Brazil is one of the most complex payroll environments in the world, and if you’re hiring there without a clear picture of your obligations, it’s easy to underestimate the true cost of employment. Understanding how employer taxes and mandatory contributions layer together is essential before you make your first hire.
How employer taxes work in brazil
Brazilian employment law is governed primarily by the Consolidação das Leis do Trabalho (CLT), and the tax system reflects that framework’s depth. As an employer, you’re responsible for calculating and remitting a range of contributions on top of every employee’s gross salary. These aren’t optional benefits or negotiable perks. They’re statutory obligations, and non-compliance carries significant penalties. The contributions fall into four main categories: social security (INSS), the severance fund (FGTS), accident and third-party levies (RAT and Terceiros), and income tax withholding (IRRF).
Inss contributions
What the employer pays
The employer’s INSS contribution is 20% of total payroll. This goes to the National Social Security Institute and funds retirement, disability, and survivor benefits. The 20% rate applies to the full gross salary with no ceiling for the employer portion, which makes it one of the largest single line items in your payroll cost.
What employees contribute
You’re also required to withhold INSS from each employee’s gross salary on their behalf. The employee rates are progressive and applied to salary bands:
- 7.5% on salary up to BRL 1,621/month
- 9% on the portion from BRL 1,621 to BRL 2,500
- 12% on the portion from BRL 2,500 to BRL 3,800
- 14% on the portion above BRL 3,800 up to the contribution ceiling (teto)
As the employer, you calculate and withhold this amount each month and remit it together with your own share via the eSocial and DARF payment system.
Fgts: the severance fund
The Fundo de Garantia do Tempo de Serviço (FGTS) is a mandatory severance savings fund. You deposit 8% of each employee’s monthly gross salary into a linked account held in the employee’s name at Caixa Econômica Federal. The employee can’t access these funds during normal employment, but they’re released on termination without cause, retirement, or other qualifying events.
From April 2026, FGTS deposits are managed through FGTS Digital, a centralised platform that replaces the older SEFIP system. The migration changes the submission and payment workflow, so you’ll want to confirm your payroll provider or local entity is already operating on the new platform. The 8% rate itself is unchanged.
FGTS sits outside the normal payroll tax remittances, but it’s a real and recurring cost you need to build into your employment budget from day one.
Rat and terceiros
Rat (accident risk contribution)
RAT, or Riscos Ambientais do Trabalho, is a levy that funds workplace accident and occupational disease coverage. The rate depends on your business activity’s risk classification:
- 1% for low-risk activities
- 2% for medium-risk activities
- 3% for high-risk activities
The applicable rate is determined by your company’s primary CNAE code (the Brazilian activity classification). If you’re operating through a local entity, confirm your CNAE and the corresponding RAT rate, because getting this wrong affects both your cost model and your compliance standing.
Terceiros (third-party contributions)
Terceiros are additional levies channelled to a set of social funds and industry bodies, including SENAI, SESC, SENAC, SESI, and others. The exact rate varies by sector and CNAE classification, ranging from roughly 0.2% to 5.8%, with an average of around 3.3% of payroll. Your accountant or payroll provider can confirm the exact rate for your industry. These amounts are relatively small individually, but when they stack on top of the other contributions, they add up.
Income tax withholding (irrf)
As an employer, you’re required to calculate and withhold imposto de renda retido na fonte (IRRF) from each employee’s salary every month, then remit it to the Receita Federal.
Brazil updated its income tax rules in 2026. Employees earning up to R$5,000/month now receive a full exemption from income tax, and there’s a partial reduction for those earning between R$5,000 and R$7,350. For salaries above R$7,350, the traditional progressive table continues to apply, with marginal rates rising from 7.5% through to 27.5%.
From a payroll administration standpoint, the 2026 reform means fewer employees will have IRRF withheld, which simplifies calculations at lower salary bands. That said, the administrative obligation to calculate, withhold, and remit remains yours regardless of whether any tax is ultimately due.
The 13th salary
The décimo terceiro, or 13th salary, is a mandatory additional payment worth one month’s gross salary paid to every employee each year. It isn’t a bonus in the discretionary sense. It’s a statutory entitlement under Brazilian law.
You’re required to pay it in two instalments:
- First instalment: by 30 November
- Second instalment: by 20 December
The first instalment is calculated as half of the employee’s most recent monthly salary. The second instalment accounts for the full annual calculation, including variable pay components, and triggers additional INSS and IRRF withholding on the portion that falls above the relevant thresholds. Budget for the 13th salary as part of your annual employment cost, not as a year-end surprise.
Total employer cost
When you add together employer INSS (20%), FGTS (8%), RAT (1–3%), and Terceiros (roughly 3.3%), the statutory on-costs alone reach approximately 32–34% above gross salary before you account for the 13th salary and any other benefits. When all contributions are combined and the 13th salary is annualised, total employer on-costs in Brazil typically run 65–70% above base salary.
That means if you’re hiring someone at a BRL 10,000/month base salary, your true monthly cost is closer to BRL 16,500–17,000 once all obligations are factored in. This is a critical number to have in hand before you sign any offer letters or finalise headcount budgets.
How an Employer of Record (EOR) simplifies brazilian payroll compliance
Managing Brazilian payroll in-house requires a registered local entity, a working knowledge of eSocial, FGTS Digital, and the Receita Federal’s filing requirements, and ongoing attention to regulatory changes like the 2026 income tax reform. For most foreign companies, that’s a significant investment of time, money, and local expertise before you’ve hired a single person.
An EOR employs your Brazilian team members on your behalf, handling all employer registrations, payroll calculations, tax filings, and statutory payments from INSS to FGTS. You retain day-to-day management of your team’s work, while the EOR carries the compliance burden.
EOR services are particularly valuable in Brazil because the volume and complexity of employer obligations don’t scale down for small headcounts. Whether you’re hiring one person or ten, the same rules apply.
Conclusion
Brazil’s employer tax obligations are extensive, but they’re manageable when you understand what each contribution covers and what you owe. The key figures to keep front of mind: 20% employer INSS, 8% FGTS, 1–3% RAT, roughly 3.3% Terceiros, and a mandatory 13th salary that adds a full month’s cost annually. Total on-costs of 65–70% above base salary are the norm, not the exception.
If you’re ready to build a compliant Brazilian team without setting up a local entity, RemotePass can help. Get in touch to find out how we handle payroll, tax, and compliance across Brazil and more than 150 other countries.
