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Concepts of Brazil Payroll:

The intent of this wiki is to provide an Overview on the Concepts of Brazil payroll pertaining to its taxation.

Purpose:

The purpose of this page is to provide an understanding on the various concepts of Brazil payroll pertaining to the local laws and taxation and its implementation in SAP Brazil Payroll.

Overview:

This Wiki represents a high level overview of the basic concepts of Brazil payroll , the labour laws and its implementation in SAP.It gives a snapshot on the various important views and tables used during configuration.It also makes a mention on various reports that are used in Brazil and some of them being statutory will be needed during the year end.The concepts have been explained citing various examples for better understanding.

Brazilian Labour laws

Labour relations are regulated by the CLT (in PT – Consolidação das Leis Trabalhista (Consolidated Labour Laws).

The Constitution guarantees to employees a large number of labour rights and benefits. If any of these rights or benefits are not observed, employees may claim in court as norms and rules described in CLT are strong as law.

Employers are organized in unions (in PT called Sindicato Patronal). In the same way employees are also organized in unions (in PT called Sindicato Trabalhista)

Once in a year, Sindicato Patronista and Trabalhista meet to define some agreements, e.g. salary increase. This meeting is called Collective Convention (in PT Convenção Coletiva)

In case of no common agreement at Convenção Coletiva, the matter will be judged by the Regional Labour Tribunal (TRT). In this case, the agreement is called Dissídio Coletivo. Both agreements are valid during one year.

If the employer wants to apply a particular procedure for employees,it is possible to make an agreement with Sindicato trabalhista. This agreement is called Collective Agreement (in PT called Acordo Coletivo)

Basic Concepts

An enterprise is registered with a CNPJ number. CNPJ means Codigo Nacional de Pessoa Jurídica (e.g 74.544.297/0001-92 where 74.544.297 is the CNPJ code, 0001 is the Branch identification and 92 is a check digit). In SAP, branch(Filial) is directly linked to the personal area and subarea.

Branch is a physical unit of an enterprise. It derives from the CNPJ of the enterprise.

Work Schedule: in CLT it is defined that employees should work maximum 44 hours in a week and must have one day-off.

Between 2 work days, there must be a minimum period of 11 hours for resting.

Employees shall have a weekly rest of 24 consecutive hours. Usually this day-off is a Sunday.

Experience contract: Experience period shall not be longer than 90 days. If the employee is fired during the experience period due a severe fault, employee has right to salary balance and other indemnities will not be paid. Otherwise it will be paid.

Remuneration is the sum of contractual salary and other additional payments (overtime, hazard bonus, health risk premium, nightwork,…)

Union: The payment of this contribution is done once per year, usually on March. When na employee is hired , the employer should check if the union contribution of current year was already paid. If the hiring date is after March and employee has not paid union contribution, then it will be deducted from the employee in the first payroll.  Please refer to IT0057 (Membership Fees) and wage type /360 and M360. In order to not inform that employee has paid the contribution in another company, wage type (M360 or copy of M360) is inserted into IT0015.

FGTS(Severence Premium Reserve Fund) is a benefit that all employees have the right to and it is paid by the employer. It is not paid in cash, but it is saved in a special Bank Account. For each hired employee, the employer has to open FGTS account. Please refer to IT0016 (Contract Elements, IT0398). SEFIP

PIS/PASEP: it is a social integration program based on the employers’ constribution. Annually part of the contributions is distributed as bonus to the employees according to their annual remuneration and seniority. This bonus usually is the national minimum salary. The necessary conditions to receive this bonus are:
Monthly salary not higher than 2 minimum salaries,
Be member of PIS program at least 5 years,
Minimum of 30 worked days in the corresponding year
      
CEF (national Bank) retrieves the information collected by RAIS & SEFIP and generates a magnetic file which contains  the bonus to be paid to each employee that is sent to the employer. Payment is integrated into the Payroll.

