Brazil at a Glance

Employment agreements in Brazil are usually for an indefinite term. Fixed-term employment agreements are only allowed:

• for up to two years when either the temporary nature of the service justifies a pre-established term, or the business activities have a temporary nature;
• during an initial 90-day probation employment period, after which the employment agreement will become for an indefinite term.
• The fixed-term agreement will automatically become an indefinite term employment agreement, if the agreement:
• is for a fixed term, but the reason to justify it is not one of the reasons allowed by law;
• does not include a clause confirming the term and the legal justification for that;
• is extended more than one time;
• the maximum term of the agreement is exceeded;
• any renewal is not agreed by the parties in writing;
• if successive fixed-term employment agreements are used without observing the legislated 6-month break.

Brazilian law is restrictive on information that can be sought from employees and that can be checked during the recruitment process.

Criminal records and drug tests are possible only for specific job positions; in which case the candidate must grant specific consent. Pregnancy tests are prohibited by law, in any case. Immigration checks are generally required for foreign workers (expatriates).

An applicant is obligated to submit to a medical examination and depending on the employee’s work activities, there could be other mandatory test requirements. If the test results are not satisfactory, the employer has the right to prevent future labour claims, e.g. by discontinuing the hiring process. However, companies must have justifiable reasons to prevent being sued for discrimination.

The trial period may be established within the terms of the Employment Contract. The trial period may be for a period up to 90 days. This period may also be split into two periods that together add up to 90 days and may be extended only once, at the discretion of the employer, to the total period.

There is no probation period for fixed-term contracts.

The regular working period cannot exceed 8 hours per day and 40 hours per week. Employees who work more than six hours a day are entitled to at least one-hour break. There must be a minimum rest period of 11 hours between the end of a working day and the beginning of another. Employees are entitled to a paid weekly rest period preferably on Sundays. Some specific categories have a different work shift.

Day hours are considered from 5 am to 10 pm. Night hours are considered from 10 pm to 5 am, and must be paid with an additional 20% of the day-hour rate.

Employers with 20 or more employees must keep a record of their employees’ working hours, including those who work from home. Some legal exceptions might apply, such as employees in a position of trust (those who have direct reports, manage a department, have the authority to sign on behalf of their employer, or are involved in hiring and firing employees).

In general overtime should be limited to two hours per day. Compensation for overtime work must be at least 100% greater than the compensation for regular work. If the overtime is performed on Saturdays, Sundays or holidays, the additional pay is 100% of the standard rate.

Employees may negotiate with the employers and agreement may be made to bank hours to compensate any overtime worked instead of taking payment. In this sense, the overtime worked in one day may be compensated by the exact reduction of the work shift in another day or days, within a period of six months (may vary depending on employer).

The following employees are not entitled to overtime payments and are not subject to the limits on working hours under the Labour Code:

• employees who carry out external activities that are incompatible with the establishment of working hours, and this condition must be noted in the Work and Social Security Card and in the employee register; and
• employees (such as managers) who occupy trust positions (subject to evaluation)
• and teleworking employees who provide services by production or task

Note: EEs who occupy trust positions, must be paid at least an additional 40% on top of their regular base monthly salary.

Employers are required to provide a section for employees to specify their self-identified racial or ethnic information in administrative documents and records. This requirement applies to various forms, such as those used for employee admission and dismissal, and registration for the Brazilian Social Security System, among others.

Employers are responsible for the health and safety of their employees. They are obliged to ensure a healthy and safe workplace for employees and to comply with all mandatory regulations regarding healthy and safety matters. These regulations cover mandatory periodical medical examinations, medical examinations upon admission and termination, medical records, provision of specific task related training, maintenance of an Internal Commission for Accident Prevention (CIPA) amongst others.

Under Brazilian labour legislation, there are five distinct types of termination.

