Did You Know Christmas Bonuses Are Mandatory in Brazil?
South America has been a hot spot for companies looking to expand their international business. Attracting world-class talent, while remaining cost-effective, has been a major challenge for employers. Extremely high taxes and a large amount of mandated employee benefits make Brazil one of the most expensive countries in the world to hire staff. The complexity of Brazilian labor laws, coupled with an average of 60 legislative changes each year, make compliance a laborious task.
Brazil has one of the highest employer payroll taxes in the world. An employer's portion cost a whopping 70% in addition to the employee's total salary, more than three times higher than the global average of 20.48%. Mandatory employee benefits such as meals, health insurance, transportation and vacation increase the employer's total cost to almost double the employee salary. Brazilian law also mandates that each employee receive a “13th salary,” the equivalent of one month’s pay, around Christmas as a holiday bonus. Introduced in 1942, the "13th salary" must be paid to all employees in two installments: November and December. It’s illegal for employers to pay this bonus in one installment and punishable by fine if they do so.
While hiring in Brazil is expensive, firing an employee can be just as costly. Unlike U.S. law, Brazilian companies cannot terminate employees due to economic issues or financial challenges. Instead, companies are expected to reduce employee working hours, therefore reducing employment costs. Also, if an employee is dismissed prior to receiving his/her 13th salary, the employer must still pay the amount correspondent to the total working months.
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