Documents ( IT 0465)

All employees in Brazil must have a Work and Social Security booklet - CTPS (in PT called Carteira de Trabalho e Previdência Social). This document belongs to the employee and has to be updated by every employer that employee has contract with. The employer will update the document with employer’s name & address, hiring date, salary, position, FGTS Bank account, salary increase and any special agreement. Please refer to IT 0465(Documents)

  • Identification Card (Carteira de Identidade): national document
  • Identification Card (Título Eleitor): card for election
  • Military Card: certifies that military duties were completed (only for men)
  • Tax Card (CPF – Cadastro de Pessoa Física): It is need for any financial transaction(e.g. open a Bank account; tax declaration,…)
  • Medical Exam

Register Form(Ficha de Registro): part of the admission. As soon as a new employee is hired, the employer must register the new employee in the book of employees of the company. Data is stored in subinfotype 0695(IT0001).
       According to the law, a company must store employee historic data regarding the employee’s lifecycle within the company.
       Eletronic register form can be printed on demand using the standard report HBRFICHA.
       The report HBRFICHA generates a Sapscript to issue the Ficha de Registro – Employee Historic Data. When the          
       report runs and finds no number in IT 0001/0695 to a new branch the employee may be assigned, it reads the    
       table  T7BRB6, adds 1 to the number and update infotype.
       Report gathers training, work schedule, absence and payroll information.

DSR

Remunerated Day Off (in PT, Descanso Semanal Remunerado)

All employees have right to one day off per week.

The payment of DSR differs from monthly anf hourly based employees.

Monthly Employees: salary is evaluated for the whole month including the days off so that DSR is not paid explicitly because DST is already part of the salary. For example, if employee works the whole month without unjustified absence, employee will be paid for 30 worked days instead of 26 days and 4 DSR. However if the employee has unjustified absence , the employer is allowed to deduct the DSR of the week.

Example: Monthly salary 3000 reais. Employee has unjustified absence on May 3rd, 2011. May,1st is public  holiday.   
Calculate the salary in May considering commercial month (30 days) and DSR.

         Salary per day = 3000 / 30 = 100
         Salary per hour = 3000 / 220 = 13,64
         Salary = 100 * 29 = 2900
         DSR = 7,33 * 13,64 = 100
         Remuneration (without tax deductions) = 2900 – 100 = 2800

Hourly Employees: the rules to evaluate the DSR are the same used for monthly. The difference is that employee gets the DSR paid in the payroll as income.
Example: Hourly rate 80 reais. Employee has unjustified absence on May 3rd, 2011. May,1st is public  holiday.   
         Calculate the salary in May considering work schedule 7,20 hours per day.
         Salary per hour = 20 reais
         Salary =  20 * (26 * 7,33) = 3811
         DSR = 4 * 7,33 * 20,00 =
         Remuneration (without tax deductions) = 3811 +  586,40 = 4397,40

Night Work bonus

The employee that works at night (between 10 pm and 5am) has the right to have thos hours to be paid with na additional of 20% over the hourly rate.

Each complete night work hour = 52 min 30 sec (defined  by law)

        Example: if employee worked from 22:00 to 05:00, he worked 7 regular hours, but according to the    
        law employee worked 8 hours (= 7 * 60 / 52,5).
        night work hours = (number of hours * 60 ) / 52,5
        It means that for 7 hours worked at night , employee will gain one hour.

It is the same if we apply the factor 1,142857

Night Work Absence Hours Adjustment: uses the same factor as mentioned above

        Example: employee works from 21:00 to 05:00
        Total number of hours = 8 hours
        Night Shift from 22:00 – 5:00 = 7hours (before adjustment) = 8 hours (after adjustment)
 
        So, if employee is absent from 21:00 to 05:00, then the absence wage type = 9 hours (after  adjustment)

Night work bonus should not be mixed with overtime. If the employee has to work at night because it is mentioned that in the work schedule, then he has the right to the work night bonus, and not overtime. If the employee usually receives the night work bonus and needs to do overtime, then those hours will have to be evaluated as overtime(additional of 50% over hourly rate) and the night work bonus should be paid as well.

Hazardous or Unpleasant Work

Employees working in hazardous or unpleasant environments are entitled to an additional payment.

In case the work is both hazardous and unpleasant, only one type of additional is paid.

Payment is usually performed during the normal payroll.

In order to inform that employee is entitled to one of those additional, flag is available in IT0016/0398. The payment is proportional to the number of days of the month where the flag is on.

Hazardous Work: in this type of additional the monthly salary is divided by number of worked hours that  is multiplied by the hazardous work percentage factor.
       Wage Type : /0B1 (Hourly Salary) & /326

Unpleasant Work: the unpleasant work additional is calculated by multiplying a percentage with the minimum salary.
       In CLT, 3 levels of unhealthy situations are defined: minimum, medium and high. Each level is assigned  
       to a percentage(10%,20%,40% respectively).
       Wage types /147 & /325

Based on the grouping, Health Risk and Hazardous percentage is saved in table T7BRRK.

