Can employment agreements be backdated in Brazil?
This is not possible. In Brazil, the general rule is to insert admission into the government system two days before the hiring start date. This date cannot be changed. Payroll is typically closed between the 8th and 10th of each month at Velocity Global, so we have until the deadline to inform all hires for that month.
Can a supported employee work before their start date?
This is not possible. The starting date of the employee cannot be changed for any legal purpose, meaning that they can only start working on the agreed date.
Can we pay the salary in a different currency than the local currency?
Wages must be paid in the national currency of Brazil (BRL). Salaries cannot be paid in USD or other currencies.
Should we classify our talent as a contractor or an employee?
Consolidação das Leis do Trabalho / Consolidation of Labor Laws Decree (CLT) and Formal Employment Contracts
In simple terms, classification status comes down to whether the individual is in business for themselves or under your company's control. If the individual is under your control, it is safer to classify them as an employee rather than a contractor.
Below are the main differences between employees and contractors in Brazil.
Employees are regulated by the Consolidation of Labor Laws (CLT). Employees:
- Use their individual fiscal code to collect taxes and social contributions. They do not operate under a legal entity or have their own tax entrepreneur code.
- Sign employment contracts.
- Submit to employer requirements such as working exclusively for the company, meeting working hours, respecting company policies, respecting noncompete agreements, etc.
- Receive a salary.
Contractors, known as pejotizados or PJs in Brazil, generally:
- Have and use their own tax entrepreneur number rather than an individual fiscal code.
- Work on projects with a set end date.
- Dictate their own rules about the format of work, including the methods, times, and places for carrying out the work.
- Provide services to multiple organizations or customers.
Employers that hire PJs to work full time put themselves at risk of pejotization, which refers to illegally classifying a worker as a contractor rather than an employee. This is considered fraud and means the employer must retroactively provide taxes, social contributions, vacation time, 13th month salary, vacation bonuses, and more. The employer may also face a fine in court.
Because of the risks associated with pejotization, it is important that you carefully determine your talent classification status. For more questions on talent classification status in Brazil, please reach out to Velocity Global through your normal process, and we will help you.