How to hire and pay employees in Brazil
Looking to hire remote workers to join your team? No matter where in the world your employees work, Oyster makes it easy for you to hire, pay, and take care of employees hassle and worry-free.
Before hiring
Before Hiring
You're eyeing Brazil's vibrant market but worried about compliance. Here's the reality: Brazil has one of the most employee-protective labor frameworks in the world, and converting contractors who've hit classification limits requires proper employment structures.
The nationality quota alone—requiring two-thirds of your workforce to be Brazilian nationals—can complicate expansion plans if you're not prepared.
Your contractors might be approaching the relationship limits that trigger misclassification risk, and your Finance team will ask hard questions about the employer tax burden on top of salary. The FGTS (Fundo de Garantia do Tempo de Serviço) system adds another layer of complexity: you'll contribute 8% of gross salary monthly to a severance fund, and employees can access these funds under specific circumstances.
A solution like Oyster eliminates these barriers for you, automating compliance across 180+ countries and managing HR and payroll—all in one platform with expert support when you need it.
Recent News
If you're planning to hire employees in Brazil, "set it and forget it" payroll and compliance is how teams get burned. Brazil's rules shift through decrees, enforcement campaigns, and economic changes that can quietly change your total employment cost or your compliance workload.
Staying current means fewer surprise budget conversations with Finance—and fewer late-night scrambles when an audit notice lands.
Minimum wage increases are raising payroll floors (and pushing up related costs)
Brazil's national minimum wage increased to BRL 1,518 on January 1, 2025, and the government confirmed a further increase to BRL 1,621 effective January 1, 2026 (often reflected in practice starting with February payroll for monthly-paid employees).
If you have roles, allowances, or internal policies tied to the minimum wage, those numbers need an immediate refresh. Even when you pay above the minimum, expect knock-on pressure from wage compression as entry-level benchmarks rise.
Payroll tax relief is being phased back in—higher employer cost for some sectors
Brazil's payroll tax relief regime (desoneração da folha) is moving into a gradual "reoneração" phase-in, increasing payroll-linked social security costs for eligible sectors across 2025–2027. Under Law 14,973/2024, the payroll contribution returns in steps (e.g., increasing again in 2026), which can materially change the fully-loaded cost of hiring.
Action item: before you sign offers, model total employer cost (gross salary + statutory charges) for your sector, not just take-home pay.
FGTS Digital changes the mechanics (and timing) of a core payroll obligation
Employers have transitioned to FGTS Digital for FGTS payments, which relies heavily on accurate eSocial reporting and uses Pix QR code payments. One practical shift: the collection deadline moved to the 20th of the following month, which can change how you build your payroll calendar and approvals.
If your data is messy (names, IDs, job info), FGTS Digital is less forgiving—so "close enough" payroll inputs become a real risk.
Pay transparency and equal pay enforcement is getting louder (especially at scale)
Brazil's Equal Pay / Salary Transparency framework (Law 14,611/2023) is seeing heavier enforcement activity from the Ministry of Labor, including broad inspection operations and employer communications through the Electronic Labor Domicile (DET).
In September–October 2025, the government extended a reporting publication deadline due to data processing issues, and employers were told to monitor for updated versions and re-publish if needed. If you're heading toward 100+ employees in Brazil, don't wait—build job architecture, clean up titles and classifications, and document pay decisions so you can answer questions quickly and consistently.
Interest rates and inflation are shaping hiring pace and wage expectations
Brazil has operated in a high interest-rate environment, including the Central Bank holding the Selic rate at 15% (July 2025), reflecting ongoing inflation-control priorities. In real terms, that can mean tighter budgets, more scrutiny of headcount, and employees expecting meaningful annual adjustments—often influenced by collective bargaining dynamics.
If your CFO is asking "why Brazil costs more than the spreadsheet said," this macro backdrop is usually part of the answer.
Potential income tax threshold changes could impact net pay (pending final enactment)
In October 2025, Brazil's lower house approved a proposal to raise the monthly income tax exemption threshold to BRL 5,000, with reported intent for January 1, 2026 effectiveness if enacted. If this becomes law, it can change withholding and net take-home pay for many employees—meaning your offer competitiveness and payroll configuration may need updates.
Treat this as "watch closely," and confirm final rules before changing payroll tables.
Hiring in Brazil is absolutely doable—but it rewards teams that plan for real-world changes in wage floors, payroll mechanics, and enforcement pressure. If you want help turning these updates into a hiring and payroll plan you can defend to Finance (and sleep on at night), Oyster can support you with both the platform and the humans who know what to check. Start hiring globally.
At a glance
CURRENCY
BRL
OFFICIAL LANGUAGE
PORTUGUESE
PAYROLL FREQUENCY
MONTHLY, BI-WEEKLY
EMPLOYER TAXES
35-40%
13th / 14th SALARY
Brazilian employees receive a 13th month bonus (half paid in July and half paid in December) and a holiday bonus (a third of a month’s salary) when holiday is taken).
