Brazil payroll has a reputation for complexity that is mostly deserved, but the structure is knowable: a consolidated labour code (the CLT) governs the employment relationship, everything is reported digitally through the government's eSocial platform, and the employer cost stack sits well above the gross salary through severance fund deposits, social security contributions and a mandatory extra month of pay each year. For a foreign company the practical question is not whether the rules are manageable, they are, but whether to manage them through your own Brazilian entity or through an employer of record that already runs them at scale.
FGTS: the severance fund deposit on every payroll
The FGTS is Brazil's severance guarantee fund, created by Law 8.036 of 1990. Every month the employer deposits an amount equal to 8% of the salary paid or owed to the worker into a blocked account in the worker's name at the state bank Caixa, with the deposit due by the 20th day of the following month; the official FGTS portal states both the rate and the deadline, and a reduced rate applies to apprentices. This is an employer cost on top of salary, not a deduction from it, and the deposits are calculated and reported through eSocial. The fund matters at termination: dismissals without cause trigger an additional employer-funded penalty calculated on the account balance, which is a major reason Brazilian offboarding needs to be costed before it is decided, not after.
The 13th salary: an extra month, on a fixed calendar
Brazilian employees receive a mandatory 13th salary each year, paid in two instalments on a statutory calendar: the first, an advance of half the monthly salary, must be paid between February and the 30th of November, and the second by the 20th of December, as the government's eSocial guidance sets out. New hires receive an amount proportional to their months of service in the year. Social security contributions are withheld on the 13th salary through the December payroll, and FGTS deposits apply to it as they do to ordinary salary. For cash planning the effect is simple but unforgiving: December carries roughly double payroll, and a proper Brazilian payroll calendar builds the accrual through the year rather than discovering it in November.
eSocial, the real cost stack, and entity versus EOR
All of this is reported through eSocial, the federal digital payroll and employment reporting system, which automates calculations like the 13th salary advance but demands accurate, event-driven filings from the employer. On top of gross salary an employer budget must carry the FGTS deposit at 8%, employer social security contributions on payroll, the 13th salary accrual, and paid vacation with its additional one-third premium, before any benefits customary in the market. Running that stack requires either a Brazilian entity with local payroll capability or an employer of record that already operates one. The EOR route prices as a flat fee per employee per month at advertised tiers and makes sense for small headcounts and market tests; an entity starts to win when the team grows enough that linear fees exceed its fixed running costs. Employment contracts and policy documents control; nothing here is legal or tax advice.
Questions people ask about brazil payroll
What is the FGTS rate and when is it due?
The employer deposits 8% of the worker's salary into their FGTS account each month, due by the 20th of the following month, under Law 8.036 of 1990. It is paid on top of salary, never deducted from it.
When must the 13th salary be paid?
In two instalments: the first between February and the 30th of November, the second by the 20th of December. Courts accept paying it in one go as long as it lands by the 30th of November, and eSocial calculates the advance automatically for monthly-paid employees.
How much does a Brazilian employee cost above gross salary?
Budget for the FGTS deposit at 8%, employer social security contributions, the 13th salary accrual and vacation with its one-third premium. The exact total depends on the role and sector, so cost a specific hire through a payroll quote rather than a rule of thumb.
Can a foreign company run Brazil payroll without an entity?
Not directly; employment and eSocial reporting need a local employer. An employer of record supplies that: it employs the person through its Brazilian entity, runs payroll, FGTS and 13th salary, and invoices you the employment cost plus its fee.