Payroll in Brazil

• Asinglefederallaborlaw• Multipleagreementswithlaborunions

• Numerouschangestolawandtostatutoryvalueseachyear

• Legislationsubjecttointerpretationrequiringsupportofalegaladvisor

• Monthlysalaryplusvariousallowancesandbenefits

• Incometaxwithholdingatsource• Mandatorysocialcontributionsforemployeeandemployer

• Ageneral-purposesocialsecurityandpublichealthcaresystemplusfundsforaccidentsandunemployment

Brazilian Payroll Highlights.

Payroll in Brazil.

Extreme complexity despite a single federal labor law

Ineachcountry,payrollprocessingisdrivenbylocallaborlaws,differentlayersoflegislationandspecificrules.Thismakesitachallengeformultinationalcompaniesorcompaniesexpandinginternationally.

Astheseventhlargesteconomyintheworld,Brazilisaveryattractivecountry.Butonceestablishedthere,companieshavetodealwithoneofthemostcomplexpayrollsystemsintheworldduetoconstantlychanginglawsandtheinfluenceoflaborunions.Usingalocalpayslipasareferencepoint,thisbrochuredeciphersthecomplexitiesofpayrollinBrazil.

2 Payroll in Brazil

Multiple levels of agreements TheConsolidationofLaborLaws(ConsolidaçaodasLeisdoTrabalho,orCLT)isthebodyoflawthatregulateslaborrelationsintheprivatesectoratthefederallevelinBrazil.Itservesasthecommonlegalbasefornegotiationsbetweenemployerassociations,laborunionsandcompanies.

Thereareabout10,000laborunionsinBrazil,organizedatthefederal,stateorcitylevel,orbytrade.Sincemostcompaniesperformavarietyofactivities–forexample,afoodcompanymayemploydriversandaccountants–theymustnegotiatewithmultiplelaborunions.Amulti-sitecompanymayfacenegotiationswithasmany20or30unions.

Constantly changing rules Thereareabout60legislativechangesand5statutoryvalueadjustmentseachyearthatallimpactpayroll.FrequentlegislativechangesandthemultitudeofcompanylevelagreementsmakepayrollcompliancearealchallengeinBrazil.AccordingtotheWorldBank,Brazilhasoneoftheworld’shighestratesoftime-to-complywithlabortaxes:490hours/yearcomparedto45hoursintheUKand55intheUSA.

The challenge of eSocial Brazilhasengagedincontinuousmodernizationinitiativestoboostthecompetitivenessofitseconomy.LegislativechangeshaveresultedinnewprogramswithnewobligationsthatdirectlyaffectpayrollprocessesandHRstructures.ThetwoprogramsthatcurrentlyrequirethemostknowledgeandexpertiseareGreaterBrazilandeSocial.

GreaterBrazil,activesince2013,isaninitiativedesignedtoboosttheappealoftheBrazilianeconomyandcreatemorejobsbyreducingthetaxburdenonpayroll.Itshiftedcompanytaxrulessocalculationswouldbebasedoncompanyrevenueandbusinessactivityinsteadofthepreviouscalculationbasedonpayrolltotals.

ButtheBrazilianmodernizationinitiativethatiscausingthebiggeststirinpayrollandHRiseSocial,whichdigitalizestheprocessofsubmittinglaborand

payrolleventsandsendsallinformationtoasinglegovernmentdatabase.eSocialopenscompaniesuptobroader,moredetailedauditinganddemandsstrictadherencetoreportingdeadlinesthatincursteepfinesifnotmet.Itaffects100%ofemployersinBrazil.

AlthougheSocialwasdesignedtoreducebureaucracybyminimizingmanualprocesses,itincreasestheworkloadofpayrollprofessionals,whoaretaskedwithenteringnotjustpayroll-relatedinformation,butHRandOccupationalHealthandSafetydataaswell.Timingisalsostrict–assame-dayreportingisrequiredformostemployee-relatedevents–andthismeanscontinualfinesforcompaniesthatcannotstayontopofreporting.

Atthestructurallevel,companiesneedtoadapttheirinternalprocessestocomplywithgovernmentSLAs,andalsoneedtoupdatetheirdatabasestobeabletocollectthenewdatarequiredbyeSocial.

How ADP resolves the eSocial challengeADPprovidescompanieswithasingleprovidersolutionthatadaptseasilytochangingneedsfordata,andhelpscompaniesfulfilltheireSocialcomplianceobligations.Itsteamoflocalandglobalpayrollandlegislativepersonnelarewell-versedineSocialrequirementsandtimelines.ADP’sintegratedtechnologyensuresthatallinformationrequiredbythegovernmentiscapturedandupdatedinyoursystem.

ADPcanhelpyougetahandleonpayrolloperationsinBrazil,sothatyourbusinessintheregionissuretocontributetotheoverallprofitabilityofyourorganization.

SalarySalariesarecalculatedandpaidonamonthlybasis,withadvancesusuallydisbursedbetweenthe15thand20thofeachmonth.Employeesareentitledtoa13thmonthofsalary,whichispaidintwoinstallments.