Good to know
Good to know
- Employer costs run 35-40% above gross salary. This includes social security contributions (20%), FGTS deposits (8%), education salary (2.5%), workplace accident insurance (1-3%), and union-specific contributions. Your Finance team will need these numbers for accurate budget planning.
- No paid vacation for the first 12 months. Employees earn the right to paid time off after completing 12 months of service, which affects how you set expectations during onboarding. After that first year, they're entitled to 30 days of paid annual leave.
- 13th-month salary is mandatory. All employees receive an additional month's salary paid in two installments (one advance payment made between June and December, and the remainder paid by December 20), increasing your annual compensation costs by roughly 8.3%. This isn't a bonus—it's a legal requirement.
- Termination carries significant costs. Without-cause terminations trigger a 40% penalty on the employee's FGTS balance, plus notice pay and potential indemnification. Proper documentation and process are critical.
- Contracts must be in Portuguese. Template contracts from other countries won't work here—you need locally compliant agreements that address mandatory clauses around FGTS, union dues (if applicable), and specific termination provisions.
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Top countries hiring in
Brazil
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Labor laws in
Brazil
Working hours and overtime
Managing a global team across time zones? Standard working hours in Brazil are 44 hours per week, typically eight hours per day with a one-hour lunch break. Overtime is strictly limited to two hours per day and must be compensated at 150% of the regular hourly rate.
Management-level employees may be exempt from overtime pay, but the classification criteria are narrowly defined—misclassifying an employee as exempt creates compliance risk.
Minimum wage
Employment contracts
Think a template contract will do? Think again. Teleworking or remote working arrangements must be included in a written individual employment contract. The contract should clearly define whether the role is exempt from overtime and specify any probationary period terms.
Legal review isn't optional—Brazil's labor courts consistently rule in favor of employees when contract language is ambiguous or non-compliant.
Probationary period
Setting hiring timeline expectations? Probationary periods in Brazil can last up to 90 days and may be structured as two separate periods (45 days + 45 days). During probation, either party can terminate the relationship, but if the employer terminates before the end date, they must pay 50% of the remaining salary that would have been owed through the end of probation.
This affects both your hiring costs and timeline planning—factor in the full 90 days when calculating time-to-productivity.
Pensions
IP protection and non-compete agreements
Non-compete agreements in Brazil can be no longer than two years, and must spell out the scope and terms clearly in writing. Such agreements can be enforced by an employer in return for the payment of a fair indemnification to the employee, which can vary between cases.
Estimate your savings when using Oyster
Use this calculator to get an estimate of employment costs using Oyster.
(Spoiler alert: It’s much cheaper than setting up entities around the world!)
- Taxes, and social security20,602
- Net annual salary29,389
- Taxes & contributions12,885
- Social Tax11,875
- Occupational Health fee35
- Labor Accident Insurance375
- Fct (Wage Guarantee Fund)0
- Allowances600
- Fct (Wage Guarantee Fund)600
Benefits and leave in
Brazil
Vacation time
Explaining vacation policies to candidates? Here's the reality: employees earn the right to paid time off after completing 12 months of service. After completing one year, they're entitled to 30 days of paid annual leave. Employees can convert up to one-third of their paid vacation into a cash allowance, but this is optional.
Vacation must be taken within 12 months of being earned, or the employer faces penalties.
Sick leave
Navigating sick leave responsibilities? For the first 15 days of illness, the employer pays 100% of the employee's salary. After day 15, Brazil's social security system (INSS) takes over sick pay at approximately 91% of salary.
Employees must provide a medical certificate stating the number of days of sick leave needed to obtain sick pay for the first 15 days, and the employer is responsible for submitting documentation to INSS when transitioning to government-funded sick leave.
Maternity and paternity leave
Parental leave
Preparing for parental leave? Maternity leave is 120 days at 100% salary, provided as a maternity allowance by INSS. Payment is made by the employer and fully reimbursed by the government. Paternity leave is five consecutive days paid at the regular rate during the leave period, though companies participating in the "Empresa Cidadã" program can extend this to 20 days with tax benefits.
For workforce planning, remember that employees return with job protection, and you cannot terminate pregnant employees from confirmation of pregnancy through five months post-birth except for cause.
Holidays
View a list of recognized public holidays in Brazil here.
Employer tax
Calculating your total employment costs? Employer taxes in Brazil range from 35-40% on top of gross salary. This includes social security contributions (20% of gross salary), FGTS deposits (8%), education salary contribution (2.5%), workplace accident insurance (varies by risk category, typically 1-3%), and potential union-specific contributions.
These aren't hidden fees—they're legal requirements that significantly impact your budget planning and should be factored into offer letters from day one.
Individual tax
Handling employee tax obligations? Brazil uses a progressive income tax system with rates from 0% to 27.5% depending on income brackets. Employers must withhold income tax from each paycheck and remit it monthly to the federal revenue service.
