How to hire and pay remote workers in Brazil

Expanding your talent search across borders and building diverse teams can give you the edge you need to succeed in today’s competitive market. With its growing tech industry and millions of highly skilled workers, growing your team in Brazil is a great option.

However, to hire remote employees from Brazil, you have to understand the country’s employment laws and tax legislation. You’ll also have to ensure you classify your workers correctly, as misclassification could lead to fines and penalties. Paying your employees, on time, and in the local currency, can also be a challenge, given that you have to accurately work out payroll deductions and taxes.

But, these difficulties shouldn’t put you off from employing workers in Brazil. This guide will take you through different aspects of hiring and paying remote workers in Brazil so that you learn how to hire from the country in confidence.

So, pour yourself a drink, and let’s begin.

How do foreign businesses pay remote workers in Brazil?

There are a few ways to pay remote workers in Brazil, such as opening a legal entity, using an employer of record, or hiring workers as contractors. 

Open a legal entity in Brazil

To hire and pay remote workers, 

You can establish a legal entity in Brazil to hire and pay remote workers in the country. A legal entity is an established company or organization that allows you to do business in the country you wish to hire in. But with that comes the legal responsibilities for accounting, tax filings, payroll remittances, and administration of an entirely new entity. 

Further, the process of registering an entity and getting it operational is costly and time-consuming. In 2021, Brazil ranked as the most complex jurisdiction in the world for financial, payroll, and tax compliance. 

Pay Brazil workers as contractors

To avoid the hassle of opening and operating an entity in Brazil, many employers choose to hire contractors instead. You’re free to negotiate your own terms with contractors, but they are ultimately responsible for setting their work schedule. Contractors are not entitled to benefits and other employment protections, so employers don’t have to offer benefits or make payroll deductions. 

Brazil defines an employee as an individual who provides services to an employer on a permanent basis, under the employer’s direction, and for a regular wage. If your company does not give your contractor the freedom to decide their working hours and location, then the government may decide that your contractor is actually an employee. 

If a contractor is reclassified as an employee, you’ll have to pay out missing payroll taxes, wages, benefits, and social security contributions, and you may face hefty fines and penalties. Contractor misclassification can also lead to legal issues from worker lawsuits or government sanctions. 

Work with a global employment partner

A simple alternative is to work with an employment partner, or an employer of record (EOR) to hire workers in Brazil for you. Using an EOR is a cost-effective way to hire remote employees in Brazil without the burden of navigating foreign labor compliance or establishing your own entity. A global employment provider like Remote can handle every aspect of the hiring, onboarding, and payments process in Brazil so that you don’t have to.

In what currency do companies pay remote workers in Brazil?

Brazilian employees must be paid in the national currency, which is the Brazilian Real (BRL, R$). However, it’s not possible to pay workers directly unless you have a legal entity in Brazil or hire a contractor. 

If you use an employment partner with global payroll services, they can handle international banking needs and help you calculate payroll deductions, statutory benefits, and currency conversion rates.

What are the tax rates for tax brackets in Brazil?

Personal income tax rates in Brazil are progressive as earnings increase. The rates vary from 0% to 27.5% tax. For example:

• 0% — R$0 to R$1,903.98

• 7.5% — R$1,903.99 to R$2,826.65

• 15% — R$2,826.66 to R$3,751.05

• 22.5% — R$3,751.06 to R$4,664.68

• 27.5% — R$4,664.69 or over

Local entities withhold income tax from remote employees in Brazil and pay the funds to the government monthly. These payments are applied as a credit toward their annual filing. 

Which parts of salary in Brazil are taxable?

You might provide your employees with benefits as part of your hiring package. While wages are subject to income tax and social security deductions, quite a few allowances are tax-exempt in Brazil. 

Components of Brazil salary that incur full taxes

Workers who are residents of Brazil are taxed on their global income, which includes:

• Base salary

• Bonuses

• Commissions

• Hazard pay

• Overtime pay

You must deduct income tax and social security contributions from these forms of income.

Components of Brazil salary that incur partial taxes

Other benefits are not considered part of a worker’s salary and are tax-exempt, some of them from both income tax and social security deductions. These benefits include:

• Transportation

• Housing

• Uniforms or work clothing

• Meal vouchers 

• Life insurance

• Health and dental benefits

• Private pension plan

You can include many of these as part of your employee's salary, but the law requires that at least 30% of the salary be paid in money.

Is per diem taxable in Brazil?

Per diem payments are regular allowances paid to the employee to cover lodging, meals, and incidentals to cover work-related expenses while working outside of the office or where employees normally work. In Brazil, per diem allowances are tax-exempt, which means you can provide your workers with funds for boarding that aren't subject to tax deductions. 

Is there a difference between allowance and reimbursement in Brazil?

Expenses your employee incurs to carry out their duties are not considered allowances and can be reimbursed without tax or social security charges.

Some personal education and medical expenses can also be reimbursed tax-free to the worker directly or through a health plan, including glasses, medication, school fees, and textbooks.

What payroll deductions are employers required to make in Brazil?

Employers must deduct income tax on an employee’s monthly salary based on the relevant tax bracket and remit it to the government within the following month. Depending on the industry’s sector, certain social security contributions have to be made by the employer.