1. Termination without cause: the employer does not have the obligation to disclose the reason.
2. Resignation by the employee.
3. Indirect termination: a termination characterized by a serious misconduct that the employer commits against the employee.
4. Termination by mutual consent: whereby both parties mutually agree to terminate employment.
5. Termination for cause. this must be grounded in one of the situations:

• an act of dishonesty;
• intemperance of conduct (related to inappropriate sexual behavior) or misconduct;
• habitual trading on the employee’s own account without permission, or when it constitutes an act of -competition to the employer or is harmful to the business;
• criminal conviction of the employee, if there has been no suspension of the sentence;
• negligent performance of duties;
• habitual drunkenness in the workplace;
• breach of company’s secrecy;
• an act of indiscipline or insubordination;
• abandonment of employment;
• physical violence or acts against someone’s honor or name during work, except in the case of self-defense or defense of third parties; or
• customary practice of gambling in the workplace.

Payment of termination costs must be made within 10 calendar days after the end date.

Pregnant women cannot be terminated by the employer during pregnancy or for a period of 60 days after the end of maternity leave. Employees under sick leave (work-related or not) cannot be terminated without cause.

An employee cannot be terminated without legal just cause within 30 days prior to the Union base date. If termination happens within this period, additional severance is due, and it is equivalent to one additional monthly salary.

By Employer

Notice of termination must be given prior to dismissal in the event of a termination without cause and at the employer’s initiative. In the event of termination of the employment agreement for an indefinite term the prior notice period is at least 30 days, with three days added per year of work, limited to 90 days in total. During this 30-day notice period, as per the law, employees are entitled to choose between reducing their notice by 2 hours per day or by 7 days.

The employer may opt to provide a pay in lieu of notice and release the employee from working in this period. Dismissal without notice is accepted in terminations for cause, in which case the communication of the termination is immediate and no payment in lieu is due.

By Employee

In the case of a termination of employment agreement of an indefinite term, without cause and upon the employee’s initiative (resignation), the employee must provide a prior notice to the employer of 30 days or request to be released from working during the prior notice period.

In the event of termination by mutual consent, the prior notice period will be reduced by half.

Fixed-term Contract

No notice is needed to terminate the fixed-term contract, but severance is still due.

There is no specific regulation in Brazil on restrictive covenants or the enforceability thereof following termination of employment agreements. However, the Brazilian Federal Constitution establishes an individual’s right and freedom of work.

Non-compete clauses – Based on case law, Brazilian Labour Courts tend to consider a non-compete agreement valid and enforceable after termination only provided the following components are in such agreement:

Limitation in time – the period of restriction must be reasonable and, in all events, limited to 24 months maximum;

Geographic limitation – a reasonable geographic limitation for the restriction must be established. It is possible to include that the restriction applies on a worldwide basis or in a specific region;

Limitation of object – the obligation must not exceed the limits of what is considered reasonable to protect the former employer’s interests;

Fair compensation – the parties may negotiate what is reasonable on a case-by-case basis based on the extension of the non-compete obligation, period and restrictions. For example, if the restriction is broad (i.e., the former employee cannot work for any company that is a competitor of the former employer) the general rule is that compensation, during the period of the non-compete obligation, should be equal to the amount the former employee would earn as his/ her ordinary compensation if he/she remained employed for such period. It is considered a fair compensation should correspond to the last compensation multiplied by the number of months for the non-compete obligation.

Customer & Employee non-solicit clause – Although there is no legislation in Brazilian Labour Law regarding non- solicitation provisions it is common for employers to include this restriction in employment agreements of management level employees. As there is also little in case law on this matter there are few decisions about its enforceability. However, current general legal opinion understands that non-solicitation clauses are valid as long as the parties agree on: (a) limitation in time; (b) limitation of geography and (c) limitation of object.

For foreign nationals who will work as an employee of a Brazilian company. It is valid for up to two years and may be extendable once for the same period or, under certain qualifying terms, may be converted into a permanent visa. The employer must submit a copy of the employment contract to the MTE and provide evidence that the employee has sufficient qualifications and experience to occupy the position.

For foreign nationals who will work as technicians or provide other specialized services in the name of the foreign company. Such visas can be valid for 30 days, 60 days, or one year. For the visa application the company must provide the MTE with, amongst other documentation, evidence of relevant profession experience (minimum three years).

