By Pablo Mourente, Lawyer and Head of International Business at David & Athayde Advogados.<\/p>\n
It is\u202fquite\u202fa common-sense\u00a0opinion, at least for Brazilians or\u202fpeople who\u202falready know the Brazilian market, that the employment costs in Brazil are very high.\u00a0And\u00a0the reason is not only related to the employment taxes, but also\u00a0explained by\u00a0the various workers\u2019 rights granted by\u00a0the\u00a0Brazilian legislation, such as 30 calendar days of paid vacation leave per every year of contract and the extra month salary per year that all employees\u202fare entitled\u202fto (the so-called 13th\u202fsalary).<\/p>\n
This way, it is important to explain to the multinational companies that have employees in Brazil what is a myth and what is true\u202fabout\u202fthis, and to what extent.<\/p>\n
First of all, we need to explain that by \u201cemployment costs\u201d we mean every penny the employers pay on top of the payroll that is\u00a0neither\u00a0salary\u00a0nor compensation, that is to say, we are talking about \u201chidden costs\u201d that can increase (by much, in the Brazilian case) the\u202fpersonnel\u202fcosts.<\/p>\n
So what are exactly these costs in the Brazilian case?<\/p>\n
As we already mentioned,\u00a0such costs\u202fare represented\u202fby both payroll taxes and workers\u2019 rights.<\/p>\n
Payroll taxes in Brazil\u202fcomprise:\u202fa)<\/b>\u202fSocial Security Taxes (which finances the pensions plans and other social security benefits);\u202fb)<\/b>\u202fOther social contributions (which fund several social entities that mainly\u202foffer\u202fprofessional education\u00a0at subsidized rates); and\u202fc)<\/b>\u202fAdditional Termination Tax (FGTS\u2019 additional fine).<\/p>\n
When it comes to workers\u2019 rights, Brazil has a very extensive labour legislation, which\u00a0was designed to\u00a0grant a high level of protection for the employees, but at the same time\u00a0increases\u00a0the employment costs\u00a0a lot. It undoubtedly produces an impact on the jobs creation, although it\u202fmay not be\u202fthe main reason of the current high unemployment rate.<\/p>\n
There are also\u202fextra\u202frights that some categories of employees can have, granted by collective agreements or at some enterprises\u2019 own policies, but at this time we will only refer to the general rights that\u202fare granted\u202fby the legislation to any sort of employee.\u00a0So here they are:\u202fa)<\/b>\u202fPaid Vacation Leave of 30 days per year (which payment\u202fis added\u202fby an extra bonus of 1\/3 of salary, so the employee gets 4\/3 of a month salary for his annual leave);\u202fb)<\/b>\u202fAn extra month salary per year (the \u201c13th\u202fsalary\u201d);\u202fc)<\/b>\u202fFGTS\u202f(A compulsory severance pay fund financed by the employer amounting\u00a0to\u00a08% of the\u00a0monthly\u00a0employee compensation);\u202fd)<\/b>\u202fNotice of termination (minimum\u202fof 30 days);\u202fe)<\/b>\u202fTermination\u202fFGTS\u202fcompensation fine.<\/p>\n
In addition to that, there is also the ripple effect caused by the taxation of some of the mentioned workers\u2019 rights (like the social security taxes, which\u00a0are also levied\u00a0on the vacation leave payment and on the 13th\u202fsalary,\u202ffor example).<\/p>\n
Therefore, we could summarize the employment costs in Brazil as follows:<\/p>\n