Employer of Record in Brazil

Budget for roughly 50% above gross salary. Statutory contributions come to about 36% — employer INSS at 20% uncapped, FGTS at 8%, Sistema S and Terceiros at 5.8%, and RAT at 1-3% adjusted by the company’s FAP experience factor. The mandatory 13th salary and the one-third vacation bonus add about another 11% in cash, and carry INSS and FGTS themselves. Reserve for the 40% FGTS termination penalty as well and a realistic figure is nearer 55%. On top of that, a professional package customarily includes a private health plan, a dental plan and a meal voucher — together roughly R$ 17,000 per employee per year, charged per head rather than as a percentage of pay, so they weigh much more on a modest salary than on a senior one. We quote the exact all-in figure per hire before you commit.

The 13th salary (décimo terceiro) is a mandatory extra month of pay under Lei 4.090/1962, paid in two instalments — the first at any point between February and 30 November, the balance by 20 December. It is a legal entitlement, not a bonus, and is subject to both INSS and FGTS. Alongside it, employees earn 30 calendar days of vacation plus a one-third vacation bonus. We accrue them monthly and pay on the statutory dates.

FGTS is a mandatory 8% employer deposit into a worker-specific account each month, calculated on salary, the 13th salary and vacation pay. Dismiss someone without just cause and the employer owes a further 40% of the entire balance built up over the whole employment — not just the current year — which is why prudent employers reserve for it from month one. Where both sides agree to separate by mutual consent, the penalty halves to 20%. FGTS is an additional employer cost, never an employee deduction, and has run through the FGTS Digital platform since March 2024. We deposit monthly and manage both termination routes.

eSocial is Brazil’s unified digital platform for reporting every employment event — hiring, pay changes, leave, termination — in near real time, with automatic penalties for errors or late filing. It is a major compliance burden for foreign employers and a key reason to use an EOR: as the legal employer, TopSource holds the digital certificate and handles all eSocial reporting.

Very. Brazil’s labour courts received 4.09 million new cases in 2024, up 19.3% on the previous year and the highest in two decades, and misclassification is among the most common claims. Article 3 of the CLT defines employment by the substance of the relationship rather than the contract, so where a contractor shows subordination, personal service, non-eventual work and regular payment, a court can reclassify — triggering back-payment of INSS, FGTS, the 13th salary, vacation and overtime for the entire period, plus fines. An EOR removes that risk by employing the person compliantly under the CLT from the start.

EOR wins on speed and on carrying the INSS, FGTS and eSocial machinery — and on removing misclassification risk — for you: employees working in days, compliance handled. Registering a company is not the slow part; becoming an employer that can legally run payroll is, and for a foreign parent that commonly takes three to four months. Your own entity wins on scale once Brazilian headcount and permanence are certain. Many clients run both in sequence — EOR to enter, entity once proven — and we transfer the team when the time comes.

The transport voucher (vale-transporte) is not optional: under Lei 7.418/1985 the employer must provide it whenever the employee asks for it, with the employee bearing up to 6% of base salary and the employer the rest. The meal voucher (vale-refeição) is the one that is discretionary in law but close to universal in practice, and is usually set by the sector’s collective agreement rather than left to the employer. Beyond those, most competitive employers provide private health and dental cover, since salaried professionals in Brazil rarely rely on the public SUS system, and life insurance. A home-office allowance for remote staff has become standard in Brazil’s tech and services sectors since 2021.

Brazil’s statutory notice period is 30 days, plus an additional three days for every year of service up to a maximum of 90 days. Termination without cause also triggers FGTS withdrawal rights, a 40% penalty on the accumulated FGTS balance paid to the employee, and other termination payments. Brazil has one of the higher-risk labor litigation environments globally, so getting the exit calculation and paperwork right is critical to avoiding claims at the labor courts.

An EOR can have your hire working in days — typically two to five — because the employment sits inside a structure that already holds a CNPJ, an eSocial digital certificate, municipal and state registrations and an FGTS Digital connection. Registering a company in Brazil is not the slow part. Becoming an employer that can legally run payroll is: a foreign parent also needs a resident legal representative, a corporate bank account through KYC on its shareholders, and each of those registrations before the first payslip — commonly three to four months end to end.