The MTE usually requires between 30 and 45 days to analyze the documentation and information before confirming approval or otherwise.

An employer sponsored temporary work visa is personal and does not extend to third parties. Therefore, spouses and other family members of a foreign worker holding a temporary work visa must apply for their own work permit. However, these family members may seek a temporary work visa and are entitled to receive a family reunion visa, which allows them to exercise any activity in the country, including remunerated activity for the same period in which the residence permit was granted.

The Brazilian Labour Code institutes a ‘two-thirds rule’. This requires that a Brazilian employer company must hire two Brazilian employees for each foreign employee they may hire. This requirement is also in reflected in relation to the ratio in the company payroll i.e., two-thirds of the payroll must be absorbed by Brazilian employees).

In addition to the specific working visa, a foreign national must also obtain a:

• Brazilian ID card, (issued by the Brazilian Federal Police – it usually takes 60 to 180 days to obtain)
• Work and social security card, (issued by the MTE – it usually takes 7 to 10 days to obtain)

Both the work and social security cards are a requirement for obtaining employment, indeed it is illegal for a Brazilian company to employee persons without obtaining these

Each entity type has its own minimum shareholder requirements:

• Limited Partnership (Sociedade Limitada): The agreement will designate an administrator, who can either be elected by the assembly or indicated in the agreement.
• Sociedade Anônima de Capital Fechado (S.A.): This type requires at least three members for the Board of Directors, with a minimum of two members being residents of Brazil. The management term is limited to 3 years.
• Sociedade Anônima de Capital Aberto (S.A.): A minimum of one president is required, and the Board of Directors must consist of at least three shareholder members. The company can be represented by a CEO or another authorized person as per the company’s Articles.

In Brazil, there is no minimum paid-up capital requirement for either a limited liability company (Sociedade Limitada, LTDA) or a corporation (Sociedade Anônima, SA). However, specific industries, such as financial services, may require higher capital levels.

Regarding debt/equity rules, Brazil has thin capitalization regulations, which set the maximum allowable debt-to-equity ratio at 2:1 for related-party debt. For debts involving entities in tax haven jurisdictions, this ratio is stricter, set at 0.3:1.

For Sociedade Anônima (corporations), at least two directors are required. For a Sociedade Limitada (limited liability company), at least one manager must be appointed.

Directors are required to be residents of Brazil. Non-resident directors can only serve if they have a permanent visa and are physically residing in the country.

It is often necessary for foreign investors to appoint a local administrator and a legal representative with a Brazilian ID (CPF). This requirement ensures compliance with Brazilian regulations and facilitates effective management of the business.

Certain insurances are mandatory upon incorporation:

• Workers’ Compensation Insurance
• Social Security Contributions

Additionally, other types of insurance are recommended to safeguard the company:

• General Liability Insurance
• Property Insurance
• Directors and Officers (D&O) Insurance

While it is not mandatory to have a physical office, a registered business address is required to make the entity operational. This address serves as the official location for company correspondence and legal matters.

Opening a business bank account in Brazil generally takes about two months. This step can significantly affect your ability to hire employees, as the bank account is often necessary for payroll processing and other business operations. Be prepared for this delay as part of the overall setup timeline.

Brazilian businesses must maintain accounting records. Brazil follows its own Generally Accepted Accounting Principles (BRGAAP), which is based on the International Financial Reporting Standards (IFRS). Official books and records are submitted electronically by an authorized accountant who is registered with the Regional Accounting Council (CRC) or the CPA accountant.

Brazil has a unique transfer pricing methodology that differs from the OECD guidelines. Rather than allowing a range of acceptable transfer pricing methods, Brazil sets fixed margins for different types of transactions, along with strict documentation requirements. Companies involved in cross-border transactions with related parties must carefully follow these rules to ensure compliance and avoid penalties.

Electronic invoicing (e-invoicing) is mandatory in Brazil. The Brazilian government requires the use of e-invoices to enhance tax compliance, reduce tax evasion, and streamline the tax collection process. Businesses must comply with this requirement for both sales and purchases, ensuring they are in line with Brazil’s digital invoicing system.

