help you create and automate your payroll. This method is relatively cheaper than setting up a legal entity and handling payroll yourself. 

However, if you have an internal payroll system, an employer of record Brazil can also help you manage your records. By working with a reliable service provider, you can save yourself from the risk of losing confidential information. Top-rated employers of records implement strong data protection measures that comply with industry standards in Brazil. They should have a secure infrastructure where they monitor data protection 24/7. 

It’s also a great idea to ensure your employer of record signs a Data Processing Agreement (DPA). This agreement will subject the service provider to stringent data protection measures and protect your confidential details in the event of a data breach. 

Mandatory Benefits for Brazil Employees

As mentioned earlier, Brazilian labor law can be quite complex. However, if you fail to pay attention to them you’ll be subject to fines and legal sanctions. These local labor laws stipulate that employers must provide their workers with several benefits which include: 

• Severance pay
• Overtime pay
• Minimum wage
• Social Security and pensions 
• Sick leave
• Marriage leave
• Paid vacation, annual leave and holiday bonus
• Bereavement leave
• Maternity leave
• Public holiday 
• 13th-month salary
• Extra pay for time spent on court proceedings 
• Extra pay for time spent on university admission exam
• Extra pay for military service
• Extra pay for voluntary donation 
• Extra pay for electoral registration 

However, there may be other benefits based on unique work agreements. These benefits may include: 

• Transportation Vouchers: These vouchers are required if the employee uses public transportation to go to and from work and these costs exceed 6% of monthly wages. 
• Daycare Assistance: This is where the company arranges to take care of their employees toddlers and young kids. This type of benefit is crucial for employers with more than 30 female employees. 

Read more: Employee Benefits in Brazil

Employer Costs for Full-time Employees in Brazil

If you plan to hire new employees, you should pay attention to the expenses that each worker will incur your organization. The average monthly salary in Brazil is R$3,000. However, IT specialists in São Paulo earn up to $14,900 per month. Here’s a list of the deductions employers must make from employee salaries: 

• Public Pension Fund – 20% of the employee’s monthly salary 
• Severance Fund – 8% of the employee’s monthly salary 
• Additional Social Security Contributions – 5.8% of the employee’s monthly salary
• Accident Insurance – 1.3% of the employee’s monthly salary

Legal Compliance in EOR Engagement

If you want to avoid any unnecessary risks while partnering with an employer of record in Brazil, you need to ensure you maintain legal compliance or you risk heavy penalties and sanctions that cripple your operations. The following tips will help you avoid falling guilty of legal sanctions: 

• Study local labor laws to know what’s applicable in different scenarios. Ensure to read details about employment contracts, termination procedures, overtime, holidays, working hours, etc. 
• Also, ensure to hire a reliable EOR that has a track record of legal compliance to avoid getting sanctioned based on association. 
• Regularly update yourself on local labor laws and determine how any regulatory changes may affect you.

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