Employer of Record Brazil | EOR Services

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An Employer of Record (EOR) in Brazil acts as the official employer for workers, often referred to as a Global Professional Employer Organization (Global PEO). This role encompasses a broad range of employment functions, ensuring full compliance with local labor laws and regulations, managing payroll, administering taxes, providing legally required benefits, and handling employment contracts.

Key Responsibilities of an Employer of Record (EOR) in Brazil:

Ensuring employment terms are fully compliant with Brazilian labor laws under the CLT.
Overseeing and processing local payroll in Brazilian Real (BRL).
Managing the filing of employment-related taxes, INSS, and FGTS contributions through eSocial.
Issuing compliant payslips (holerite) to employees.
Disbursing salary payments, including the mandatory 13th-month salary, in accordance with Brazilian standards.

With our Employer of Record (EOR) services, expanding your business into Brazil becomes easier and more efficient. Our solution eliminates the need for setting up a local entity, providing a seamless path to establish a legal presence in Brazil. We ensure full legal compliance, manage payroll, protect your intellectual property, and handle work permits, so you can focus on growing your business and building your workforce in Latin America’s largest economy.

Things you need to know before hiring in Brazil

Employment Contracts in Brazil

Brazilian labor relations are governed by the CLT (Consolidação das Leis do Trabalho). An indefinite-term contract is the default and standard form of employment, while fixed-term and other special contract types are exceptions permitted only in specific circumstances.

Indefinite-Term Contracts

The standard, presumed form of employment in Brazil. Every new hire must be registered in eSocial, the government’s unified digital platform for payroll, FGTS, INSS, and tax reporting, generally before the employee’s first day.

Fixed-Term Contracts

Permitted only for transitory services, temporary business activity, or probationary arrangements, for a maximum of 2 years.

Probationary Contract (Contrato de Experiência)

Limited to a maximum of 90 days total, which can be structured as a single period or split into two (for example, 45+45 days). If the employee continues working past day 90 without a formal extension, the contract automatically converts to indefinite-term.

Intermittent Work Contracts

Introduced by the 2017 labor reform, this allows on-call, sporadic work where the employee is paid only for hours actually worked, with a minimum 3 calendar days’ advance call notice. It remains a formal CLT employment relationship, with FGTS and INSS applying proportionally.

FGTS (Fundo de Garantia do Tempo de Serviço)

Employers must deposit 8% of an employee’s monthly gross salary into an individual FGTS savings account held at Caixa Econômica Federal, on top of the employee’s salary. The balance is withdrawable on dismissal without cause, retirement, serious illness, or certain other qualifying events.

Working Hours

The standard legal working week in Brazil is 44 hours, structured as 8 hours per day. Overtime is capped at 2 extra hours per day.

13th Month Salary & Vacation Bonus

Brazil requires a mandatory 13th-month salary (décimo terceiro), equal to 1/12 of the employee’s annual salary per month worked. It is generally paid in two instalments: the first (up to 50% of the prior year’s salary) by 30 November, and the second, subject to INSS and income tax withholding, by 20 December.
A further constitutional guarantee requires an additional 1/3 vacation bonus (terço constitucional de férias) to be paid alongside annual vacation pay, at least 2 days before leave begins.

Key Points on Overtime & Hours Banking

Overtime Premium

Overtime is paid at a minimum 50% premium above the normal hourly rate on weekdays, commonly rising to 100% for work on Sundays or public holidays.

Night Work Differential

Night work carries a minimum 20% premium above the day-hour rate.

Banco de Horas (Hours Bank)

An individual written agreement can authorize hours banking, with compensatory time off required within 6 months; a collective bargaining agreement can extend this to 12 months. Uncompensated hours after that period must still be paid with the overtime surcharge.

Termination and Severance Pay

Termination in Brazil involves several mandatory components: notice of termination (aviso prévio), FGTS-related payments, and proportional 13th-salary and vacation payments.

Notice of Termination (Aviso Prévio)

The base notice period is 30 days, increasing by 3 additional days for each year of service, up to a maximum of 90 days. This notice benefits the employee only — if the employee resigns, only the base 30 days can be required regardless of tenure.

Severance for Dismissal Without Cause

An employee dismissed without cause is generally entitled to: any outstanding balance of days worked, proportional 13th salary, proportional vacation pay plus the 1/3 bonus, the full FGTS account balance, and a 40% employer-paid penalty calculated on the accumulated FGTS balance.