The fiscal year in Brazil can be set up as any 12-month period. This allows companies flexibility in determining their fiscal cycle, which can be aligned with the calendar year or any other period that suits the business.

Corporate income tax returns in Brazil, known as ECF (Escrituração Contábil Fiscal), must be filed by July 31 of the following year. This filing includes the company’s income tax return along with relevant financial statements.

Brazil has a highly complex tax system, with over 90 different taxes levied at the municipal, state, and federal levels. Companies must comply with a variety of taxes, including:

• Income Taxes
• Consumption Taxes (like VAT)
• Property Taxes
• Payroll Taxes
• Other Specific Taxes

Brazil also has double taxation agreements with around 30 countries, helping to reduce the potential for businesses to be taxed twice on the same income. Tax rates vary depending on the taxable income and the type of tax.

Foreign companies operating in Brazil must appoint a local tax representative. This representative ensures the company’s compliance with Brazilian tax laws, including the filing of taxes such as ICMS (State VAT), IPI (Federal VAT), and other applicable taxes. The tax representative acts as the point of contact with the Brazilian tax authorities, ensuring that all obligations are met.

Brazil offers two primary tax regimes for calculating corporate taxes:

• Lucro Presumido (Presumed Profit): This regime allows for simplified tax calculations based on presumed profit margins, which can be advantageous for smaller businesses.
• Lucro Real (Actual Profit): This regime requires companies to pay taxes based on their actual profits, taking into account their financial statements. It is typically used by larger companies or those in more regulated industries.

The corporate tax rate in Brazil is around 34%, including both federal income tax and social contributions.

Brazil has a complex multi-level sales tax system that includes state and federal taxes. The State VAT (ICMS) ranges between 17% and 19%, depending on the state. Additionally, there is a Federal VAT on Industrialized Products (IPI), typically ranging from 10% to 15%. The combined rate for PIS/COFINS (federal taxes) is approximately 9.25%.

Brazilian Resident Individuals are taxed on a progressive basis as follows:

Non-residents are taxed at a flat rate of 25%.

Residents of Brazil are taxed on their worldwide income, and non-residents are taxed exclusively at source on their Brazilian-sourced income.

The social security contribution rates paid by employees vary depending on the individual’s salary level.

As of January 1, 2026, employee INSS contributions in Brazil are still calculated using progressive rates applied to salary brackets. Each portion of the employee’s gross monthly salary is taxed at its corresponding rate, and once the highest bracket is reached, the total employee contribution is capped at BRL 988.07.

The employer’s contribution is determined at a rate ranging from 20-28.8% percent of the total payroll, with no cap on earnings subject to contributions. It is calculated separately based on the applicable statutory rates (generally around 20%), plus additional third-party and RAT contributions, depending on the company’s activity and risk classification.

The employer’s contributions are used to finance sickness, maternity benefits and family allowances. Employers are also subject to an 8% contribution to the Brazilian Indemnity Severance Fund (FGTS).

*The above table serves as a broad guideline. Actual rates charged will differ.

Employers may also face additional payroll taxes for contributions to organizations like SESC, SENAI, SENAC, and SEBRAE, which can add approximately 2.5% to 5.8% to the payroll.

Payroll taxes in Brazil include both income tax withholding and social security contributions:

• Income Tax Withholding: Employers are responsible for withholding income tax from employees’ salaries based on progressive rates. These rates range from 5% to 27.5%, depending on the employee’s income level.
• Social Security Contributions: Employers contribute 20% of the payroll to the INSS, along with an additional 1%-3% for workplace accident insurance. Employees contribute 5% to 14% based on their salary.
• Other Payroll Taxes: Employers must also contribute 8% to the FGTS (Severance Indemnity Fund), and additional contributions may be required for other social programs such as SESC, SENAI, and SENAC.

