Brazilian Labor Laws – What Companies Need to Know

Brazilian labor law is governed by the Consolidação das Leis do Trabalho (CLT), a federal statute (1943) incorporating constitutional work rights, plus numerous amendments. A sweeping labor reform in 2017 (Lei 13.467/2017) modernized the CLT, and further updates (e.g., Law 14.442/2022) have clarified rules for meal allowances and telework. The federal labor authorities handle enforcement: the Ministry of Labor and Social Security (Ministério do Trabalho e Previdência) supervises compliance (Auditores-Fiscais do Trabalho audit payrolls and deposits) while specialized Labor Courts (Justiça do Trabalho) hear disputes. Employers should note that Brazil’s system is highly protective of workers, and inspectors or judges routinely hold employers to a strict interpretation of CLT requirements. 

The key sources of law are the Federal Constitution, the CLT and its many regulatory amendments, collective bargaining agreements, and related statutes (e.g., the Lei de Migração, which expressly gives migrant workers the same labor rights as Brazilians).

On this blog

1. Mandatory Benefits and Employee Rights 
2. Working Hours and Overtime 
3. Termination and Severance 
4. Remote Work and Cross-Border Employment 
5. Labor Unions and Collective Bargaining 
6. Compliance Risks for Foreign Employers 

Hiring and Contract Models 

Brazilian law recognizes several labor contracts. The standard model is an indefinite-term (permanent) contract under CLT. Employers may also use fixed-term contracts in limited cases (e.g., seasonal work, specific projects) with a statutory maximum of two years. 

Apprenticeships and internships are separate regimes (requiring educational components and distinct rights). Independent contractor arrangements (“PJ”/provision-of-services contracts) are tolerated but heavily scrutinized: if the relationship exhibits employer control and continuity, courts will reclassify the worker as an employee. Companies must therefore follow formal hiring procedures: contract terms should be in Portuguese and must be registered via eSocial; each employee (including foreign nationals) must have a work card (Carteira de Trabalho) recording all terms. The Brazilian Migration Law (Lei 13.445/2017) guarantees that migrant and refugee workers have identical rights to Brazilian employees, and forbids any discrimination based on nationality. Likewise, any Brazilian working abroad on a local contract generally remains covered by CLT protections unless exempted by treaty. 

Typical contract types include: 

• direct employment under CLT,  

• temporary staffing (via licensed agencies, but not for core staff per the 2017 reform),  

• on-demand (intermittent) work, and de facto remote or offshore service agreements.  

In all cases, the employer is obligated to provide the core statutory benefits (see below) and cannot avoid them by labelling a worker as “contractor.” Common foreign-investor pitfalls include misclassifying workers as consultants or failing to follow official pay systems: for example, any English-language or foreign-only employment agreement will have no effect unless fully adapted to Brazilian law.  

Mandatory Benefits and Employee Rights 

Brazilian law mandates numerous benefits in addition to the base salary. Key examples (all per employee unless noted) include: 

• 13th Salary – a mandatory annual bonus equal to one month’s pay. It is constitutionally guaranteed and typically paid for in two installments: one half-salary by November 30 and the balance by December 20 each year. 

• Paid Vacation (after 12 months of service), an employee is entitled to 30 calendar days of paid vacation, with an additional one-third of salary as an “abono” (bonus) on top of the normal pay. Unused vacation days become due as a double payment if not granted on time. 

• FGTS (Fundo de Garantia) – the employer must deposit 8% of each employee’s gross salary monthly into a government-managed severance fund (the worker’s FGTS account). On involuntary termination (dismissal without cause), the employer must also pay a severance penalty of 40% of the total FGTS deposits into that account as an indemnity. (If termination is by mutual agreement, the penalty is reduced to 20%.) These funds are the worker’s assets and can only be withdrawn upon dismissal, illness, house purchase, or other statutory triggers. Enforcement audits by Labor Inspectors increasingly focus on FGTS compliance, and unpaid FGTS contributions carry heavy penalties. 

• Social Security (INSS) – Mandatory contributions to the National Social Security Institute fund pensions, health leave, etc. Employers pay a standard rate (approximately 20% of payroll) plus an extra 1–3% Work Accident Insurance (RAT/SAT), depending on industry risk. Employees themselves contribute on a sliding scale (about 7.5–14% of wages). All INSS withholdings must be remitted monthly via the eSocial system along with other payroll taxes. 

• Other Benefits – These include paid maternity leave (120 days fully paid by INSS), paid sick leave (up to 15 days fully on the employer, longer on INSS), and certain allowances (e.g., a meal or transportation allowance if provided under a collective agreement). There is also a small number of days for paternity leave. 

Each benefit has detailed requirements under the CLT and related laws. For example, salaries must be paid monthly by the 5th business day of the following month; mandated extras like 13th salary and FGTS must be tracked and reported. Violations (e.g., withheld FGTS, unpaid overtime, or vacation pay) generate back-pay liabilities and fines, which Labor Courts enforce strictly. 

Working Hours and Overtime 

Brazil’s standard workweek is up to 44 hours (art. 7, CF/88), typically structured as 8 hours per day from Monday to Friday and 4 hours on Saturday. Overtime is generally limited to 2 extra hours per day and must be paid at no less than 150% of the normal hourly rate; holiday and Sunday work often command 200% pay. Nighttime work (10 pm–5 am) carries a 20% premium, and most workers are entitled to a 1-hour daily lunch break without pay. Flexible scheduling (e.g., “banco de horas” hour-bank systems) is allowed only by collective agreement. 