You're also responsible for reporting annual income statements (Informe de Rendimentos) to employees and tax authorities—compliance with these deadlines is critical to avoid penalties.
Termination in
Brazil
Facing a termination scenario? Brazil's termination requirements are among the most complex in Latin America. Without-cause terminations trigger substantial costs: 30 days advance notice (either worked or paid), prorated 13th-month salary, unused vacation pay plus one-third vacation premium, and a 40% penalty on the employee's entire FGTS balance paid directly to them.
The FGTS penalty alone can represent a significant cost—if an employee has worked for three years at R$10,000/month, their FGTS balance would be approximately R$28,800, making the 40% penalty R$11,520.
With-cause terminations (for serious misconduct) avoid some of these costs but require substantial documentation and following strict procedural requirements. Brazil's labor courts heavily favor employees, so attempting a for-cause termination without proper evidence and process creates litigation risk. Most companies opt for without-cause terminations to ensure clean exits.
There's also a mutual termination option introduced in 2017: if both parties agree, the employee receives 20% (instead of 40%) of their FGTS balance, half of the advance notice payment, and full prorated benefits—but they cannot access their full FGTS balance or apply for unemployment benefits. This option requires documented mutual consent and can reduce termination costs while providing employees with immediate access to some severance funds.
Navigating notice period requirements? Employers must provide a minimum 30 days notice for terminations. During the notice period, if termination was initiated by the employer, the employee has the right to reduce their working hours by two hours a day for the remainder of the notice period. Alternatively, an employee who has at least a 30 days notice period may take seven consecutive paid days off during this period.
Employers can opt to pay in lieu of notice (paying 30 days salary instead of requiring the employee to work), which is common for immediate separations. The notice period payment is subject to all standard payroll taxes and contributions, so factor these costs into your termination budget.
Start hiring employees in
Brazil
Ready to employ in Brazil? You've got two paths: establish a legal entity or use an Employer of Record (EOR). Entity setup in Brazil takes 6-12 months, requires a local director, demands ongoing accounting and legal support, and makes sense only if you're planning significant long-term presence.
This local director requirement carries significant personal risk, as a withdrawing partner remains subsidiarily liable for the company's labor debts for up to two years after their departure is officially registered. For most companies—especially those converting contractors or making their first Brazilian employment—an EOR provides compliant employment in weeks, not months.
Here's the decision framework: if your contractors are approaching classification limits, if you're testing the Brazilian market before committing to entity setup, or if you need to employ quickly while maintaining full compliance, an EOR like Oyster eliminates the barriers. You get locally compliant contracts, accurate payroll processing, expert guidance on complex scenarios (terminations, leave management, tax questions), and the ability to employ across multiple Brazilian states without navigating regional variations yourself.
With Oyster, you can manage HR and payroll and automate compliance across 180+ countries—all in one platform. When software alone isn't enough, you get expert support from people who understand Brazil's employment complexity. No asterisks, no hidden fees, and no abandoning you when contractor conversion or termination scenarios get complicated.
Disclaimer: The information provided in this resource is for general educational purposes only and shall not be construed as legal advice. While Oyster strives to provide current and accurate information, Oyster makes no warranties or representations as to the correctness of the content provided and accepts no liability or responsibility for any errors or omissions in the content provided. By using this resource you acknowledge and agree that you do so at your own risk. The content of this resource is subject to change without notice.
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FAQs
Can I convert my Brazilian contractors to employees?
Yes, but timing matters. If contractors have been working for you in ways that look like employment (fixed hours, direct supervision, economic dependence), Brazilian labor courts may reclassify the entire relationship retroactively—triggering back payments for benefits, taxes, and potential penalties.
An EOR can help you convert contractors to proper employment quickly while ensuring the new employment relationship is compliant from day one.
What's the real cost of employing someone in Brazil?
Plan for 35-40% above gross salary for employer taxes and contributions, plus 13th-month salary (adding roughly 8.3% annually). A R$120,000 annual salary actually costs R$170,000-180,000 when you factor in all mandatory contributions.
Don't forget termination reserves—the 40% FGTS penalty means you should budget for potential separation costs from the start.
Do I need a Brazilian entity to employ in Brazil?
Not necessarily. An Employer of Record (EOR) like Oyster acts as the legal employer, handling all compliance, payroll, and tax obligations while you manage the employee's day-to-day work. This eliminates the 6-12 month entity setup timeline and ongoing administrative burden while ensuring full legal compliance.
How does the FGTS system work?
You deposit 8% of the employee's gross salary monthly into their FGTS account (managed by the government). Employees can access these funds when terminated without cause, retiring, purchasing a home, or facing serious illness.
When you terminate without cause, you also pay a 40% penalty on the total FGTS balance directly to the employee—this is separate from the FGTS account itself.
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