The Main Challenges Faced by Foreign Companies in Brazil

Understanding Employment Practices

One of the main challenges for international entrepreneurs is understanding labor conditions and their legal implications in Brazil, where there is strong protection for employees—especially in labor courts. Aiming to boost job creation and attract foreign investment, Law No. 13.467 introduced major reforms to labor legislation in 2017, modernizing the Consolidation of Labor Laws (CLT).

The flexibility of employee rights guaranteed to workers through individual negotiations, as well as outsourcing in all company activities, regardless of the sector or the nature of the contract, are among the topics included in the text.

Employee Rights

In Brazil, employees are entitled to:

• A minimum wage with annual adjustments;
• A work schedule of 8 hours per day and 44 hours per week, with 50% extra pay for overtime;
• An 8% deposit of the employee’s salary into the FGTS (Severance Indemnity Fund);
• A 13th salary, 30 days of paid vacation with an additional one-third bonus, and a weekly paid rest day;
• Additional compensation for night shifts, hazardous work, unhealthy conditions, or job transfers;
• Profit-sharing (PLR), transportation vouchers, and mandatory time tracking for companies with over 20 employees.

Types of Employment Contracts

Most employment contracts are for an indefinite term and may be in-person, hybrid, or remote. Outsourcing is also permitted, through which a third-party company becomes responsible for recruiting, supervising, and paying the workforce.

Termination of Employment Contracts

Employment contracts may be terminated in several ways, including unfair dismissal, mutual agreement, or for cause.

By way of example, in the event of an unfair dismissal by the employer, the employee is entitled to receive additional benefits such as a 40% penalty on the FGTS (Severance Indemnity Fund) balance, payment in lieu of or performance of prior notice, proportional 13th salary, unused vacation, and unemployment insurance.

Employee Guarantees

In Brazil, some employees are legally protected from dismissal without just cause. This applies in cases such as work-related accidents, pregnancy, elected union representatives, and members of internal accident prevention commissions.

Labor Unions

Brazil’s union system is robust, and collective agreements often prevail over statutory law in many areas. The 2017 labor reform abolished mandatory union contributions and strengthened collective bargaining.

Right to Strike

Workers have the right to strike; however, the employer must be notified at least 48 hours in advance. In the case of essential services or activities, the notice period is extended to 72 hours. If the conflict that led to the strike persists and no agreement is reached, the Labor Judiciary may be called upon to intervene, including declaring the strike abusive and ordering employees to return to work under penalty of a daily fine.

Social Security

Social security in Brazil is based on a contributory system, with payments made by both the employee and the employer. Under the current system, companies are required to contribute monthly to social security in the amount of 20% of the total remuneration paid to employees, with no maximum limit established.

In addition to this, employers must contribute an extra 1%, 2%, or 3% of the employee’s remuneration to cover work accident insurance, currently referred to as GILRAT (Degree of Occupational Disability Due to Environmental Work Risks).

Companies are also responsible for an additional contribution of 6%, 9%, or 12% on the remuneration of employees working under conditions that may impact their health or physical integrity. This contribution is intended to fund early retirement benefits, which may be granted after 25, 20, or 15 years of contributions, respectively.

Social Costs

Hiring costs are significantly impacted by social charges on payroll, which fund public services and programs such as education, healthcare, and social assistance.

Investing in Brazil can be a great opportunity to expand your business into an emerging and dynamic market. Understanding employment conditions and labor rights is essential for ensuring compliance and running a successful operation.

Vaz de Almeida has the expertise and experience to support foreign companies in structuring employment relationships within legal parameters, offering specialized legal advice at every stage of the process.

Useful Links

• Full Version of the CLT (Consolidation of Labor Laws)
  • https://bd.camara.leg.br/bd/items/198fbacb-963e-496d-8224-e3dead2eb8a6
• Brazilian Constitution (English Version)
  • https://www2.senado.leg.br/bdsf/bitstream/handle/id/243334/Constitution_2013.pdf?sequence=11&isAllowed=y
• Brazilian Ministry of Labor and Employment (English Version)
  • https://www.gov.br/trabalho-e-emprego/en
• Brazil: New Law Reforms Labor Relations | Library of Congress (USA)
  • https://www.loc.gov/item/global-legal-monitor/2017-07-20/brazil-new-law-reforms-labor-relations/
• Labor Law Glossary – Key Legal Terms in English
  • https://www.jusbrasil.com.br/artigos/direito-do-trabalho-na-lingua-inglesa-glossario-de-termos-juridicos-recorrentes/490740927

About the Authors

Julhi Bonespírito

Julhi is a partner and head of the Dispute Prevention and Resolution Practice, which also includes Labor Relations and Global Mobility. She holds postgraduate degrees in Civil Procedure and Administrative Law and has experience working at law firms in São Paulo and Curitiba. Her team assists other practice areas of the firm with alternative dispute resolution or, when necessary, litigation through the judicial system.

Graziela Barreto

Graziela is a senior associate in the Labor Relations Practice, advising domestic and international companies on how to establish compliant employment relationships with their workforce.