Brazil — Business: Payroll

Why this matters

Getting payroll wrong exposes a company to fines, back-tax claims, and labor lawsuits (which are common in Brazil). Proper registration in eSocial and timely payment of mandatory contributions are non-negotiable for legal operation.

Key facts

• Brazilian labor law is governed by the CLT (Consolidação das Leis do Trabalho)
• Employers must deduct and pay INSS (social security) contributions from employee wages
• FGTS is an 8% employer contribution deposited monthly into an employee-accessible account
• INSS employee rates are progressive, ranging from 7.5% to 14% depending on salary bracket, capped at about R$1,017/month in 2026
• Employees are entitled to a 13th salary (13º salário) paid in two installments
• Vacation pay is mandatory after 12 months, plus a 1/3 vacation bonus
• eSocial is the unified digital system for reporting labor, social security, and tax information

Steps

1. Register the company and obtain a CNPJ — The employing entity must have a CNPJ (tax registration) and be registered with the relevant state and municipal authorities.
2. Register the employee in eSocial — Employers must register new hires in the eSocial system before they begin work, and report monthly payroll events.
3. Calculate gross salary and mandatory deductions — Calculate INSS (progressive 7.5%-14%), income tax (IRRF, progressive 0%-27.5%), and any other deductions such as benefits or advances.
4. Pay the net salary by the 5th business day of the following month — Net salary must be paid monthly, typically by the 5th business day of the subsequent month, in compliance with CLT rules.
5. Deposit FGTS monthly — Deposit 8% of each employee's gross salary into their individual FGTS account at Caixa Econômica Federal. As of April 2026, FGTS Digital replaced the older GFIP/SEFIP mechanism for collecting FGTS contributions.
6. File payroll information in eSocial/DCTFWeb and pay INSS — Submit monthly payroll events in eSocial; INSS, FGTS, and IRRF payments are generally due by the last business day of the second decêndio (days 11-20) of the following month. DCTFWeb consolidates federal tax debts/credits, due by the 15th business day of the following month.
7. Manage year-end obligations — Pay the first installment of the 13th salary by November 30 and the second by December 20. Note that DIRF has been replaced by EFD-Reinf, a monthly filing due by the 15th of the following month, rather than a standalone annual return.

Costs

• Employer INSS contribution: 20% of gross salary, uncapped
• FGTS deposit: 8% of gross salary
• Total statutory employer burden (INSS + FGTS + other mandatory charges): roughly 28%-36.8% on top of gross salary; fully loaded employee cost often cited as ~1.7x base pay

Timelines

• Monthly net salary payment deadline: by the 5th business day of the following month
• FGTS monthly deposit deadline: by the 20th of each month
• INSS/FGTS/IRRF payment deadline: by the last business day of the second decêndio (days 11-20) of the following month
• DCTFWeb filing deadline: 15th business day of the following month
• 13th salary first installment: between February 1 and November 30
• 13th salary second installment: by December 20

Required documents

• Employee CPF (individual taxpayer registration)
• Employee RG or CNH (identification document)
• CTPS (work and social security card) for registration
• PIS/PASEP number
• Proof of address
• Medical admission exam (ASO - Atestado de Saúde Ocupacional)
• eSocial registration records

Common mistakes

• Missing or late eSocial filings, which trigger automatic fines
• Incorrect INSS bracket calculations (progressive rates are applied per bracket, not to the full salary)
• Failing to deposit FGTS on time, which can trigger substantial penalties
• Not accounting for the 13th salary and vacation provisions in monthly cash flow
• Misclassifying workers as contractors (autônomos) instead of CLT employees
• Ignoring collective bargaining agreements (convenções coletivas) that may mandate additional benefits or salary floors