Payroll Services in Brazil

The employer’s social security contribution has three parts. The CPP is 20% of total remuneration under article 22 of Lei 8.212/1991. The RAT, for occupational risk, is 1%, 2% or 3% depending on the CNAE activity code, then multiplied by the company’s FAP – a performance factor between 0.5 and 2.0 published each September, which makes the effective RAT anything from 0.5% to 6%. The terceiros contributions fund the Sistema S and related bodies and typically total 5.8%, though the exact composition depends on the FPAS code: salário-educação 2.5%, SESI/SESC/SEST 1.5%, SENAI/SENAC/SENAT 1.0%, SEBRAE 0.6% and INCRA 0.2%. A typical employer therefore pays 27.8%, with a realistic range of 26.3% to 31.8%.

The critical structural point is that none of this is capped. Article 22 applies to the total remuneration paid, with no reference to the contribution ceiling – that ceiling, in article 28, limits only the employee’s own contribution. The employee pays on a progressive scale of 7.5%, 9%, 12% and 14% up to a ceiling of R$8.475,55, a maximum of R$988,09 a month. Above that the employee pays nothing more and the employer keeps paying 27.8% on everything.

Income tax withholding changed this January. Lei 15.270 of 26 November 2025 did not move the tax bands – the statutory exemption is still R$2.428,80 a month. What it added was a monthly reduction, a redutor, of up to R$312,89 calibrated so that anyone earning up to R$5.000 a month pays no income tax at all, tapering linearly to zero at R$7.350. Payroll systems must apply it at source, not leave it to the annual return. One open point worth knowing: how the redutor interacts with the 13th salary, which is taxed separately and exclusively at source, is not yet settled in published guidance.

Seventeen sectors still benefit from the desoneração transition under Lei 14.973/2024, but it is winding down: the reduced CPP share rose from 5% in 2025 to 10% in 2026, becomes 15% in 2027 and disappears entirely on 1 January 2028. The reduced rate never applied to the 13th salary, which always bears the full 20%.

The FGTS is 8% of gross remuneration under Lei 8.036/1990, deposited into an account in the employee’s name. The base is wide: salary, overtime, night premium, weekly rest pay, commissions, the 13th salary, vacation pay including the one-third bonus, and indemnified notice. Vale-transporte, PAT meal benefits and profit-sharing are outside it. Since 1 March 2024 deposits run through FGTS Digital, which replaced SEFIP, GRF and Conectividade Social, calculates the amount from the remuneration already declared in eSocial, and issues a guia payable by PIX. The deadline moved from the 7th to the 20th of the following month.

On dismissal without cause the employer pays a penalty of 40% of the total deposits made over the whole contract. Termination by mutual agreement under article 484-A carries 20%. The additional 10% social contribution that used to sit alongside was abolished by Lei 13.932/2019 with effect from 1 January 2020 and has not returned.

That 40% is what makes long-service dismissals expensive, because it compounds with tenure. Aviso prévio is 30 days plus three days per year of service, capped at 90 days. Add the pro rata 13th and férias with their notice projections, and the total cash at termination runs to roughly two and a half to three months’ salary for a one-year employee, four to four and a half months at five years, and around six months at ten years. Payment is due within ten days of the contract ending; miss it and article 477 §8 costs a further month’s salary.

Two practical points. Union assistance at termination stopped being mandatory in the 2017 reform, but a good many CCTs reinstate homologação contractually and some labour courts enforce those clauses – read the CCT before assuming. And late FGTS deposits do more than attract interest: they block the CRF certificate, which in turn blocks public contracting, credit lines and various licences. Commercially that is sharper than the fine.

The 13th salary is one twelfth of December salary for each month worked, with a month counting if the employee worked fifteen days or more. It is paid in two parts under Lei 4.749/1965: an advance of 50% of the previous month’s salary, payable any time between February and 30 November, and the balance by 20 December. The tax treatment differs between them. The first instalment carries FGTS but no INSS and no IRRF. The second triggers INSS on the whole 13th, calculated separately from the month’s salary on its own progressive table with its own ceiling, and IRRF likewise calculated separately and taxed exclusively at source.

Férias is 30 calendar days after each twelve-month acquisitive period, paid at normal remuneration plus a constitutional one-third bonus that cannot be waived. The employee may convert up to one third – ten days – into cash as an abono pecuniário by requesting it at least fifteen days before the end of the acquisitive period, and the employer cannot refuse a valid request. The abono is exempt from both INSS and IRRF, which is worth knowing when an employee asks. Leave may be split into up to three periods since the 2017 reform, one of at least fourteen consecutive days and the others at least five, and cannot start in the two days before a holiday or rest day. Payment is due up to two days before the leave begins.

