Payroll Outsourcing in Brazil: How It Works for Foreign-Owned Companies

For a foreign company with a small team in Brazil, running payroll in-house means hiring specialists, licensing payroll software and keeping up with collective agreements, eSocial and frequent rule changes. That is why most foreign-owned subsidiaries outsource payroll, at least in their first years. Outsourcing does not move the legal responsibility away from the employer, so it only works if the division of tasks, the controls and the reporting are clear. This article explains how payroll outsourcing works in Brazil and what to look for.

What a payroll provider does

For what the monthly cycle involves, see eSocial and monthly payroll compliance in Brazil.

Payroll outsourcing, EOR and PEO: not the same thing

• Payroll outsourcing: your Brazilian company is the employer. The provider runs payroll and compliance on your behalf.
• Employer of record (EOR): a third party in Brazil is the legal employer, and the people work for you through a services contract. It is useful before you have an entity, but it has limits under Brazilian labor law and costs more per head as the team grows.
• Your own entity with outsourced payroll is the usual model once the company is incorporated and has more than a few employees.

Who does what

The payroll calendar to agree

• Input cut-off: usually around the 20th to 25th of the month, so payroll can close at month-end.
• Review and approval: the first business days of the following month.
• Salary payment: by the 5th business day of the following month (CLT, article 459). Many companies pay earlier, on a fixed date.
• Taxes and FGTS: by their due dates, around the 20th.
• Report to headquarters: aligned with the group’s month-end close (see monthly financial reporting from Brazil to foreign headquarters).

What to ask a payroll provider

• Who reviews our payroll before it is released, and how are variances explained?
• How do you track our collective agreement and its annual adjustment?
• How are payroll costs reconciled with accounting each month?
• Can you report in English and in the group’s format, by cost center?
• How do you handle group bonus plans, equity awards and expatriates?
• How is employee data protected under the Brazilian data protection law (LGPD)?
• What happens if a mistake causes a penalty?

When to keep part of it in-house

Even with payroll outsourced, someone in the company must own HR decisions: hiring, performance, policies and terminations. Larger subsidiaries often keep an HR business partner in-house and outsource the payroll processing and compliance, which gives them local judgment without building a payroll team.

How Solidy can help

Solidy already serves subsidiaries of multinational companies in Brazil. Our Payroll and HR Administration team runs payroll, eSocial and FGTS Digital, applies collective agreements, handles expatriates and group plans, and reports payroll to headquarters reconciled with accounting. See our payroll service or talk to our consultants.