“Acordo” Mutual-Agreement Termination

Introduced by the 2017 labor reform, this route allows employer and employee to terminate by mutual agreement: the notice period is halved, the FGTS penalty is reduced to 20%, and the employee may withdraw up to 80% of the FGTS balance — though unemployment insurance eligibility is not available under this route.

Rescission Process

Union homologation of the termination is no longer mandatory nationally following the 2017 labor reform, unless the applicable collective bargaining agreement still requires it. Employers generally have 10 business days from termination to pay all amounts owed and deliver the required termination documentation.

Employees vs Independent Contractors (Pejotização)

Engaging a worker who functions as an employee through their own registered company (pessoa jurídica, or “PJ”) instead of a CLT employment contract — known as “pejotização” — is a long-standing and currently very active legal risk area in Brazil. Labor courts have historically reclassified such arrangements as disguised employment where subordination, personal service, non-eventuality, and pay-for-work are present.

This is an unusually active and unresolved area right now. In April 2025, Brazil’s Federal Supreme Court (STF) suspended all labor lawsuits nationwide discussing the legality of contractor/PJ arrangements pending a final ruling (Theme 1,389). That nationwide stay was lifted in June 2026, allowing cases to resume in lower labor courts, but the Supreme Court’s final merits ruling on the legality of PJ contracting models is still pending as of this writing. Companies using PJ arrangements in Brazil continue to face meaningful reclassification risk until a final ruling is issued.

Comparison Table: Employee vs Independent Contractor (PJ)

Factor	Employee (CLT)	Independent Contractor (PJ)
Governing Law	CLT (Consolidação das Leis do Trabalho)	Civil/commercial contract between two legal entities
Control & Subordination	Works under the employer’s direction, schedule, and supervision	Should control own working hours and methods
Registration	Registered by the employer in eSocial	Operates through its own registered company (PJ)
Payment Structure	Fixed monthly salary plus mandatory 13th salary	Paid per invoice, project, or retainer
Statutory Benefits	Entitled to paid leave, 13th salary, FGTS, and INSS coverage	No statutory employment benefits
Misclassification Risk	Not applicable	High and currently unsettled — subject to a pending Supreme Court ruling on the legality of PJ contracting (STF Theme 1,389)

Given this unresolved legal uncertainty, engaging talent in Brazil through compliant CLT employment via an EOR is a materially lower-risk path than structuring what is functionally an employment relationship as a PJ contractor arrangement.

Social Security and Payroll Charges in Brazil

Brazilian payroll involves several mandatory contributions layered on top of gross salary, funding social security (INSS), the FGTS savings fund, and work-accident insurance.

Contribution	Who Pays	Rate
INSS (Social Security)	Employee	Progressive: 7.5%, 9%, 12%, 14%, up to a monthly contribution ceiling of approximately R$8,475.55
INSS Patronal (Employer Social Security)	Employer	20% of gross payroll, uncapped (subject to variation under the Simples Nacional tax regime)
FGTS	Employer	8% of gross monthly salary
RAT / Work Accident Insurance	Employer	1% to 3% depending on risk classification, adjusted by the FAP multiplier (approximately 0.5% to 6% effective)
Sistema S / Third-Party Contributions	Employer	Approximately 5.8% – 6%, varies by sector

Employers registered under the Simples Nacional simplified tax regime should note that companies in Annexes I, II, III, and V already have employer INSS bundled into their single DAS tax payment; only Annex IV (certain labor-intensive services) pays employer INSS separately at 20% on top of the DAS. Mercans confirms the applicable regime for each specific engagement.

Payroll in Brazil

Minimum Wages

Brazil’s national minimum wage is R$1,621 per month, effective 1 January 2026. Several states — including São Paulo, Paraná, Rio Grande do Sul, Santa Catarina, and Rio de Janeiro — set their own higher regional minimum wage floors for private-sector workers; Mercans confirms the applicable floor for each engagement’s location.

Payroll Cycle

Salaries in Brazil are paid monthly in Brazilian Real (BRL), generally by the 5th business day of the following month. Employers must provide an itemized payslip (holerite) showing gross salary, all statutory deductions, and net pay.

Overtime Pay

Overtime pay is provided when an employee works beyond the standard 44-hour week, capped at 2 extra hours per day.

Overtime Rate

Overtime on weekdays is paid at a minimum 50% premium above the normal hourly rate, commonly rising to 100% for work on Sundays or public holidays.

