What US businesses employing in Brazil should expect from the CLT

US businesses employing in Brazil usually hire under the Consolidação das Leis do Trabalho (CLT, the federal labour code) because Brazilian law treats anyone who works personally, regularly, for pay and under direction as an employee. CLT art. 3 sets out that test, and it applies regardless of where the paying company is incorporated.

The commercial reasons for looking south are familiar to most US hiring managers. Brazilian working hours overlap well with the US business day, the country has a deep pool of engineers, designers, analysts and customer-facing staff, and many candidates already work in English with North American teams. Those advantages hold up only if the employment side is set up properly from the first payslip.

Three routes are realistic for a US company. It can open its own Brazilian company and register as an employer; it can engage people as contractors through their own companies; or it can let an employer of record in Brazil hold the employment contract for it. Each route carries different cost, time and risk, and the sections below compare them with the US rules your finance and HR teams already know.

One practical point shapes every route: Brazil registers employment centrally. The hire must be recorded on the digital carteira de trabalho (CTPS, work record) within 5 business days under CLT art. 29, which in practice means an eSocial admission event before the first working day. There is no informal grace period for a new starter.

Brazil has no equivalent of US at-will employment in the sense of ending a job without a statutory payment. An employer can dismiss sem justa causa (without cause), but it must then pay notice and a fine on the employee’s severance fund.

Across most of the US, a job can be ended for any lawful reason, subject to contracts, anti-discrimination law and state rules, and there is usually no federal severance entitlement. In Brazil, aviso prévio (notice) is 30 days to start with, and 3 days are added for every completed year of service, up to 90 days in total (Lei 12.506/2011). On top of that, the employer deposits a fine equal to 40% of the FGTS money paid in over the life of the contract (Lei 8.036/1990, art. 18).

The final settlement, known as the verbas rescisórias, has to be paid within 10 days of the termination date (CLT art. 477). It includes the balance of salary, a proportional 13º salário, accrued and proportional holiday with its one-third bonus, and notice. Claims can follow for up to 2 years after departure and can reach back over 5 years of the job, a limit set by the Federal Constitution (art. 7, XXIX).

For a US team that is used to letting someone go on a Friday with a few weeks’ pay as goodwill, this changes how exits are planned and budgeted. Our comparison of at-will and CLT dismissal rules sets out the costs step by step.

Brazilian employer charges are several times higher than US payroll taxes as a share of pay, and they carry no ceiling. In our São Paulo worked example they add 35.8% to every payment an employee receives.

On the US side, the IRS sets the employer share of social security at 6.2% on wages up to a 2026 wage base of USD 184,500, and the employer share of Medicare at 1.45% with no cap (IRS Topic 751). Federal unemployment tax and state unemployment insurance come on top, but for most salaried staff the federal payroll bill sits around 7.65% until the wage base is reached.

The Brazilian side of our example is a business taxed on lucro real or lucro presumido and classified as FPAS 515. The charges are employer INSS at 20% with no ceiling (Lei 8.212/1991 art. 22), a work-accident contribution (RAT) of 2%, terceiros levies of 5.8% and FGTS deposits of 8% (Lei 8.036/1990 art. 15). RAT can be 1%, 2% or 3% depending on the risk of the employer’s main activity, so the total moves a little from one employer to another.

For a salary of R$ 15.000,00 a month, those charges come to R$ 71.600,00 a year. They are levied on the twelve monthly salaries and also on the two statutory extras, which takes the yearly bill for the employer to R$ 271.600,00. Converted at the European Central Bank rate published on 24 September 2026, that is close to USD 52,424. The line-by-line comparison is in our article on US vs Brazil employer charges.

The two items US budgets most often miss are the 13th-month payment (13º salário) and the extra third paid on holiday, which together turn twelve monthly salaries into about 13⅓ salaries a year. Neither is optional and neither can be folded into a higher monthly rate.

The 13º salário is a statutory extra month of pay; for an employee who works the full year it equals one month’s salary. Annual leave, férias, is earned at 30 calendar days per 12 months of service under CLT art. 130, and art. 7, XVII of the Constitution tops up the holiday pay by a third. Both payments attract the full employer charges in our worked example.

