Brazil Payroll and Benefits Guide
What global businesses need to know about payroll in Brazil
Brazil is a large and growing economy: its GDP has now far exceeded pre-COVID-19 levels, and it’s currently rivaling Canada for tenth place on the list of the world’s biggest economies by GDP. Secondly, its economy is very diverse, with a good mixture of services, accompanied by heavy industry and raw materials, including iron, steel, cement, chemicals, and automobiles. And thirdly, as an emerging market, staffing and operational costs are substantially lower in Brazil than in developed Western powerhouses.
But there is a bit of a downside to all this. Running payroll and complying with employment law in Brazil can be extremely complicated. There are various rules and regulations to get to grips with, and many of them are undergoing substantial overhauls at the time of writing. Many companies struggle to get their payroll consistently right, and that’s why – according to CloudPay’s 2025 Global Payroll Efficiency Index – Brazil has a supplementary impact rate of 139.89%, far above any other country in the world.
This means, to give yourself the best chance of keeping your Brazilian payroll on the right side of compliance, accessing local payroll expertise is essential. This guide sets out the basics around running payroll in Brazil, including some of the key changes currently in the pipeline.
Getting Started
Firstly, foreigners are restricted from operating in certain jobs and industries in Brazil, including journalism and broadcasting, mining, road haulage, and some healthcare services. This is by no means an exhaustive list, so make sure you check your organization’s eligibility before starting any business set-up activities.
A central tenet of doing business in Brazil is the eSocial system. It was implemented in 2018 to streamline and standardize how employment data is submitted to government bodies, so that Brazilian labor laws can be better enforced. All companies in Brazil are now required to use eSocial, submitting data across employment status, tax, social security, payroll, working hours, health and safety, and much more. The penalties for not collecting and retaining comprehensive records on the business and its workforce can be severe.
Key steps on the set-up journey include drafting a Power of Attorney agreement with your chosen lawyers; getting documents notarized; obtaining a CNPJ tax number (essential for using eSocial); registering with the Central Bank; submitting documents of incorporation to the State Trade Board; and opening a Brazilian bank account. You may also be required to apply for business licenses, depending on your industry. It should be noted that Brazilian processes and admin can be slow (although they are gradually improving), so it may take you several months to complete everything.
Employment Considerations
It’s vital to note that trade unions are a major part of the Brazilian business landscape, and collective bargaining agreements are commonplace. Terms signed by employers under these agreements are enforceable by law.
The maximum working week in Brazil is 44 hours, with no more than eight hours in any one working day, theoretically meaning 5.5 days of work each week. A maximum of two hours of overtime can be worked per day (Brazilian law prohibits more than ten hours of work per day in total) and is paid at 150% the rate of normal salary, or 200% on Sundays or public holidays. Additional rates may be applied for those working late at night. Further overtime rates, and variations to working hours and days, can be agreed on an individual company basis through collective bargaining.
Statutory notice periods are 30 days for employees with one year of service, increasing by three days each year, up to a maximum of 60 days for employees with at least 11 years of service. Notice periods can be halved if the end of the employment is by mutual consent. Again, these arrangements can be increased through collective bargaining. Probation periods can be between 45 and 90 days.
Compensation and Severance in Brazil
Brazil’s national minimum wage level is regularly adjusted. On January 1 2025, it rose for the fourth time in just over two years, to 1,518 reais per month (approximately £220, $290, €250). At the time of writing, it was expected to rise again to 1,631 reais per month for 2026. You should watch out for short-notice confirmations of changes in this area: the 2025 pay rise was only officially confirmed on December 30 2024, two days before it took effect.
It’s also worth noting that many companies offer benefits such as food, housing, clothing, phone contracts and gym memberships (and some are required to do so by collective bargaining agreement). These benefits count as payment in the context of the minimum wage calculation.
Payroll can be run monthly (payment within the first five business days of each month), or every two weeks (40% of monthly salary paid between the 15th and 20th of each month, the rest at the end of the month, or within the first five business days of the following month).
As with many other Latin American countries, all employees in Brazil are also entitled to a ‘bonus’ 13th-month payment, equal to one month’s salary and paid out in two equal installments in November and December; tax and social security contributions should be withheld from the second payment.