Thefederallawsetsaminimumwage,buttheminimumsalarymaybehigherdependingonthestateinwhichemployeesworkortheirprofession(negotiatedbytradeunions).

Itisalsocommonforcompaniestoincludeprofitsharing(PPR/PLR)intheremunerationpackageontermsagreedtowithlaborunions.

Working time and overtimeInBrazil,workhoursarecappedat44perweek.Aregularshiftcannotexceed8hoursandamaximumof2hoursofovertimeisallowedperday.

Overtimeispaidataminimumrateof150%theregularsalary.Therateforextranighthoursworkedisatleast20%higherthanthedaytimeovertimerate.

Ratesmaybehigherdependingonthecollectivebargainingagreementsnegotiatedwithlaborunions.

Everycompanymustkeeptrackoftheiremployees’workinghours,recordingboththestartandendtimes,aswellasmealbreaksandrestgrantedduringtheworkday.Employeesareentitledto30consecutivedaysofpaidvacation,with1/3extrasalary.Employeescanchoosetoforgo10ofthe30vacationdaysandreceiveacashpaymentinstead.

AllowancesInadditiontocash(whichmustcompriseatleast30%oftheentireremunerationpackage),workerscanbecompensatedforexpensessuchashousingorvacation/travelcosts;whichshallberegardedassalaryfortaxpurposes.

Transportationvouchersareprovidedtoemployeeswhocommutebypublictransportation.Thecompanycandeductupto6%ofthesalaryforthisexpense,limitedtothevalueofthetickets.

TaxesEmployerscalculateandwithdrawfederalincometax(IR)fromtheemployeesalaryeverymonth.

IRisbasedontheemployee’snumberofdependents;thesamerulesapplythroughoutthecountry.

Companiessubmitannualinformationaboutincomeandbenefitstotheemployeeandthetaxauthority.

Social contributionsTheBraziliancontribution-basedsocialsecuritysystem(INSS)grantsinsuredemployeescoverageforretirement,publichealthcare,accidentassistance,familyallowance,maternityleave,andincaseofemployee’sdeath(familymonthlypension).Bothemployersandemployeescontributetothesocialsecuritysystem.

Companiesalsocontributetofundsforwork-relatedac-cidentsandtheearlyretirementofemployeeswhoworkinhazardousconditions.Finally,companiescontributetoamandatoryunemploymentinsurancefund(FGTS).

Additional benefits Companiesmayalsoprovideadditionalbenefitsthatarenotconsideredsalarycomponents:privatehealthinsuranceandpensionplans,lifeinsurance,educationalservicesforemployeesandtheirchildren,medicalassistance,culturalbonuses,foodstipends,andsoon.

Itisverycommonforlargercompaniestoalsooffersuchplansaspartoftheirbenefitspackagetoremainattractivetoemployeesinthelabormarket.

TherulesthatgovernlaborrelationsinBrazilareacomplexcombinationofthefederallaborlawandagreementsnegotiatedwithunions,sometimesatthestateandcitylevel.Thisleadstoavarietyofallowances,socialbenefitsanddeductionsonthepayslipsofBrazilianemployees.Companiesmustalsocalculateandwithholdsocialcontributionsandincometaxesfromemployeesalaries.

TheBrazilianpayrollsystemisoneofthemostcomplexintheworld.Legislationiseverchanging,andcompaniesmustreachagreementswithmultiplelaborunions.Newprogramsaimedatmodernizationalsogreatlyimpactthewaycompaniesmanagepayrollinthecountry.

54 Payroll in Brazil – A complex system with frequently changing rules Payroll in Brazil – A complex system with frequently changing rules

A variety of allowances and social benefits.

Compliance is a constant challenge.

Do you know approximately how many legal changes happen in Brazil every year?

60%of which have an impact on payroll

922

The total yearly cost of work accidents in

Brazil is Brazilian Reals70 billion

This represents 9% of the yearly payroll amount for workers in the formal sector, which amounts to 800 billion Brazilian Reals

9%

Anin-depthdescriptionofthemostspecificcategoriesonaBrazilianpayslipoffersadditionalkeystounderstandthecountry’spayrollsystem.

SampleBrazilianpayslip

6 Payroll in Brazil – A complex system with frequently changing rules

Behind a Brazilian payslip.