Other items depend on the employee or the sector:

• Vale-transporte. An employee may ask for a transport voucher; the employer then covers whatever commuting costs exceed 6% of basic salary (Lei 7.418/1985).
• Meal or food vouchers. No statute makes them compulsory, although the sector’s collective agreement, the convenção coletiva de trabalho (CCT), frequently does.
• Health plan and profit sharing. These are commonly set by the CCT or expected by candidates, and they sit outside the 35.8%.

Pay dates are also fixed. CLT art. 459 sets payday at the latest on the fifth working day after each month closes, and INSS and FGTS are due on the 20th. A US company used to semi-monthly payroll should expect a single monthly cycle with these hard deadlines.

A US company can sign service agreements with Brazilian professionals, but if the relationship looks like employment under CLT art. 3, a labour court can treat it as employment. The label on the contract does not settle the question.

In the US, worker classification turns on tests set by the IRS, the Department of Labor and individual states. In Brazil the equivalent risk has its own name, pejotização: paying someone through their pessoa jurídica (PJ, a personal company) for work that has the features of a job. Courts look at whether the person works personally, on a continuing basis, for pay and under the client’s direction.

The law is also in motion. Brazil’s supreme court has the question of company-based hiring before it in STF Tema 1389, with no ruling on the merits by 25 September 2026. Until that decision arrives, a long PJ arrangement with daily management by a US line manager remains exposed.

There is an administrative penalty as well: CLT art. 47 fines an employer R$ 3.000,00 for each worker left unregistered, R$ 800,00 for the smallest businesses (micro and small companies), and the amount doubles for a repeat offence. For roles that are really full-time jobs, most US companies find that a CLT contract is the more predictable choice.

A US company should settle the gross monthly salary in reais, the benefits package and the working pattern before it makes an offer, because each of these is written into the CLT contract and is hard to change afterwards. Brazilian offers are normally quoted as a monthly figure, and candidates will multiply it by 13⅓ in their heads.

A short checklist keeps the first hire on track:

• Salary basis. Quote a gross monthly salary, then show the annual figure including the 13º salário and holiday bonus so the candidate and your finance team read the same number.
• Collective agreement. Ask which CCT will apply, since it can set a sector wage floor, an annual raise date, meal vouchers and a health plan.
• Remote work. Teletrabalho (remote work) has to be named expressly in the contract, and equipment and expense arrangements need a written agreement, per CLT arts. 75-A to 75-F.
• Probation. The trial contract, contrato de experiência, is limited to 90 days by CLT art. 445, which is the closest match to a US introductory period.
• Hours. Ordinary hours stop at 8 a day and 44 a week, and CLT arts. 58 and 59 allow no more than 2 hours of overtime daily.

Family leave also differs from US practice. Mothers receive 120 days of maternity leave. Fathers receive 5 days in 2026, and Lei 15.371/2026 doubles that to 10 days with effect from 1 January 2027.

With Employer of Record Brazil, each person you choose is on our payroll, with EOR Brazil as the legal employer. We issue the CLT contract, record the admission in eSocial, process the monthly payroll, withhold IRRF and employee INSS, and pay employer contributions and FGTS.

Your company keeps the working relationship: you choose the person, set objectives and review their work. You fund salary, charges and benefits, and the service itself costs from USD 560 per person each month (R$ 2.901,24 on the ECB rate for 24 September 2026), with a set-up fee normally due once. The fee’s scope is listed on our pricing page.

US counsel should note that no Brazilian statute deals with employer of record arrangements. The only frameworks for supplying workers to another business are in Lei 6.019/1974, which covers licensed temporary work agencies and outsourcing where the provider directs the work. Day-to-day direction by the client can lead a labour court to see an employment link with the client itself, so the employer of record’s contract terms and your own management habits both deserve attention.

Many US companies use this route while they test the market, then weigh opening a Brazilian sociedade limitada once headcount grows. Our role and yours are set out in detail in our guide to employer of record for Brazil hires.