Terminations are paid no later than ten days from termination (or within two days for employees that are still in a trial period). Employees dismissed without cause are entitled to 40% of the money that has been paid into their unemployment guarantee fund. There may also be a requirement to make further payments of a month’s salary plus unused holiday pay if defined by collective bargaining.
Tax and social security in Brazil
Like many major economies, income tax rates in Brazil are progressive, with higher earnings subjected to higher rates of tax. However, they have undergone substantial revision of late.
In November 2025, new legislation was approved for 2026 to raise the tax exemption threshold to anyone who earns 5,000 reais per month (approx. £720, $950, €820) or less, which is more than triple the current minimum wage.
For those earning more than that, under the 2025 tax thresholds, the first 2,428 reais earned per month (approx. £350, $460, €395) are exempt from taxation, after which a rate of 7.5% is levied. Progressively higher rates of 15% and 22.5% are applied to greater earnings, and the highest rate of 27.5% is applied on all earnings above 4,664 reais per month (approx. £670, $880, €760).
Employees in Brazil are paid monthly, although union and company contracts may also provide for advance payments within the payroll period. Taxes and employer contributions are calculated and paid within the month-end payroll (Folha Mensal).
There are a variety of social security contributions required in the Brazilian system. These include:
- Main social security: 20-26.8% employer, 7.5%-14% employee
- Work accident insurance: 1-3% employer
- Employees severance indemnity fund: 8% employer
- Third-party payment: 0.2-5.8% employer
- Vacation bonus: 2.75% employer
If there are collective bargaining agreements in place, then workers may also be entitled to additional benefits on top of these, including vouchers for meals, groceries, and transport to and from their place of work.
Corporate tax is currently levied at 15%, although there is a further 9% required in ‘social contribution’, and a 10% surcharge on all annual profits in excess of 240,000 reais (approx. £34,500, $45,500, €39,300). This effectively gives Brazil a relatively high corporate tax rate of 34%.
The VAT rate in Brazil is currently between 17% and 20%, and varies from one state to the next. However, 2026 marks the start of the pilot of a new ‘dual VAT’ system, where VAT will be replaced by two separate taxes that will collectively come to 28%. This will gradually be rolled out across Brazil between 2027 and 2033.
Holidays and leave
Paid leave entitlement in Brazil is relatively generous at 30 calendar days per year, accrued at the rate of 2.5 calendar days per month, but holiday cannot be carried over into the following year. This leave can be taken in three blocks, one of which should be at least 14 days long. The other two are required to be a minimum of five days in duration. During their time off, employees should be paid an extra third of their normal salary as vacation bonus, on top of their usual pay; this should be paid to employees in advance.
Brazil has eight national holidays per year, for which employees should receive paid time off. On top of this, there are also a number of other local and traditional holidays (such as the Carnival) that are observed in different parts of the country. In the case of these extra holidays, decisions to grant paid or unpaid leave tend to be at the employer’s discretion.
Maternity leave entitlement is four months, which can be extended to six months if employers are signed up to the Empresa Cidadã scheme. Similarly, paternity leave entitlement is five days (immediately after the birth), and can be extended to 20 days by the same scheme. Social security covers these types of leave at full pay; employers should pay employees and apply for reimbursement from the authorities.
Medically certified sick leave is covered at full pay, for the first 15 days of absence and then by social security thereafter.
Other types of leave include family bereavement (two days, paid), providing essential care for a child under 12 (30 days, paid), caring for an elderly relative (15 days, paid), and when getting married (three days, paid).
Payroll in Brazil: A Summary
As a large and increasingly powerful economy, it’s easy to see why Brazil is such a popular choice for businesses from all over the world. But as this guide demonstrates, there are plenty of major changes in the world of Brazilian payroll and business administration at present, from rising income tax thresholds to a complete overhaul of the VAT system.
To keep track of all the changes and ensure your Brazilian payroll operation is fully compliant, working with a payroll partner with specific Brazilian expertise can make a real difference.
This article is for informational purposes only and not intended to convey or constitute legal or any other advice. It is not a substitute for advice from a qualified professional.