Earnings • SalárioBase:basesalary•Quinquenio:senioritybonusforeveryfiveyearsworkedatthecompany.Notmandatory:dependsoncompany’spolicyandthecollectivebargainagreementwiththelaborunion

•D.S.R.:weeklypaidleavecompensationforextraornighthours•Averageadjustment–13thmonth•HorasExtras:overtime,whoseratemustbeatleast50%morethanregularhours;ratecanbenegotiatedwithtradeunions(here,100%)

Employee & Company information•CompanyCompanyID(C.N.P.J.)Pageno.• EstablishmentIDEmployeeIDEmployeenamePositionDEP/FILH:thenumberofeconomicallydependentpersonsisusedtocalculateincometax

•CostcenterBankBankbranchAccountno.BasesalaryPayrollmonth

• Paydate•Hiredate

Reference values/Other• Incometaxreferencefor13thmonthsalary• Incometaxreference• Socialsecuritycontributionreference• Basesalaryforcontributions•Unemploymentcompensationfundcontributionbytheemployer•Unemploymentcompensationfundreference•Unemploymentcompensationfundcontribution−over13thsalary•Unemploymentcompensationfundreference−13thmonth• Socialsecuritycontributionreference−13thmonth

Referencesalariesforvariouscontributionsandtaxes:IR(incometaxes),INSS(socialsecurity),FGTS(unemploymentinsurance).TheDecemberpayslipIncludesbasesforregularsalariesaswellasthe13thmonthbonus(13Sal.)

FGTS:“FundforGuaranteedTimeofService”Companiescontribute8%oftheemployee’ssalarytotheFGTS,agovernmentfundthatprovidesunemploymentinsurancetoworkers.Incaseofemployer-initiatedtermination,theemployerpaysadditional40%overthewholeaccumulatedFGTScontribution

7Payroll in Brazil – A complex system with frequently changing rules

Deductions• Adiantamentoquizenal:bimonthlyadvancepaymentofsalary•DescontoIdioma:employeecontributiontolanguagelessons(whencompanieshaveanagreementwithlanguageinstitutes)

•Combustivel:deductionsoffuelpurchases(ifthecompanyhasanagreementwithgasstations)

•IRRetido13°Sal:incometaxwithholdingon13thmonthsalary•IRRetido:incometaxwithholdingCalculatedandwithheldeverymonthusingaprogressiverateandtakingintoaccountthenumberofeconomicallydependentpersons

•INSS:socialsecuritycontributionEmployeescontributeapercentageoftheirsalary,calculatedaccordingtoaprogressiverate(between8%and11%).Employer’scontribution(notvisibleonpayslip)is20%ofthesalary.

•Othercontributions(notvisibleonpayslip):Companiesalsocontributetoafundforwork-relatedaccidentsatarate(1%to3%)thatdependsontheirlineofbusinessandinvestmentsinoccupationalsafety.Anadditionalcontribution(6%,9%or12%)ispaidtocoverearlierretirementwhenemployeesworkinhazardousconditions.

•Refeiçoes:employeecontributiontowardmealvouchers–upto20%ofactualvalue

•MensalidadeSindic:monthlyunionduesAlthoughtheyarenotlegallymandatedtobeactivelyinvolvedinunionactivities,allemployeesmustberepresentedbyalaborunion.

•AssistMedica:contributiontoprivatehealthinsuranceplan(companyspecific)

•ContribAssistencial:unionassistancecontributionUnionsprovideemployeeswithadditionalservices.

•Farmacia:deductionsofmedicationpurchases,(ifthecompanyhasanagreementwithdrugstores/pharmacies.)

•PensaoJud.Salario:alimonyandchildsupportinBrazilarededucteddirectlyfromwageswhencourtordered

Totals•Earnings•Deductions•Netpay

The information contained in this Payroll in Brazil brochure is to be used for informational purposes only. ADP is not a legal labor or tax adviser, and this information should not be considered legal, tax or labor advice, nor is it intended to provide specific advice about labor, tax and/or legal questions. This information should not be used to replace consultation with a trained legal professional, or any other qualified expert. ADP assumes no liability for the use or interpretation of information contained in this Payroll in Brazil brochure. ADP has made considerable efforts to present accurate and reliable information in this Payroll in Brazil brochure. However, ADP does not take any responsibility for the accuracy, completeness, or usefulness of the information herein. Such information is by nature subject to revision and may not be the most current information available. This Payroll in Brazil brochure should not be considered a substitute for a reader’s own independent research and evaluation.

ADP and the ADP logo are registered trademarks of ADP, LLC. ADP – A more human resource. is a service mark of ADP, LLC. Copyright © 2016 ADP, LLC. All rights reserved.

Asaleaderofamultinationalorganizationmanagingaglobalworkforce,youfacemultiplechallengeseveryday.DisparateHRsystemsaddcomplexitytoyourglobalemployeedatamanagement,andthousandsoflegislativeupdateseveryyearincreaseyourorganization’sriskofnon-compliance.

ADPhasbeeninthebusinessofmanagingsomeoftheworld’smostcomplexpayrollprocessesandfast-changingcompliancechallengesforover65years.Drawingonthisvastexperience,weofferaunifiedsolutionthatgoesfarbeyondjusttechnologytohelp

youachievescalabilityandreliability.ADPGlobalPayrollServicesgivesyouglobalvisibilityacross111countriesandterritoriesthroughacentralizedcloud-basedsoftwaresolution,andsupportedbythousandsofon-the-ground,dedicatedlocalexperts.

Whateverthesizeofyourworkforce,ADPGlobalPayrolldeliverscomprehensivemanagementstandards,alongsidecontinuousinnovation,andacutting-edgeuserexperienceforprofoundnewlevelsofworkforceengagement.

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