Hiring Developers in Brazil: CLT Employees, PJ Contractors or an Employer of Record

Brazil has one of the largest pools of software engineers in the Americas, in time zones that overlap with North America and Europe. Foreign technology companies hire there in three main ways: as employees of their own Brazilian entity under the labor code (CLT), as independent contractors who invoice through their own company (known locally as “PJ”), or through an employer of record (EOR) that employs the developers on their behalf. Each model has a different cost, a different level of control and a different legal risk, and the rules on contractors are under review by the Supreme Court. This guide compares the three for a foreign company.

The three models at a glance

CLT employment: the reference model

Under the CLT, an employee is an individual who provides services on a non-occasional basis, under the employer’s direction and in exchange for pay; the employer is the one who directs the personal provision of the service. Those elements (personal service, continuity, subordination and pay) define employment, whatever the contract says. Supervision through digital tools counts as direction for this purpose.

For a foreign company with a Brazilian subsidiary, hiring under the CLT gives full control over the work and the lowest legal risk. The cost is predictable but significant: see the cost of an employee in Brazil and hiring your first employee. Payroll costs for IT companies are also rising as the payroll tax relief for the sector is phased out until 2028 (see the CPRB phase-out and running a software development center in Brazil).

Remote work and developers abroad

The CLT regulates remote work (teletrabalho), which must be stated in the employment contract. Equipment and expense reimbursement are agreed in writing and do not count as salary. Remote employees can be hired on a working-hours basis, with overtime, or on an output basis, outside hours control. An employee hired in Brazil who chooses to work remotely from abroad remains under Brazilian law, unless the parties agree otherwise.

Hours and on-call

The normal working day is eight hours, with a maximum of two hours of overtime per day paid at a premium of at least 50%. Using messaging apps or tools outside working hours does not by itself count as on-call time, unless an individual or collective agreement provides for it, but an employee formally on standby and controlled by the employer during rest periods is entitled to on-call pay. Engineering teams with support rotations should set this out in writing.

PJ contractors: common, but under review

Hiring developers as contractors who invoice through their own company is widespread in the Brazilian tech market. The CLT accepts genuine independent contractors, hired with all legal formalities, with or without exclusivity. The problem is substance: if the contractor works like an employee, with fixed hours, a manager, a team and no real autonomy, a labor court can declare an employment relationship and the company owes all employment rights and charges for the period, plus social security contributions. The CLT treats arrangements designed to avoid labor law as void.

Rules on outsourcing add a further limit: a company cannot hire as a service provider a company whose owners or partners were its employees, or worked for it, in the previous 18 months, except retirees. Converting existing employees into contractors is therefore a red flag.

STF Theme 1389

The Supreme Court (STF) is deciding, in Theme 1389, whether contracting individuals through civil or commercial contracts is lawful, which courts are competent to judge claims of fraud and who bears the burden of proof. The rapporteur said the thesis will cover all forms of civil or commercial service contracts. In April 2025 the court suspended related cases nationwide; in June 2026 it allowed them to proceed in the first and second instances. As of October 2026, the case has not been judged. Until it is, the existing risk of reclassification remains, and contractor arrangements should be reviewed against how the work actually happens.

Employers of record

Brazil has no specific EOR law. In practice, the EOR employs the developer under the CLT and the client contracts the EOR to provide services, under the outsourcing rules of Law 6,019/1974. Those rules allow any activity, including the client’s core business, to be outsourced to a company that hires, pays and directs the work. The client is secondarily liable for labor obligations of the period if the EOR does not pay.

The model works well for a first hire or a market test. Its main weakness is direction: if the foreign company manages the developer day to day, as it usually does, there is an argument that the employment relationship is really with the client. The risk is lower when the arrangement is documented carefully, but it does not disappear. Temporary work agencies are a different regime, limited to temporary needs of up to 180 days plus a 90-day extension, and do not suit permanent roles.

For a team that grows beyond a handful of people, many companies move from an EOR to their own entity (see how to set up a subsidiary in Brazil).

Who owns the code

Under Brazil’s software law (Law 9,609/1998), unless agreed otherwise, the rights to software developed during a contract whose purpose is research and development, or where development is the nature of the work, belong exclusively to the employer or to the contracting party. The rule covers contractors as well as employees, and the developer’s compensation is limited to the agreed pay. Software created without any relation to the contract and without the company’s resources belongs to the developer. Contracts should still include clear IP assignment clauses, especially when the client is a foreign company that is not the developer’s direct employer.

Non-compete clauses

There is no statute on post-employment non-compete clauses. Labor courts tend to accept them when they are limited in time and territory and come with financial compensation; without compensation, they are often voided. Decisions vary between panels of the Superior Labor Court (TST).

Choosing the model

1. One or two developers, market test: an EOR, with the work organized to limit direct management risk.
2. A growing team you manage directly: your own entity and CLT employment.
3. Genuinely independent specialists or project work: PJ contracts, documented and reviewed against how the work is done, while Theme 1389 is pending.
4. In every model: written remote work terms, IP assignment and a review of on-call arrangements.

How Solidy can help

Solidy already serves subsidiaries of multinational companies in Brazil, including technology companies. We set up the Brazilian entity, run CLT payroll for development teams, model the cost of each hiring model and review contractor arrangements. Read our guide for technology and SaaS companies in Brazil or talk to our specialists.