Night Work Rate

Night work carries a minimum 20% premium above the day-hour rate.

Overtime rules can vary depending on the applicable collective bargaining agreement (CCT).

Mercans’ payroll capabilities

Payroll Cycle Management in Brazil

Mercans delivers efficient, seamless payroll cycle management tailored to Brazilian requirements, including the mandatory 13th salary instalments and FGTS deposits. We ensure that both employees and contractors are paid accurately and on time, in Brazilian Real, providing a smooth and compliant payroll experience aligned with Brazilian standards.

Payroll Setup, Processing, and Administration

Mercans offers a complete range of payroll services from start to finish. Whether it’s setting up your payroll system, processing payments, or managing ongoing administration, we take care of every detail, ensuring accuracy, compliance, and efficiency so you can focus on running your business.

Statutory Filings and Payments

Navigating Brazil’s complex regulatory framework — including eSocial reporting, INSS, and FGTS — can be challenging, but with Mercans, you’re in safe hands. We manage all statutory filings and payments, ensuring your business remains fully compliant with Brazilian tax laws and employment regulations.

Personal Income Tax in Brazil

Personal income tax in Brazil (IRPF) is progressive, and was significantly reformed effective 1 January 2026 under Lei 15.270/2025.

Income Tax Rates in Brazil

Monthly Taxable Income	Treatment
Up to R$5,000	Effectively exempt under the 2026 reduction mechanism
R$5,000.01 – R$7,350	Partial, gradually tapering reduction applies
Above R$7,350	Standard progressive brackets of 7.5%, 15%, 22.5%, and 27.5% apply

The 2026 reform also introduced a new minimum income tax (IRPFM) for individuals with annual income above R$600,000, reaching a guaranteed minimum effective rate of 10% above R$1,200,000 per year, and reinstated taxation on dividends paid to individuals. This reform is estimated to remove millions of lower-income taxpayers from the tax rolls while introducing a new minimum tax for very high earners.

Brazil Employee Hiring Cost

Brazil’s mandatory statutory contributions and CLT-required provisions (13th salary, vacation plus the 1/3 bonus, FGTS, and other benefits) mean the fully-loaded employer cost is meaningfully higher than gross salary alone — commonly estimated in the range of approximately 70% to 90% of gross salary in additional mandatory cost, before any optional benefits.

Salary Details	Amount (BRL)
Gross Monthly Salary	10,000
Employer INSS (20%)	2,000
FGTS (8%)	800
RAT, Sistema S & Mandatory Provisions (13th salary, vacation + 1/3 bonus, estimated ~35–45%)	~3,500 – 4,500
Estimated Total Monthly Cost	~16,300 – 17,300

Employee Benefits in Brazil

Brazilian employees are entitled to a robust set of mandatory statutory benefits under the CLT, alongside increasingly common supplementary benefits.

Annual Leave: 30 calendar days per year after 12 months of service, reduced on a sliding scale if unjustified absences exceed certain thresholds during the acquisition period.
Public Holidays: Brazil observes around 12 fixed national holidays each year, including New Year’s Day, Tiradentes Day, Labour Day, Independence Day, and Republic Day, with some municipal and state holidays adding further non-working days locally.
Sick Leave: The employer pays the first 15 days of sick leave in full; from day 16 onward, the benefit is paid by INSS.
Maternity Leave: 120 days paid, extendable to 180 days under the voluntary “Empresa Cidadã” program.
Paternity Leave: 5 consecutive days standard, extendable to 20 days under the Empresa Cidadã program.

13th Salary & Vacation Bonus: A mandatory 13th-month payment plus an additional 1/3 vacation bonus, both described above.
FGTS: An 8% employer contribution into a personal savings account for each employee, described above.
Meal & Transport Vouchers (Vale-Refeição / Vale-Transporte): Widely provided benefits, mandatory in many collective bargaining agreements even where not required by federal law.
Supplementary Health Insurance: Common in professional and corporate roles, often provided alongside the mandatory public healthcare system.

Workplace Wellness Programs: Companies are enhancing the workplace experience with wellness initiatives, including mental health support.
Flexible Work Options: Employers are increasingly offering flexible or hybrid working arrangements where operationally feasible.
Team-Building Activities: Employers are introducing more team-building and employee engagement activities.
Discount Programs: Some companies offer group discounts on shopping, travel, and leisure activities.