Employers must adhere to strict deadlines for submitting payroll tax payments:

• Income Tax Withholding: Employers must submit payments for income tax withholding by the 20th of the following month.
• Social Security Contributions (INSS): Contributions for social security must also be paid by the 20th of the following month.
• FGTS (Unemployment Fund): Contributions to the FGTS must be made by the 7th of the following month.

13th Month Salary (Décimo Terceiro Salário): Employees receive an additional month’s salary at the end of the year, paid in two installments. The cost to the employer is equivalent to 1/12 of the annual salary per month.

Most employees are entitled to receive a statutory Christmas bonus corresponding to one monthly salary per year. Typically, 50% of the Christmas bonus must be paid by the 30th of November, and the other 50% on or before the 20th of December.

It is quite common in Brazil to reward employees through the payment of bonuses. These may be contractual or discretionary, but they must be provided on an equal opportunity basis to all employees at similar levels.

Bonus term and conditions are generally agreed upon at will between the employer and employee. However, employers should note that if a bonus is paid regularly it could be considered as part of the employment contract therefore subject to its regulation and for example the regular payment of bonus established on not allowed to be altered to the detriment of the employee.

To ensure that the bonus received by the employee is not considered part of his or her remuneration, the following considerations must be met:

• The bonus payment must be made at the employer’s discretion.
• The bonus payment cannot be paid on a regular basis.
  • The bonus payment must be related to the employee’s performance being “above the usual expected”.

Severance Indemnity Fund (FGTS – Fundo de Garantia do Tempo de Serviço): Employers contribute 8% of the employee’s gross salary to this fund, which provides financial support in case of dismissal.

Under the five distinct types of termination severance pay as follows:

1. Termination without cause by the employer: payment of salary balance, accrued vacation plus one-third bonus, proportional vacation plus one-third bonus, proportional 13th salary, 40 per cent severance fund (FGTS) fine over the balance of the employee’s individual account. The employee is also entitled to withdraw the FGTS balance and receive the unemployment insurance. For early termination of fixed-term contracts (including the probationary period), additional severance is due and it is equivalent to 50% of salaries up to the end of the original contract tenure.
2. Resignation by the employee: payment of salary balance, proportional 13th salary, accrued vacation plus one-third bonus and proportional vacation plus one-third bonus;
3. Indirect termination: same payments due as in a termination without cause;
4. Termination by mutual consent: half the payment of the prior notice and the FGTS fine (employee’s part) and, in full, other labour allowances due in a termination without cause. In this type of termination, the employee will be able to withdraw up to 80 per cent of the FGTS balance and will not be entitled to receive the unemployment insurance.
5. Termination for cause: payment of salary balance and accrued vacation plus one-third.

Gross Salary (Salário Bruto) is the base salary agreed upon between the employer and the employee.

Salary should be paid monthly, no later than the 5th business day after any given working month. It is important to note the Federal Constitution also specifically prohibits salary reduction, except where this is agreed by way of collective bargaining agreement.

A payslip must be provided to the employee by the time of salary payment. The payslip must include details of the pay period, the gross salary for that period, the relevant deductions and the net salary.

Vacation Pay (Férias): Employees are entitled to 30 days of paid vacation annually, plus an additional one-third of their monthly salary as a vacation bonus. The cost to the employer is approximately 1/12 of the annual salary, plus 1/3 of one month’s salary.

After a qualifying period of 12 months employees are entitled to 30 calendar-days of paid vacation. This should be taken within the subsequent period of 12 months, and at times that are most convenient to the employer. The vacation period may be split provided that the employee agrees. The vacation period can be taken in up to three periods, one of which cannot be less than 14 days and the others cannot be less than 5 days each. Additionally, the employee may trade up to 10 days of their vacation period for the equivalent salary compensation. The vacation remuneration corresponds to the monthly salary plus 1/3 of the employee’s monthly salary as vacation bonus. Payment of the vacation bonus must happen at least 2 days prior to the vacation start date.

***Vacations must be approved at least 30 days in advance.

Carry over rules

If the vacation it is not taken within the year, employers must pay double salary for the vacation period, as well as allowing the employee to carry over the right to take the vacation to the next year and they must be scheduled right away to allow the employee to rest.