Employers are required to record working hours. Under CLT Art. 74 (as updated by decree), any establishment with 20 or more employees must maintain a formal time-control system (digital or mechanical clock) for all staff, keeping logs of daily entry, exit, and breaks. (Even firms below that threshold often track attendance via eSocial.) Accurate time records are critical, as any undocumented overtime can be claimed by employees. 

Termination and Severance 

Ending employment in Brazil carries strict formalities and costs. Except in cases of just cause (serious misconduct), employers must provide advance notice or payment in lieu. The minimum is 30 days’ notice; beyond that, the employer must add three additional days of notice for each year of service, up to 90 days in total. In practice, this means an employee with 3 years’ tenure requires 39 days’ notice, or equivalent pay if not worked out.  

The termination must be documented in writing (a “Termo de Rescisão”), and the employer must update the worker’s CTPS book to record the end date. Union involvement is generally not required for individual dismissals (other than certain programs of collective layoff), though employees have the right to Union-assisted termination meetings if they choose. 

On termination without cause, the employer must pay all accrued rights (pro-rated vacation pay with bonus, proportional 13th salary, unsettled wages, etc.) plus a mandatory severance payment equal to 40% of the total FGTS funds accumulated for that worker. The employer must also provide an FGTS withdrawal form, allowing the employee to access the deposited funds immediately. If the termination is by mutual agreement, the FGTS penalty is halved (20%). By contrast, termination for cause relieves the employer of the FGTS penalty; however, the employer still owes the prorated 13th, accrued vacation pay (1/12 for each month worked), and any earned salary up to the dismissal date. Employees in protected categories (pregnancy, union leadership candidacy, certain illness stabilizations, etc.) cannot be fired without cause for the protected period and may gain reinstatement if dismissed improperly. 

Remote Work and Cross-Border Employment 

According to the Gerência Executiva de Relações do Trabalho, Law 14.442/2022 introduced new regulations for teleworking. These include: the authorization of hybrid teleworking; the exemption from monitoring working hours only for teleworking based on production or tasks; the applicability of collective bargaining agreements or work agreements to teleworkers; and the authorization of teleworking for apprentices and people with disabilities. 

What is teleworking? 

• Telework, or remote work, is the provision of services outside the employer's premises, predominantly or not, using information and communication technologies, which, by its nature, does not constitute external work. 

• The telework or remote work regime is not the same as, nor is it equivalent to, the occupation of telemarketing or call center operator. 

Hybrids telework 

• The new law expressly establishes that telework or remote work can be provided predominantly or not. 

• Furthermore, even habitual attendance at the employer's premises to perform specific activities does not disqualify teleworking or remote work arrangements. 

Use of equipment, software, and other resources outside of normal working hours 

• The use of infrastructure, digital equipment, software, digital tools, and internet applications by the employee outside of working hours does not constitute time at the employer's disposal, on-call time, or standby time, unless there is an individual or collective agreement or collective bargaining agreement to that effect. 

Work Schedule 

• In a teleworking arrangement, the employee may provide services on a shift basis, by production, or by task. 
• In the case of a production-based or task-based contract, the chapter of the Consolidation of Labor Laws (CLT) that deals with working hours and provides for the control of working hours will not apply. 

However, for companies with more than twenty employees and where the teleworkers provide services on a shift basis, recording the time of arrival and departure from work is mandatory. The law also addresses points relating to the return to in-person work and teleworking carried out abroad at the worker's choice. 

Labor Unions and Collective Bargaining 

Brazil has a well-established union system organized by industry and region. Unions negotiate Collective Bargaining Agreements (Convenções ou Acordos Coletivos) that typically set minimum wages, annual raise indexes, overtime rates, and other conditions for entire sectors. These agreements are legally binding on all covered employers and employees (even non-union members) once registered.  

Notably, labor reform now allows negotiated terms to override CLT provisions for many subjects. In practice, an employer must check applicable collective deals: many contain provisions such as mandatory meal or transport allowances, limits on working hours, or union-mandated holiday bonuses. Union dues and fees were made voluntary by the 2017 reform, but employees often still pay a one-time “contribuição negocial” or “assistencial” fee if a collective deal provides for it. 

Compliance Risks for Foreign Employers 

In Brazil’s pro-employee legal environment, foreign companies face high compliance risks if they overlook local rules. Common pitfalls include using informal contracts, mislabeling employees as freelancers, failing to register properly on eSocial, or not depositing FGTS. Labor inspectors and courts take a broad view of employment. One Brazilian guide warns that non-compliant employers risk “fines, penalties, and labor lawsuits, invalid contracts, and back payments for unpaid benefits or misclassification. For example, a U.S. tech firm found that its remote software developers in Brazil were entitled to 13th salary and FGTS just like any other employee. 

Enforcement can be aggressive: federal audits will cross-check payroll vs. FGTS deposits, and the fines (plus a 40% penalty on missing FGTS) can exceed the original liability. 

Brazil should implement robust local compliance measures: use Portuguese contracts, run payroll through approved channels, keep meticulous time records, and engage local legal counsel. Understanding that “salary-related contributions (INSS, FGTS, S-System, etc.) must be paid monthly” is key to avoiding surprise liabilities. 

How H&CO Supports Your Expansion into Brazil 

We help multinational companies comply with Brazil’s strict labor, payroll, and regulatory requirements. Our team prepares compliant employment documents, sets up payroll aligned with CLT, FGTS, and INSS rules, and manages all onboarding and reporting through systems like eSocial. 

We also guide companies on remote-work regulations, expatriate compliance, work visas, and tax residency, while providing continuous updates and periodic reviews to minimize risks. Let’s go with H&CO! 

This article is for informational purposes only and does not constitute legal advice, and the information contained herein is subject to change. We recommend consulting with a qualified legal or compliance advisor before making any employment-related decisions.