Employer of Record in Brazil: A Guide

This trend reflects a growing preference for hybrid and remote work models in Brazil, particularly in industries like technology, finance, and professional legal services.¹

As businesses continue to embrace remote work, partnering with an Employer of Record (EOR) can simplify the process of hiring and managing remote employees while ensuring compliance with Brazil's labour laws.

What Is an Employer of Record (EOR)?

An EOR is a third-party organization that takes on the legal responsibilities of employing staff on behalf of another company. This arrangement allows businesses to hire employees in a foreign country without setting up a local entity.

Specifically, the EOR manages various employment-related tasks, including: 

• Payroll
• HR
• Taxes
• Benefits
• Compliance with local labour laws

In Brazil, partnering with an EOR enables companies to quickly and compliantly hire global talent, streamlining the expansion process.

Why Businesses Choose an EOR for Hiring in Brazil

Companies employing Brazilian citizens must abide by the Brazilian Consolidation of Labour Laws, which was enacted in 1943 and amended in 2022.^2,3

Essentially, these laws protect employee rights and outline employer obligations regarding wages, working hours, overtime, holidays, termination procedures, and benefits. 

The 2022 amendments introduced more flexible rules around remote work, improved regulations for temporary contracts, and clarified guidelines for digital communication between employers and employees. 

Companies must also navigate mandatory benefits such as the 13th salary (an annual bonus equivalent to one month’s pay), paid vacation, and social security contributions. Failure to comply with these regulations can result in costly fines or legal disputes, making it crucial for businesses to fully understand and adhere to these labour laws when employing Brazilian citizens.³

To abide by these rules and regulations, employers can partner with an EOR to assure compliance with local labour laws and mitigate the risk of penalties. An EOR can also benefit a company’s:

• Global growth – An EOR can facilitate hiring in Brazil within a few weeks, allowing companies to commence operations swiftly.

• Finances – Setting up a local subsidiary involves significant financial investment. An EOR eliminates the need for such expenditures, providing a cost-effective alternative for market entry.

• Administrative duties – An EOR can manage HR functions, payroll, and benefits administration in a new country, allowing businesses to focus on core operations.

Key Responsibilities of an EOR in Brazil

An employer of record in Brazil undertakes a range of duties to ensure seamless employment processes. These include:

• Payroll management – Processing employee salaries, withholding taxes, and ensuring timely payments. 

• Tax compliance – Calculating and remitting all required payroll taxes and social contributions in accordance with Brazilian law. 

• Benefits administration – Managing statutory benefits such as health insurance, vacation entitlements, and the mandatory 13th-month salary. 

• Employment contracts – Drafting and maintaining compliant employment agreements that align with local labour laws and collective bargaining agreements. 

• Regulatory compliance – Ensuring adherence to Brazil's labour regulations, including working hours, overtime, and employee rights. 

• Employee onboarding and offboarding – Facilitating smooth transitions for new hires and departing employees, including handling necessary documentation and legal requirements.

EOR vs. Setting Up a Local Entity in Brazil

When expanding into Brazil, companies can choose between partnering with an EOR or establishing a local entity. Here's a comparison to consider: 

• Establishment time – Setting up a local entity can take several months due to bureaucratic procedures, whereas an EOR can have employees operational within weeks. 

• Cost implications – Creating a subsidiary involves substantial setup and ongoing operational costs. An EOR offers a more economical solution by handling employment functions without the need for a physical presence. 

• Compliance management – Operating a local entity requires in-depth understanding and continuous monitoring of Brazilian labour laws. An EOR possesses this expertise, reducing the compliance burden and potential risks on your company. 

• Flexibility – An EOR provides the flexibility to scale your workforce up or down based on business needs without the long-term commitments associated with a local entity.

Compliance and Labour Law Challenges in Brazil

Brazil's labour laws are comprehensive and can pose challenges for foreign businesses. These include: 

• Complex regulations – The Consolidation of Labour Laws establishes the framework for contracts, working hours, overtime, benefits, and termination, which requires meticulous compliance.² 

• ICLG mandatory benefits – Employers must provide benefits such as the 13th-month salary, paid vacations, and social security contributions.⁴

• Collective Bargaining Agreements (CBAs) –  Many industries are subject to CBAs that stipulate additional employee rights and benefits, necessitating careful consideration.^5,6

• Termination procedures – Employee termination involves specific legal procedures and potential severance payments, requiring careful navigation to avoid disputes, depending on the cause of termination.⁷

• Data protection – Compliance with data protection laws, such as the General Data Protection Law (LGPD), is essential when handling employee information. Specifically, Brazil's General Data Protection Law (Lei Geral de Proteção de Dados or LGPD) mandates how personal data, including employee information, is collected, stored, processed, and shared to maintain employee privacy.⁸

Choosing the Right Employer of Record in Brazil

Choosing the right EOR partner is key to successfully expanding into Brazil. You want to start by finding an EOR with a strong track record and a deep understanding of local labour laws and business practices. This experience is crucial to navigating the complexities of the Brazilian market. 

Further, look for an EOR that offers a wide range of services, including payroll, compliance, benefits management, HR support, and legal practices to stay aligned with Brazil’s labour regulations. A full-service approach will make your operations run more smoothly and keep you focused on growing your business. 

Reputation matters, too. Take the time to read reviews and client testimonials to get a sense of how reliable and effective the EOR is. Real feedback from other companies will give you confidence in their ability to deliver quality service. 

The best EORs also provide easy-to-use platforms for managing employee information and payroll efficiently. A modern system saves you time and reduces the risk of errors.