Brazil's Payroll Taxes. Presented by Antonio Ferreira DBS Partner

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Branden Perkins
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1 Brazil's Payroll Taxes Date: June 2011 Presented by Antonio Ferreira DBS Partner

2 About DBS Partner Agenda Company s CEO Antonio Ferreira (Presenter) Legal Concepts Basis of Calculation Employees Calculations Employer Calculations Files & Reports to be sent to the Brazilian Government Conclusions Questions & Answers 1

Calculations Employer Calculations Files & Reports to be

3 About DBS Partner Founded in 2002 by HR executives. 42 clients and 30 employees in SP Outsourcing Services: BSP BPO Consultancy Services: Strategic HR projects People recruitment Systems Available: Payroll & Time Working Control HR Portal & Workflow Performance Appraisal Compensation & HR Budget Technology: Oracle Full WEB 2

Services: Strategic HR projects People recruitment Systems Available: Payroll &

4 About the Company s CEO Antonio Ferreira DBS s CEO for the last nine years. Prior to DBS Partner: Several managerial HR roles for Brazilian and international companies CIGNA: 6 years as CHRO INA: 5 years as HR Manager Payroll Supervisor for more than 15 years. System Analyst for more than 5 years. Teaching HR in Brazilian Universities for 10 years. 3

companies CIGNA: 6 years as CHRO INA: 5 years as HR Manager Payroll Supervisor for more

5 What is Social Security? Who has to pay it? Is there any limit for calculating this Tax? Social Security is the government entity that is responsible by retirement management in Brazil. Employers and employees are eligible to pay this tax according to the law. Employees: There is a limit that is established in the law and updated annually by the Brazilian Social Security Office. Employers: There is no limit. Calculations are made over the total compensation paid to employee. 4

Employers and employees are eligible to pay this tax according to the law.

6 How is the Basis of the Calculation defined? The basis of calculation is the total compensation paid monthly to the employee. This basis includes the following earning: Monthly Salary, Vacations payment, Overtime and any other additional or allowances paid. Only the indemnity payments such as: Notice, Vacations paid in terminations, sold vacations shall not be included in the basis of the calculation. 5

This basis includes the following earning: Monthly Salary, Vacations payment, Overtime and any other

7 How to calculate the employees contribution? Percentage over total compensation paid to employee monthly according to the following scale: Current Scale - BRL Up to 1.106,90 8% From 1.106,91 to 1.844,93 9% Higher than 1.844,93 11% Current Limit: 405,86. 6

according to the following scale: Current Scale - BRL Up to 1.

8 Example of Employee Calculation: Monthly Salary: 900,00 Overtime: 200,00 Additional: 150,00 Total: 1.250,00 According to the scale the percentage to be used is: 9% Then: 1.250,00 * 9% = 112,50. Suppose that the total was: 5.500,00. Then, the percentage to be used would be equal to 11%. Consequently: 5.500,00 * 11% = 550,00, but There is a limit 405,86. In this case the employee would be discounted as of 405,86. 7

Suppose that the total was: 5.500,00. Then, the percentage to be used would be equal to 11%.

9 Is this calculation the same one for all employees? No According to the law: Stringers (Part Time Employees) always pay 11% independently of the total compensation respecting the limit. Interns are not eligible to pay Social Security. 8

always pay 11% independently of the total compensation

10 What happens if one person has been working for more than one employer at the same time? Consider that the monthly current limit for Social Security Contribution is 405,86. According to the law no one can pay more than the limited amount when putting together all discounts in each employer. In this case the discounts have to be pro-rated according to the monthly salary in each job. 9

According to the law no one can pay more than the limited amount when putting together all

11 Employer s Contribution Employer s contribution is divided in three parts: Employer s Contribution Working Accident Contribution Other Entities Contribution Basis of Calculation: The same one used for employees calculation. There is no limit. Social Security Taxes Employer s contribution: Always 20%. Working Accident Contribution: RAT - Variable according to the Market segment From 1,00% to 3,00%. FAP - Also this contribution s part can be reduced or increased according to the market segment Index from 0,50 to 2,00. Other Entities Contribution: Variable according to market segment From 0.00% to 5,80%. 10

Social Security Taxes Employer s contribution: Always 20%.

12 Using our example: Monthly Salary: 900,00 Overtime: 200,00 Additional: 150,00 Total: 1.250,00 Employer Contribution: 20% RAT Working Accident: 3% FAP Index applied to RAT: 1,3550 Other Entities: 5,80% Employer Contribution 20%: 1.250,00 * 20% = 250,00 RAT - Working Accident 3,00% 1.250,00 * 3,00% = 45,00 FAP Index over RAT 1, ,00 * 0,3550 = 15,98 Other Entities 5,80% 1.250,00 * 5,80% = 72,50 Employer Contribution: 383,48 11

5,80% Employer Contribution 20%: 1.250,00 * 20% = 250,00 RAT - Working Accident 3,00% 1.

13 Which reports must be submitted to the Brazilian Social Security Office? GEFIP Report and TXT file must to be sent to Brazilian Social Security Office on a monthly basis. These files demonstrate all detailed contributions by branch and breakdown by employee. Once the files have been submitted the payments must be sent to the Social Security office. Once the payment is complete, the Social Security Office compares the total paid with the numbers informed in the GEFIP file. 12

These files demonstrate all detailed contributions by branch and breakdown by employee.

14 What happens when the government detects differences between the informed amounts and payments received? Employers cannot work for the government until the proper amendments have been completed. Employers cannot apply to get public financial loans. Brazilian Taxes Office will send agents to the company to audit the payrolls and all processes related to Social Security. High value of fines will be applied to the employer. 13

Employers cannot apply to get public financial loans.

15 Social Security legislation is very complex: The Law has more than 100 pages. Conclusions We are covering the most important details only: For additional clarifications send us an . Employer's contribution is extremely high when compared to employee s contribution. Even though the Social Security in Brazil is insolvent. Estimated deficit for 2011 is higher than USD 20 billions. 14

us an e-mail. Employer's contribution is extremely high when compared to employee s contribution.

16 Questions & Answers 15

17 Contact Details for DBS Partner Rua Catequese, 1171 Bairro Jardim Santo André São Paulo - Brazil Phone Number: Direct Number: [email protected] Thank you for your attention 16

Number:55 11 4433 52 10 Direct Number: 55 11 4433 52 14

2.1 Employment Committee approve the implementation of an employee benefits portal, subject to recommendations 2.2 and 2.3 below

2.1 Employment Committee approve the implementation of an employee benefits portal, subject to recommendations 2.2 and 2.3 below Title of meeting: Employment Committee Agenda item: Date of meeting: 15 September 2015 Subject: Report by: Wards affected: Key decision: Full Council decision: Employee Benefits Portal Shaun Tetley, Payroll