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Payroll in Brazil | All you need to get started

Exploring payroll management in Brazil? Here's what American companies need to know.

Brazil’s attractive market, with its strong workforce and favorable exchange rates, is enticing for U.S. businesses.

However, understanding Brazil’s unique employment and tax laws is crucial for effective payroll management.

This guide provides a clear overview, steering clear of the complexities of establishing a business in Brazil and presenting efficient alternatives. Check it out!

The Brazilian Outsourcing Landscape: CLT and Beyond

Brazil’s labor market operates under two main categories: CLT (Consolidação das Leis do Trabalho) and non-CLT employment.

CLT, the cornerstone of formal employment, includes comprehensive labor protections but also involves complex tax implications and significant contributions to the INSS (National Social Security Institute).

For U.S. companies, grasping these details is crucial to managing payroll while remaining compliant with Brazilian laws.

Do you need to Establish a Branch in Brazil?

It’s a common belief that setting up a local entity in Brazil is the go-to strategy.

However, this can lead to unexpected tax burdens, with Brazilian businesses taxed on revenue rather than profits, as in the U.S.

Such distinctions can have a profound impact on your finances, urging a cautious approach to establishing a Brazilian branch.

Hiring Brazilians as PJs

Outsourcing to Brazil can be done as PJs (Pessoa Jurídica), akin to independent contractors.

This model sidesteps the complexities of CLT employment, offering a more flexible and tax-efficient setup.

It’s an appealing option that minimizes legal and financial burdens for U.S. companies while maintaining compliance with Brazilian laws.

In this scenario the contractor can be an “MEI” – Individual Micro Entrepreneur. That’s a category in Brazil for a freelancer or small business owner to offer international services and products.

Your entire Brazilian team can be composed of “MEI”s, but there are limitations.

A contractor in Brazil works in a different regiment than a regular employee, therefore there are rules that need to be followed so that these regiments don’t mix.

A MEI can receive up to 81.000 Brazilian Reais per year in compensation (that’s approximately 16K a USD a year).

For higher compensation there are other categories that best suit contracting outsourced labor.

Even though MEIs are supposed to simplify contractors and freelancers finances, there are still major concerns related to taxes and those will be passed on as Payroll costs.

MEI’s are not eligible to pay income tax as a company, but they are required to pay their personal income tax.

The percentages will depend on the services they provide, but they will add that to their compensation contract.

Also, there are only some kinds of services that can be offered as MEI. For others, like legal or marketing services, for example, the contractor needs to move to a different category.

That means more taxes will be added to their earnings and also the costs related to accounting.

There are four major categories that constitute an employee status in Brazilian labor law:

  • Pessoalidade – only that person can perform that task;
  • Onerosidade – there is compensation for that labor;
  • Habitualidade – there are regular hours of work or frequency;
  • Subordinação – there is a superior hierarchy that controls the hours and tasks.

 

If a contractor must perform tasks under all these categories, he is an employee and it’s protected under the labor laws like a CLT.

For example, MEIs should not work specific hours. You and the contractor can set up  meetings and a feedback routine, but they should not be compelled to work from 9 to 5pm,

MEI’s are also not subordinate to anybody. They have their tasks defined by contract and will perform them without depending on a superior.

If your company can hire under these circumstances, then MEI outsourcing might be an alternative.

Payroll Management: Keeping it Simple

When it comes to actual payroll management, solutions like CambioPay come in handy.

The platform negates the necessity of establishing a separate business entity in Brazil, enabling companies to manage their payroll directly from the U.S. but without all the extra costs associated with hiring capabilities huge platforms offer.

In summary, CambioPay presents a straightforward, cost-effective solution for U.S. companies to manage their Brazilian payroll without the complexity of setting up a foreign entity.

Ok, so let’s go back to the subject. You want to hire in Brazil or you already do, but you want to make sure that you’re compliant to all Brazilian laws. This is what you need to know.

Running Payroll from the US to Brazil

Now that we established that you don’t have to be in Brazil to have a team of Brazilian staff. Let’s talk about how to run said teams and their payroll.

All you need is a valid contract between your company and the employee and an invoice of the services provided by that contractor.

So the Payroll would follow these steps:

  1. You company in the USA registers at CambioPay;
  2. CambioReal (CambioPay’s provider) acts as a Money Service Business between you and your employee;
  3. You can add as many employees as you want at CambioPay;
  4. Once all the employees are registered you can finish your Payroll at the Checkout!
  5. All payments are then processed as soon as the Wire Transfer from your company to CambioReal is Approved.
  6. All the employees get paid locally in Brazilian Reais in up to one business day.

 

Key advantages of CambioPay include simplified beneficiary registration by uploading their contract or invoice documentation only.

You may also execute payroll with a single monthly local transfer or ACH debit, efficiently handling multiple beneficiaries in one go.

They receive compensation in BRL directly in their bank account.

And it’s free for businesses, with a minimal transaction fee of $3.99, offering a budget-friendly alternative to costly international bank transfers.

And that’s pretty much it. There is no need to deal with contribution, income tax or employee laws in Brazil.

Your company keeps all the benefits of staying in America, but can hire third party contracts and scale to Brazil easily.

Of course, all expenses related to your teams are going to be negotiated individually by every contractor and add it up to its compensation.

Next, we are going to show you all the variables that will come as a cost to your team and inevitably spill over to your payroll costs.

Conclusion

For American companies looking to leverage Brazil’s dynamic market, understanding the payroll landscape is critical.

By considering alternatives to CLT employment and being cautious about establishing a business in Brazil, companies can navigate this complex arena more effectively.

While services like CambioPay offer convenient solutions, the key is to stay informed and choose strategies that align with your business objectives.

Also, it’s crucial that you find legal counseling regarding Brazilian laws and regulations. It would help to also have a Brazilian accountant specialist to help you with taxes.

Looking for more insights on managing payroll in Brazil? Stay tuned for more updates and expert advice to guide your business decisions.

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