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If you have business in Brazil you have certainly wondered if it is worth hiring through the rules of the CLT or PJ. But, before calculating which regime is best for your company or service, you need to understand how each of them legally works under Brazilian law. Check out all tips ahead!
What is CLT and what are the main advantages?
CLT is the acronym for Consolidation of Labor Laws: an instrument that institutes the rules that regulate individual and collective labor relations in Brazil, approved by Decree-Law No. 5,452, of 1943, and modified by updates and reforms – such as labor , 2017.
This type of job is characterized by:
- Act as a private individual;
- Provide service with personality – that is, the work must be performed by a specific person, hired for that;
- Follow the rules of the employer, in a subordinate relationship;
- Receive a salary for the service provided;
- Provide non-occasional service – every day or at a specific frequency, except in the case of intermittent work.
At CLT, the employer can be an individual or collective company, self-employed person, association or any other organization that admits employees.
When being hired as a CLT, the worker receives some rights, such as:
- Weekly paid rest;
- Paid annual vacation with at least a third more than salary;
- Thirteen first salary;
- FGTS (Time Guarantee Fund);
- Social security benefits, such as retirement and sickness benefits;
- Unemployment insurance and indemnity in case of unfair dismissal;
- 120 days of maternity leave;
- Paternity leave;
- Additional for unhealthy or dangerous activities – such as those dealing with inflatables, explosives or electrical energy;
- Free assistance to children and dependents up to five years of age in daycare centers and preschools;
- Insurance against accidents at work.
On the other hand, the CLT worker may have discounts on his salary referring to the INSS and the Income Tax – that is, the amount the employee receives is always less than the gross salary recorded in the work card.
LEARN ALL ABOUT TAX REFORM IN BRAZIL
How does PJ hired work?
Generally, working as a PJ means being an “employee” of a company, but hired as a Legal Entity – the famous “pejotizado” employee.
The only difference for a CLT worker is that service is provided by a legal entity. The contractor keeps the employee, but gets rid of the expenses of a formal employee – such as FGTS, INSS, vacation, thirteenth and other benefits.
This practice, however, is not permitted by law in Brazil. Although the labor reform has created space for freelancers to be hired exclusively and on a continuous basis by a company without forming an employment relationship – even if it is to carry out the main activity of the company -, there can be no subordinate relationship between contractor and contractor.
By subordination, understand the contractor’s power to direct, regulate, supervise and apply penalties to the contractor’s work.
Basically, a professional can legally provide services as a company to a company when there is no such subordination relationship. In other words, when the professional has the autonomy to do his job.
Precisely for this reason, it is not possible to be hired for a “job vacancy” like PJ. If the regime is PJ, it is not a job – and you must be free to do your job as a self-employed professional.
CLT or PJ: what is the best form of hiring
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Hiring an employee as a Legal Entity for a job vacancy is not permitted by law in Brazil. Despite being a common practice in many sectors of the economy, “pejotização” is illegal – and, contrary to what many people think, this has not changed with labor reform.
However, with help of an accounting consulting, you can hire PJ employees to act as service providers in certain functions in the company, but never occupy an employment position.
The company establishes an employment relationship (work rules such as fixed times of entry and exit, salary, face-to-face work, daily provision of services, etc.), the PJ can file a lawsuit to prove that it acts as an employee and gain access to the rights of a CLT worker.
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