Employment laws and regulations in Brazil are based on the Federal Constitution, which establishes numerous basic rights for employees, and on the Consolidação das Leis do Trabalho or Consolidated Labour Laws (CLT), enacted in 1943. Brazilian employment law is recognized as one of the most protective of employees. Although CLT has been amended significantly and has been complemented by many new laws since 1943, it does not provide the flexibility in labour relations that are needed in a modern economy. As a consequence, Brazilian employment law still retains important limits on employees’ and employers’ freedom to agree the terms of employment or to change or adapt these terms from time to time, depending on the economic situation.
Certain changes in labour conditions and policies can only be made through collective agreements with the involvement of the representative trade union, provided that those agreements are made in accordance with the law.
Labour courts also play a very important role in the interpretation and application of Brazilian employment law. It is important to note that in the majority of cases, the labour courts find in favour of the employee.
Issues arising on hiring individuals
Foreign nationals wanting to work in Brazil must first obtain a valid Brazilian work visa which can either be a permanent visa (less common and more difficult to obtain), or a temporary visa (for up to two years). To obtain a work visa, the employer must apply with the candidate for the work authorisation to be issued by the Brazilian Ministry of Labour (“Ministério do Trabalho e Emprego”) and then the Brazilian Ministry of Justice (“Ministério da Justiça”) will review the application. The main documents and requirements are: (1) a work authorisation request form (authorisation to be issued by the Brazilian Ministry of Labour); (2) employer’s and candidate’s request form; (3) employer’s constitutional documents duly registered; (4) undertaking from the employer to be responsible for any of the candidate’s medical expenses; (5) proof of payment of the applicable fee; (6) addresses where the candidate will work; (7) proof of the candidate’s legal authorisation to practice their career; (8) proof of compatible professional experience (attested by companies where the candidate has worked for a minimum of one year in the same profession, unless the candidate has at least a master’s degree, in a course of over 360 hours’ duration); (9) an employment contract for up to two years (in the case of a temporary visa) or for an unlimited term (in the case of a permanent visa). All documents drafted in a foreign language must be legalised and translated by a sworn public translator.
Employment structuring and documentation
The employment relationship is established by an employment agreement. Although verbal employment agreements are permitted, generally, written employment agreements are entered into, signed by the employer and employee.
Every employee must have an “employment book” (Carteira de Trabalho) in which the employer must register the employment agreement and some of the basic conditions (date, salary, etc.), and other notes.
Fixed-term employment agreements are only permitted when: (1) the nature of the job is temporary; (2) the employer’s activities are temporary; or (3) in the case of “experience contracts”, which are applicable to new employees only. For (1) and (2), the maximum term of the employment agreement cannot exceed two years. “Experience contracts” may be agreed for a maximum term of 90 days. After this, if the employment agreement is not terminated, it will automatically be deemed to be for an indefinite term. The main difference between such agreements is that the cost of termination where there has been no fault by the employee in an employment agreement for an unlimited term is generally higher because of certain rights which are not afforded to employees on fixed-term contracts.
Issues arising during the employment relationship
Wages, annual leave and working time
The national minimum wage, which applies to any employee working in Brazil, is established by a decree of the President of Brazil, usually in January of each year. For 2014, it is BRL 724.00 per month, (approximately USD 310.00, EUR 225.00 or GBP 190.00). The national minimum wage includes a Christmas bonus, payable in two instalments, one by 30 November and the other by 20 December every year, in the amount of up to one month’s salary, depending on the time worked in that calendar year. Therefore, if an employee works from 1 January to 31 December, their Christmas bonus will be one month’s salary. Employees have the right to ask their employer, just before starting their leave period, for 50% of their Christmas bonus (or 50% of their monthly salary), regardless of when their leave starts.
Employers in Brazil must make monthly deposits of 8% of the monthly salary payable to each employee, in a fund managed by the Federal government. Such deposits are called “Fundo de Garantia por Tempo de Serviço” (FGTS) (“Employee Severance Indemnity Fund”). If the employer terminates the employee’s employment, where this is not due to fault by the employee, they are entitled to receive the total amount of the FGTS deposited by their employer on their behalf.
Brazilian employees have the right to 30 consecutive days’ annual leave. Before they take leave, the employer must pay them a vacation bonus of 1/3 of a month’s salary. As a general rule, the maximum working hours are eight hours per day, 44 hours per week and 220 hours per month. For some specific jobs or situations, working hours may be subject to lower legal limits (for example, for jobs that alternate day and night shifts, the limit is 36 hours per week and 180 hours per month).
If an employee works in excess of these limits, they will be entitled to receive a minimum additional payment of 50% of their hourly pay. Collective bargaining agreements usually increase their additional payments to 100% or more of the employee’s hourly pay. Employees are not permitted to work more than two hours per day in excess of the applicable maximum working hours limit.
Tax and social insurance
Brazil has a social security system that grants certain benefits to employees, such as for medical costs, payments for accidents at work or industrial diseases, pregnancy, unemployment insurance, retirement, etc. The social security system is managed by the federal entity, the National Institute of Social Security (INSS).
INSS is funded by contributions made by employers and employees. Employers pay contributions representing 20% of their payroll; employees pay a percentage of their monthly wage, between 8% and 11%, but limited to BRL 482.93 for 2014. Employees’ contributions are deducted from employees’ salaries by the employer. In addition, employers must pay other payroll costs which may exceed 8% of the total payroll, the amount depends on the industry in question.
Issues arising on termination of the employment relationship
Except in limited cases, Brazilian employers may terminate an employment agreement without fault by the employee. In such case, the employee will have the right to receive the balance of their wages, accrued leave paid in lieu, vacation and Christmas bonuses proportionate to their period of employment, FGTS deposits and 40% over the FGTS deposits. The employer must also pay a further 10% of FGTS deposits to the government. In addition to these payments, if the termination is during the first year of employment, the employee is entitled to receive one month’s notice of termination. For each additional year of employment, the employee is entitled to three additional days’ notice, to a maximum of 60 days. Therefore, the total notice period an employee may be entitled to is 90 days. The employer may make a payment in lieu of notice.
Collective agreements may establish additional termination rights for employees in certain professions or economic sectors.