In the event of sickness leave, and with the presentation of an appropriate medical certificate, the employer will be responsible for the employee’s salary during the first fifteen days. After the fifteenth day of absence due to sickness, the Social Security Agency (INSS) will pay a sick leave benefit to the employee. This benefit does not substitute the actual salary but is based on INSS calculations of the last contributions and is capped at approximately BRL 7,786.02. The INSS supported leave will last for the time necessary for the employee to make a full recovery from their sickness without any legal limitation.

During medical leave, the employment contract is suspended and may not be terminated.

According to the Labour Code, an employee may be absent from work, without any prejudice to his or her salary, in the following situations:

• marriage: three consecutive days (the employee has the right to take vacation time off immediately before or after marriage leave. It is mandatory that the employee informs the employee at least 60 days in advance.);
• certified voluntary blood donation: one day each 12-month period;
• electoral enlistment: up to two days, consecutive or not;
• military or any other public service: for the necessary period (the employer must continue paying salaries during the first 90 days);
• university admission tests: on the dates of the exams;
• participation in court proceedings: for the necessary period required by the authorities;
• union officers: for the necessary period to meet the duties related to the mandate;
• accompanying a spouse or partner to medical appointments and follow-up examinations during their pregnancy: up to 6 medical appointments;
• accompanying a child of up to six years to a medical consultation: one day per year (if the employee needs to care for his/her sick minor child, the absence shall be considered excused and without pay for the day not worked. The absence cannot substitute the day of rest);
• certified cancer preventive exams: three days each 12-month period;
• legal abortion: two weeks;

Collective bargaining agreements may also provide other types of paid leave that must be observed by the company.

The employer can choose to grant unpaid leave if employees request. During this period, the contract is suspended for all legal means.

Two consecutive days paid leave for death of a spouse, ascendant, descendant, sibling or person who, declared in his or her labour booklet, lives under his or her economic dependence.

All female employees are eligible for maternity benefits. The maternity benefit is subsidised by the INSS to the employee for a period of 120 days. This period may commence up to 28 days before the due birth date. The employer is responsible to pay this benefit, they can then deduct the relevant amount from the social security contributions due to the INSS.

Male employees are entitled to 5 consecutive days of paid paternity leave.

Under certain circumstances the maternity leave may be extended to 180 days and the paternity leave to 20 days, provided some requirements established by the government program are observed.

Parents adopting are also entitled to the same 120 days for female employees and five consecutive days for male employees.

Many employers offer meal and transportation allowances, either voluntarily or based on collective bargaining agreements. Meal allowances typically range from BRL 20-40 per workday, while transportation allowances often reimburse up to 6% of the employee’s salary.

Offering health insurance is common, though not mandatory. Costs for this benefit can range from BRL 200 to BRL 800 per month per employee, depending on the coverage and provider.

Employees are entitled to paid leave from work on public holidays. Local (Municipal or State) holidays may also apply, depending on where the company is based. If the employer demands the employee to work on a holiday, the remuneration paid with respect to the worked holiday must be at least double the regular compensation. Applicable collective bargaining agreements may establish a higher rate for the holiday remuneration.

The social security authority provides the following insurances to workers who have contributed to the system, individual allowances will depend on the number of contributions made and, on the amounts, involved in each contribution. The main insurances provided by the social security authority are:

1. retirement allowance;
2. accident/illness allowance;
3. disability allowance; and
4. maternity allowance.

Employers are required to provide Life/Short-term disability insurance to employees. At GoGlobal, the current amount is BRL 334.62 per worker/month.

Additional benefits may include life insurance, dental plans, profit sharing, and bonuses, depending on the industry and collective bargaining agreements.

Typically, employees in senior roles are offered supplementary benefit packages, which typically may include:

• Supplementary Private pension programs
• Employers are not required to offer private healthcare to their employees, but it is very common
• Collective bargaining agreements may establish additional benefits to employees and, therefore, employers must comply with the conditions set forth and grant such benefits to its employees
• Meal vouchers
• Transportation