We get the grouping by reading table T7BR0P

Vacation Bonus

Vacation is a 30 day paid absence plus a bonus of 1/3 of this payment.
According to the law, payment shall be done at least 2 days before beginning of vacation.
In order to be able to take vacation, employee shall work a certain period of time, that is called accrual period. During the accrual period, employee gets the right of vacation. Usually this period lasts 1 year(12 months) and only after this period the employee can take 30 days of vacation.
After the end of the accrual period, na eligibility period begins. It means  that during this period the employee can use the vacation entitlement that was gained during the previous accrual period.
The eligibility period lasts 1 year(12 months).
Vacation processes starts when the employee notifies the employer the dates of the vacation.Notification shall be in written form (Aviso de Férias)
Vacation payslip (Comprovante de Férias) shall be printed
       twice: one remains with employer (with signature of
       employee) and the copy belongs to the employee.

Basis /003(daily salary), /004(Hourly salary) and /005(Monthly Salary) are created by the rule BR10.

Vacation wage types defined in table T7BR4C: IMG -> Absences -> Leave Payment -> Wage Type Generation

Table T7BR03: Relation between the imported wage types for advances to the current period.

/331: First portion of 13th Salary paid together with vacation

/C00:First portion of 13th Salary paid together with vacation (next year)

Report: HBRCFER0 is used to select employees with vacation records to run the HBRCALC0

13th Salary Christmas Bonus

Christmas Bonus (13th Salary) is a special payment that should be paid till December 20th.
According to the law, this payment shall be paid in 2 parts: first portion is paid till November,20th and second payment till December 20th(before the payroll).
The amount paid in the first portion is 50% of the Christmas Bonus.
Usually the first portion is paid together with the vacation.
In case of retro calculation, the first portion is not retro calculated as it is considered as an advance payment.
As the second portion is paid before the payroll in December, the variable part of the Christmas Bonus payment may not be completed. The correction should be done till January 5th.

Off cycle - Advance payment

The following are some of the off cycle payments:

1313 – Payment of the 13th Salary
131P – Payment of the 13th Salary (1st Portion)
13DI – Difference of the 13th Salary
AJUS – Adjustments (Retrocalculation)
PPRP – Profit Sharing
FERI – Payment of Vacation
RESC – Termination
ADIA – Advance Payment

In the past as the inflation rate was very high in Brazil, the employers used to antecipate part of the regular payment.

There’s no regulamentation for advances of regular payments. It is na employer decision.

It is usually paid via offcycle ADIA.

According to the standard configuration, some conditions are checked: min number of worked days, absence days

It can be calculated based in infotype 0267 or based on a fixed percentage. And usually it is proportional to the number of worked days.

If the monthly payroll is paid in the same month of the advance payment, then usually no tax contribution is calculated.

IMG: Payroll Brazil -> Advance Wage Payment

Termination

Termination is the end of the work contract. After the notification(called Pedido de Demissão) that is done in written form, the indemnities are calculated. The payment of indemnities depends on the reason of the action and seniority.

After termination, the employer updates the document CTPS and the register form (ficha de registro).

If work contract lasted for more than one year, then the end of this contract must happen in the union’s office (in PT is called Homologação) and employer must show the following documents:

  • FGTS payment form
  • Termination letter
  • CTPS updated
  • Register Form updated
  • End of contract form (in PT is called “Termo de Rescisão de Contrato”)
  • Unemployment insurance form (in PT is called Seguro Desemprego)

Pre-notice: minimum 30 days after the oficial notification.

The termintation is confirmed only after the end of the pre-notice period, even if the decision is to receive the payment instead of working that period. But if the month of the termination is  30 days before the month of salary increase and the employee is fired without a reason, then  the employer can pay na indemnity that is usually 1 month of salary (to prevent employer to terminate contract just before the  month of the annual salary increase). If the end of pre-notice is in the same month of the salary increase, then payments will take into account the new salary

At the end of the work contract, the employee shall receive all rights till the leaving date. It means that other payments as Vacation, Christmas Bonus are considered.

Article 479: this indemnity is paid in case of work contract with fixed end date. It applies if the contract ends before the agreed end date. In this case, the time period between termination date and agreed end date of the contract must be remunerated in a rate of 50%. This payment includes monthly salary plus overtime , night work bonus,… For the evaluation  of the variable part of the remuneration , na average of the last previous 12 months must be calculated.