The employee must also contribute to the social security program, which the employer must deduct from their salary and pay to the National Institute for Social Security on their behalf. The rates are proportional to their earnings and range from 7.5% to 14% of the monthly salary to a maximum limit of R$751.97 as of 2021.

What is the minimum wage in Brazil?

The national minimum wage as of 2023 in Brazil is R$1,302 per month, but some states have higher minimums. You can negotiate a professional salary when you hire remote employees in Brazil, as long as it's higher than the national requirement.

How much is overtime pay in Brazil?

Workers in Brazil are entitled to overtime page at 1.5 times their regular rate. However, they can only work 2 hours of overtime a day. The Labor Code allows you to adopt an Hour Bank or a 12 × 36 rule as long as there is a written individual or collective agreement. The 12 × 36 rule permits a 12-hour working day followed by 36 hours of rest, and an Hour Bank allows you to pay overtime as time off instead of monetary compensation. It must be provided within 6 months. 

Workers in trust positions, like managers, and employees who work from home don’t track hours and aren’t entitled to overtime pay.

What are the local labor laws in Brazil?

Brazil has minimum employment standards, which apply to employees but not independent contractors. The maximum working hours are set at eight hours per day and 44 hours per week, with at least one full day of rest per week. Work beyond the daily maximum is considered overtime, and the worker is entitled to overtime pay. 

Employees must get a 60-minute break for continuous work that lasts longer than six hours and a 15-minute break for shorter shifts. 

Remote workers in Brazil are also entitled to 30 days paid vacation after 12 months of employment and a 13th-month salary. This is a yearly bonus called the Christmas Bonus, which is due at the end of the year and is equal to a regular month's wages. 

Employers must contribute to the Severance Fund on behalf of the worker with payments equal to 8% of their monthly salary. The worker can withdraw from the balance during serious illness, retirement, or termination without cause. 

Employers also contribute to social security on behalf of the worker. You must pay 20% of the employee’s salary and labor accident insurance to the social security program. 

Brazilian labor laws also allow for:

• Job protection for pregnant workers 

• Maternity leave of 120 days and up to 180 days

• Paternity leave for at least 5 and up to 20 days

• Mandatory equal pay for workers in the same position 

• Job protection during work-related illness 

If you need to terminate an employment contract without cause, you must give a 30-day notice in the first year. For every following year with your organization, the notice period increases by 3 days to a maximum of 90 days notice. You can issue termination pay for the notice period. Alternatively, you can ask the employee to work off the notice period. However, they'll only have to work part of it. They are also entitled to a prorated 13th-month salary and vacation pay.

An employee can also terminate their contract with a 30-day notice of resignation or by paying the employer one month of salary. In both cases, you must file the employment records within 10 days of termination, so your employee can withdraw from the Severance Fund and collect unemployment insurance if it applies. 

How to pay contractors in Brazil?

You can directly pay contractors in Brazil after they submit an invoice for services to your company. Before you begin working with the contractor, you should sign an agreement with the contractor that outlines the services expected, payment schedule, and method of payment.

Some organizations pay contractors with a wire transfer using a messaging platform called SWIFT. The banks carry out the transaction using a SWIFT code, and you can log into the platform to monitor transactions. Problems with incorrect codes and other issues can delay processing and payment. Other payment methods include bank transfers, digital wallets, checks, or online payment providers like Wise or PayPal.

While working with remote contractors, however, it’s important to avoid misclassification as this can lead to severe fines, penalties, or other repercussions.

To avoid legal and financial missteps, you might want to consider converting your contractors to employees. When you’re ready to make the switch, Remote’s contractor management platform can easily handle the conversion process for you. 

For more information, read our expert guide on how to convert a contractor to an employee. 

How to pay remote employees in Brazil?

You can pay your employees in Brazil by opening your own legal entity in the country. You'll then be responsible for complying with Brazilian employment laws and tax legislation.

Importantly, you also have to be aware that having an ongoing presence in a country could put you at risk of permanent establishment, which means you might have to pay corporate tax to the government. You can trigger permanent establishment in Brazil by generating revenue in the country or exercising control over workers. 

An EOR can shield companies from permanent establishment risks by hiring and paying remote employees in Brazil for you via their own local entity. Working with a reliable EOR like Remote with local knowledge of Brazil’s tax and labor laws, is the best way to safely hire, onboard, and pay remote employees in the country.

Read our guide to learn more about how to choose the best EOR for your needs.

Pay remote workers in Brazil with Remote

Hiring employees from Brazil can add diversity to your team, and help you grow operations in Latin America. But the process of hiring in Brazil is tricky. From developing onboarding procedures to making payments in the local currency, you’ll have to set things up from scratch. There's also the added risk of misclassification and non-compliance to think about.

This is where Remote comes in. A trusted global employment provider like Remote, with an established entity in Brazil, can do the heavy lifting for you. We help you manage contracts, invoices, and payments, all while quickly onboarding employees and issuing international payroll and benefits. Using Remote provides insulation against legal risks and helps you remain compliant with local laws. Our expert team takes the hassle out of global hiring and payments so that you’re free to focus on business growth.

Download our handy guide on hiring remote employees for practical advice on recruiting your remote team. Or sign up with Remote to start onboarding remote employees in Brazil today!