Essential Benefits for Employees in Brazil

Annual Leave: 30 calendar days per year after 12 months of service, reduced on a sliding scale if unjustified absences exceed certain thresholds during the acquisition period.
Public Holidays: Brazil observes around 12 fixed national holidays each year, including New Year’s Day, Tiradentes Day, Labour Day, Independence Day, and Republic Day, with some municipal and state holidays adding further non-working days locally.
Sick Leave: The employer pays the first 15 days of sick leave in full; from day 16 onward, the benefit is paid by INSS.
Maternity Leave: 120 days paid, extendable to 180 days under the voluntary “Empresa Cidadã” program.
Paternity Leave: 5 consecutive days standard, extendable to 20 days under the Empresa Cidadã program.

Additional Employee Benefits

13th Salary & Vacation Bonus: A mandatory 13th-month payment plus an additional 1/3 vacation bonus, both described above.
FGTS: An 8% employer contribution into a personal savings account for each employee, described above.
Meal & Transport Vouchers (Vale-Refeição / Vale-Transporte): Widely provided benefits, mandatory in many collective bargaining agreements even where not required by federal law.
Supplementary Health Insurance: Common in professional and corporate roles, often provided alongside the mandatory public healthcare system.

Perks & Wellness Initiatives

Workplace Wellness Programs: Companies are enhancing the workplace experience with wellness initiatives, including mental health support.
Flexible Work Options: Employers are increasingly offering flexible or hybrid working arrangements where operationally feasible.
Team-Building Activities: Employers are introducing more team-building and employee engagement activities.
Discount Programs: Some companies offer group discounts on shopping, travel, and leisure activities.

Work Permit in Brazil

Foreign nationals generally need a work visa to be legally employed in Brazil, most commonly the VITEM V temporary work visa.

Primary Steps for Foreign Worker Authorization

Employer-Sponsored Work Authorization

The Brazilian employer must obtain work/residence authorization from the relevant federal authority, generally justifying the hire and confirming the role and qualifications required.

Consular Visa Application

The employee then applies for the visa stamp at a Brazilian consulate abroad.

Federal Police Registration

Upon arrival in Brazil, the foreign employee must register with the Federal Police to obtain their resident identification.

Permit Validity

Temporary residence under a VITEM V visa is generally valid for up to 2 years and renewable; holders may apply for permanent residency after approximately 2 years with the same employer.

Important Considerations for Employers

Employer Sponsorship

A registered legal entity in Brazil is required to sponsor a foreign employee’s work authorization — an EOR partner such as Mercans allows companies without a local entity to still hire and sponsor talent compliantly.

Mercosur Nationals

Nationals of Mercosur member and associated states benefit from a simplified residency route under the Mercosur Residence Agreement, generally bypassing the standard work-visa sponsorship process.
Understanding these pathways can streamline the hiring process, allowing employers to bring skilled talent into their Brazil-based operations effectively.

EOR Solutions in Brazil

EOR Solutions for Prospective Employees in Brazil

Mercans provides efficient Employer of Record (EOR) services for businesses that have already identified their ideal candidates in Brazil. Our comprehensive services cover the entire employee lifecycle, ensuring full compliance with Brazilian labor laws, tax regulations, and employment standards, so you can focus on your business growth without the administrative burden.

EOR + Recruitment: Streamlined Talent Acquisition

For businesses seeking assistance with talent acquisition, our EOR and recruitment solutions offer a complete, end-to-end service, helping you find, hire, and retain top talent in Brazil while ensuring all recruitment and compliance requirements are met.

Visa Sponsorship and Global Mobility Solutions

Navigating the complexities of expatriate employment becomes straightforward with our visa sponsorship and global mobility services. Mercans ensures a smooth relocation process for your international workforce, handling all aspects of Brazilian immigration and employment laws to guarantee compliance.

AOR Services for Contractor Payments

For businesses managing contractor payments in Brazil, Mercans offers Agent of Record (AOR) services, handling the complexities of PJ and independent contractor payments to ensure accurate, timely, and fully compliant payments while managing pejotização misclassification risk.

Converting Freelancers to Employees in Brazil

Mercans supports businesses transitioning freelancers and PJ contractors to full-time CLT employees in Brazil, ensuring a smooth, legally compliant conversion process.

HCM Integration for Enhanced Workforce Management

Integrate Mercans’ EOR services with your Human Capital Management (HCM) system for a unified, real-time approach to data exchange, compliance tracking, and payroll management in Brazil.