Article 480: it is similar to Article 479. But it applies when the employee ends the contract before the official end date. An indemnity shall be paid to the employer.

Guia Recolhimento Rescisório: this form prints the FGTS contribution of the previous month, current month of the termination, and indemnity (40% of the FGTS contributions)

Transport Ticket

Ticket that is accepted by the public transportation.

Employers are allowed to deduct the cost of the tickets in the payroll up to 6% of the monthly salary of the employee. If the cost is greater than 6%, then only 6% can be deducted from the employee’s remuneration.

If the employee is absent or the contract is ended, then employee has to give the respective tickets back,otherwise employer has the right to deduct amount of those tickets in the payroll.

Infotype 0410: defines the types of transportation used by the employee

Family Allowance

It is paid to employees proportionally to the number of children with age < 14 years old

Employees needs to present the vaccine booklet in order to receive the family allowance.

Employees only receive this payment if salary < 862,60

Salary

Family Allowance

Up to 573,91

29,43

Up to 862,60

20,74

Monthly Reports

CAGED – Cadastro Geral de Empregados e Desempregados
    SAP transaction PC00_M37_CAGE
    All employers have to inform the Brazilian Labor Ministerial till  7th of the following month a list of all hired and fired employees in the current month.
    Reads IT 0000,0001,0002,0004,and 0465.
    Relevant tables: T7BRT0 (Read the Movement Codes).
                       The Output: TemSe file.
 
Contribuição de terceiros (“third-party contribution”)
    SAP transaction PC00_M37_3RDE0

 
DARF – Documento de Arrecadação de Receitas Federais
    SAP transaction PC00_M37_DARF
      Reads all the tax deduction saved in the employee’s cluster for the period chosen in the     selection-    screen. Sums all deductions and generates a form by company code.
    Output: Form
 
GPS – Guia da Previdência Social
    SAP transaction: PC00_M37_GRPS
                       Data related to the social security(INSS) that is sent by the employer.
                       Frequency : Every Month + Competence 13

The following are the fields in the report and their explanation:
1    Company related data:name, address and contact details
3    Payment code assigned to the company in table T7BRCO3
4    Competence period (MM/YYYY)
5    Identifier (CNPJ)
6    Amount to the be transferred by the Employer to the social security: Employer’s Part:

        INSS basis  + contractor’s basis (/1A0, /1A1) + maternity 13thSal  (/353,/354)  +  estorno ) * Employer’scontribution (Table T7BRB2) + Insurance (INSS bais  + Maternity 13th Sal) * (SAT/RAT (Table T7BRB2) * FAP (Table T7BRC2))+ Employee’s contribution

9    Amount to the forwarded to the “Other Entities”: Percentage to Other Entities * ( INSS Basis  + Maternity 13th Sal + Maternity  INSS (/T81,T91)
10    Fees in case of delay
11    Total = Field 6 + Field 9 + Field 10

Annual Reports

DIRF – Declaração de Imposto de Renda Retido na Fonte
    SAP transaction PC00_M37_DIRF
    Relevant wage types are configured using Evaluation Class 07.
                       Output: Form
 
Informe de Rendimentos
SAP transaction PC00_M37_CCED
This report is used to generate the document that is sent to employees after the end of the fiscal year. It   shows all tax’s basis and deduction of the last fiscal year and can be used as a basis of the tax declaration . Due date is usually end of February. ( in PT. it is called  “Comprovante de Rendimentos Pagos e de     Retenção de Imposto de Renda na Fonte” ).

Read data from IT0001(Organizational Data), IT0002(Pers. Data), IT0007(Time), IT0021/IT0397     (Dependents) e IT0465(Documents).

Relevant wage types are configured using Evaluation Class 07.
    Output: Form
 
RAIS – Relação Anual de Informações Sociais
SAP transaction PC00_M37_RAIS
Each year between January and March, depending on the number of employees, the employers have to send the RAIS. This report shows information related to social nature and is used by the government for statistics and for some calculations.

Reads data from IT0000 (Measures), IT0001 (Org Data), IT0002 (Pers. Data), IT0007 (Time data), IT0008 (Basic Payment), IT0016 (Contract) e IT0465 (Documents).

Relevant wage types are configured using Evaluation Class 12

Output: TemSe file