Working legally as a Freelancer in Brazil
Even though there isn't a clear definition for a freelancer in the Brazilian labor laws, it is possible for an independent professional to work legally in the country, what we will discuss in this article.
As many countries, Brazil has a very complex and confusing set of labor laws. Not only the CLT rules are complicated, but the costs of hiring are extremely high for the employers. In this scenario, companies in need to reduce costs have to find other ways to establish working relations with their workers.
Because hiring under the CLT regime is costly in Brazil, there are scarce opportunities, compared to the amount of unemployed people. Also, most of the positions are destined for qualified people. Brazilians work under either of the following circumstances (defined in Portuguese, as stated in the laws):
Trabalho formal
It is the formal job with signed labor cart, in which the employee establishes full-time employment relationship with the company. This form of labor is regulated by the CLT laws and comprises several labor rights and collection of taxes. According to IBGE only 46.3% of the Brazilian workforce is registered (2011).
Trabalho informal
It is the informal work, in which there’s no specific contract between who buys the service and who sells it. It can also be street vendors, domestic servants etc. Because there is no collection of taxes involved, this type of work is considered illegal before Brazilian laws. However, around half of the Brazilian working population works under this condition. The government implemented several measures to bring these workers to formality, which we will discuss further.
Trabalho autônomo
It is a formal job without signed labor cart, in which workers don’t establish any employment relationship with the company, but they are legally supported by a contract between the parties. Also, there is collection of taxes involved. The independent contractors are defined as service providers, and may perform their work either as legal entities or individuals in Brazil.
A closer look to independent work in Brazil
There’s no such thing as a freelancer recognized by the Brazilian legislation. However, the closest definition to this kind of professional is the trabalhador autônomo, a self-employed worker that provide services to companies. Hiring independent professionals and legal entities (PJ) to perform some functions in the company is a legal practice, but only if it is not a simple replacement of workers with formal employment ties.
A company can only hire an independent contractor if the person was called to perform a job with a predetermined schedule, with beginning, middle and end of the activities. The independent professional can provide his services to the contracting companies out of two ways (always supported by a legal contract):
As an individual
It is an individual who provides his services to the companies, without establishing any employment link. The difference between employee and an independent contractor lies on the requirements that one must have to be an employee.
An individual will be considered an independent contractor if he or she has independence to perform the work and it is not subordinate to a company’s directives and regulations, and there is no exclusivity in the relationship between the parties. These professionals are not covered by the labor legislation and are not protect by the labor rights.
The cost of hiring a freelance professional is much lower. The only requirement is that the worker must be registered at Social Security as an autonomous professional, and the contracting company must pay 20% of his payroll as INSS.
As an entity
Professionals turned into legal entities are more likely to be contracted as independent workers, because it is safer for the hiring company. In Brazil, the contracting of a legal entity to perform services to other company is known by the acronym PJ (Pessoa Jurídica). It is also imperative that the professional have no exclusive relation with the company and does not attend every day at the same time to work, receiving constant direct orders from a boss.
The cost of hiring a legal entity to perform some activities in a company is zero. That is why autonomous professionals turned into legal entities are preferred over individuals. Because they work in the name of a company, they also are able to issue invoices to the buyer of their services.
Understanding the PJ regime
PJ, acronym for Pessoa Jurídica (Legal Entity), is an alternative working regime to CLT’s. While the second provides labor rights and require the formation of an employment link, the first waives these obligations and exempt the employers from labor and tax obligations.
However, to work under the PJ regime, it is necessary to open a company in order to obtain a CNPJ number. Normally, professionals that work under this regime start a company out of forms that count with privileged tax collection, such as:
Microempreendedor Individual (MEI)
Professionals invoicing up to BRL 36.000 per year can open a company as MEI to provide their services. This company form has a privileged tax collection, as it was created to defeat the informal work. It is only necessary to pay a fixed monthly amount, for Social Security and ICMS or ISS, and with that the professional can have access to labor benefits such as maternity allowance, sickness allowance, and retirement, among others.
Empresa Individual de Responsabilidade Limitada (EIRELI)
Also counts a privileged tax collection. The only difference from MEI is that EIRELI doesn't impose a limit of invoice.