Best Employer of Record Brazil

Mercans stands out as a leading Employer of Record (EOR) provider in Brazil for several key reasons:

Full Compliance with Brazilian Labor Laws: Mercans ensures strict compliance with the CLT and Brazil’s evolving eSocial, tax, and social security requirements, keeping your business aligned with local labor law and protecting you from potential legal risk, including the unresolved pejotização/contractor classification landscape.
Independent Operations: As a fully independent entity, Mercans operates without external affiliations, delivering reliable, customized employment services tailored to your business requirements in Brazil.
Supports All Employment Types: Whether you’re hiring employees, contractors, or expatriates, Mercans offers flexible solutions across a variety of workforce models.
Designed for Large Enterprises: Our scalable solutions meet the demands of enterprise-level organizations, integrating with your broader global business goals.
Multi-Currency Payroll Management: Mercans handles multi-currency payroll, simplifying salary management across multiple countries alongside Brazil.
Global Network and Multi-Country Payroll Expertise: With a robust global presence, Mercans manages multi-country payroll seamlessly across Latin America and beyond, handling local tax regulations and compliance requirements wherever your teams are based.
Certified Data Protection and Security Standards: Mercans adheres to stringent data protection protocols, including GDPR alignment and SOC 1 & SOC 2 compliance.
ISO-Certified Service Quality and Security: Mercans holds ISO 20000 and ISO 27001 certifications, reflecting our commitment to excellence in IT service management and information security.
OWASP ASVS 3.0 Compliant: We adhere to OWASP ASVS 3.0 standards, protecting your business through secure software development and management practices.
Mercans HRBlizz: Our proprietary global payroll and talent management SaaS platform simplifies payroll while ensuring full compliance with local labor laws in Brazil, backed by a team of in-country specialists.
G2N Nova: Our advanced gross-to-net payroll engine, available in over 100 countries, integrates with major HCM and Workforce Management systems for a unified global payroll process.

Conclusion

Mercans provides comprehensive Employer of Record (EOR) services in Brazil, ensuring accuracy, compliance, and efficiency in managing your workforce amid a complex and actively evolving regulatory environment. Our end-to-end solutions simplify payroll and employment processes, making us a trusted partner for businesses navigating the complexities of the Brazilian labor market. With Mercans by your side, your expansion into Brazil will be smooth, compliant, and successful, allowing you to focus on growing your business with confidence.

This document was prepared for informational purposes only. As local laws & regulations keeps on changing. Please consult your tax & legal advisors as well.

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FAQs

What is an Employer of Record (EOR) in Brazil?

An Employer of Record (EOR) in Brazil is a third-party organization that legally employs workers on behalf of another company under the CLT, handling payroll, INSS and FGTS contributions, eSocial reporting, employment contracts, and compliance with Brazilian labor law, so the client company does not need to set up its own local entity.

Can a foreign company hire employees in Brazil without a local entity?

Yes. By partnering with an EOR such as Mercans, a foreign company can hire employees in Brazil without registering a local branch or subsidiary. The EOR acts as the legal employer of record while the client company directs the employee’s day-to-day work.

Is it safe to hire workers in Brazil as independent contractors (PJ) instead of employees?

This carries meaningful legal risk. Brazil’s Federal Supreme Court is currently reviewing the legality of PJ contractor arrangements (Theme 1,389), and a final ruling is still pending as of 2026. Labor courts have historically reclassified PJ arrangements as disguised employment where subordination and personal service are present. Genuine CLT employment through an EOR is a materially lower-risk path.

What compliance, payroll, and HR services does an EOR manage in Brazil?

An EOR manages drafting and executing compliant employment contracts, monthly payroll processing in Brazilian Real, INSS and FGTS contributions, the mandatory 13th salary and vacation bonus, eSocial reporting, statutory leave and benefits administration, and lawful termination procedures including severance calculations.

How much does an EOR service cost in Brazil?

EOR pricing varies by provider and the scope of services required, and is typically charged as a flat monthly fee per employee or a percentage of payroll. Contact Mercans for a tailored quote based on your specific hiring needs in Brazil.

Is EOR suitable for expanding into Brazil?

Yes. EOR is well suited to companies testing the Brazilian market, hiring a small number of employees, or needing to move quickly without the time and cost of incorporating a local entity, while remaining fully compliant with Brazil’s complex labor and tax law.

Employer of Record (EOR) Brazil