The trap is the concessive period. The employer must grant the leave within the twelve months following the end of the acquisitive period. Miss that and article 137 requires the vacation to be paid in double – and the doubling attaches to failing to grant it in time, not merely to paying it late. Accrued férias sitting unbooked past 24 months from the start of the reference year is a liability accumulating at 200%.

Add these together and total remuneration is about 111% of base salary: twelve monthly salaries, one 13th, and the one-third bonus. Every contribution and every FGTS deposit is calculated on that larger figure, which is why Brazilian employer loading is close to 51% rather than the 35.8% the headline rates suggest.

Normal hours are 8 a day and 44 a week under the Constitution, with a monthly reference of 220 hours. Overtime is capped at two hours a day and carries a minimum 50% premium, though CCTs frequently set more. Work on a weekly rest day or public holiday without a substitute day off is paid double. The night premium is 20% for work between 22:00 and 05:00, with the night hour reduced to 52 minutes 30 seconds. A banco de horas allows offsetting within six months by individual written agreement, or twelve months by collective agreement.

Employers with more than twenty employees must keep a time record. Three systems are permitted: REP-C, a physical clock requiring ministerial homologation; REP-A, an alternative system that needs no approval but must be authorised by a collective agreement; and REP-P, a program-based system needing only an INPI software registration and no union authorisation. REP-P is the mainstream route for office and remote workforces. Records are kept five years, pre-filled records are invalid, and a tolerance of five minutes per marking applies.

Maternity leave is 120 days, extendable to 180 under the Empresa Cidadã programme for employers taxed on lucro real, with the extension deducted from IRPJ. Job stability runs from confirmation of pregnancy to five months after the birth. Paternity leave is currently five days, or twenty under Empresa Cidadã. That changes: Lei 15.371 of 31 March 2026 raises it to ten days from 1 January 2027, fifteen from 2028 and twenty from 2029, and creates a salário-paternidade benefit the employer pays and offsets. Nothing in it applies during 2026 – an employer today still owes five days, and should budget for ten from January.

For sickness the employer pays the first fifteen days at full salary and the INSS takes over from the sixteenth. If the employee returns and is absent again for the same condition within sixty days, the fifteen days do not restart.

eSocial consolidates labour, social security and tax reporting into one channel, on version S-1.3 for periods from January 2025. Admissions are filed by the end of the business day before work starts. Terminations within ten days. Work accident reports by the next business day, immediately for a fatality. Periodic events – remuneration, payments, payroll closing – by the 15th of the following month. From that data, DCTFWeb produces the consolidated federal return, now due the last business day of the following month after IN RFB 2.248/2025, and EFD-Reinf reports withholdings on non-employees monthly by the 15th. Social contributions themselves are still paid by the 20th.

What has gone is worth stating plainly, because a good deal of published guidance is out of date. DIRF was discontinued – the last one was filed in February 2025 for reference year 2024, and the data now flows through eSocial S-1210 and the EFD-Reinf R-4000 series. SEFIP and GRF went with FGTS Digital in March 2024. CAGED was replaced from the January 2020 competency and RAIS from reference year 2019. A private-sector employer in 2026 files none of them.

A Brazilian legal entity with a CNPJ is required to employ someone under the CLT. eSocial, FGTS Digital and DCTFWeb are all keyed to a CNPJ, and there is no route for a non-resident entity to be an eSocial employer. The practical options are a subsidiary, usually a Ltda., a branch requiring federal executive authorisation, or an Employer of Record in Brazil – which works, but note that the end client can carry subsidiary liability under TST Súmula 331 and joint liability on the social security side. It removes the entity, not the obligations.

Then there is pejotização – engaging an individual through their own company. It is lawful only where the relationship genuinely lacks subordination, personal performance, non-eventual work and onerosity. Where those exist, the labour courts recognise employment and the employer owes the full retroactive package. This is the central Brazilian labour dispute of the decade and it is unresolved: STF Tema 1389 will decide the lawfulness of PJ contracting, the Labour Court’s competence and, decisively, the burden of proof. The merits judgment opened in November 2025 and has been stalled since December awaiting a review. In June 2026 the national suspension was partially lifted, so cases may now proceed in the first instance and the regional courts but freeze again at that point; TST cases remain suspended. Until the STF rules, treat PJ engagement of individuals doing core subordinated work as carrying unquantified retroactive exposure.