Don’t Forget to Pay the 13th Salary

Two of the biggest impediments to doing business in Brazil are the tax laws and employment laws. Over a period of 23 years, a Brazilian lawyer compiled the country’s tax laws in a 41,000-page book. Imagine the poor tax lawyer who has to read and understand it all. But that’s for another day (or days perhaps). The employment laws are not as voluminous, but they can be a significant burden for employers.

In general, Brazilian employment laws favor the employee. Assuming there is a formal employment relationship, workers receive a myriad of benefits. There are requirements for time off, payment of commuting expenses (vale transporte), and even payment of meals (vale refeição).

But one of the benefits that most surprises foreigners is what Brazilians refer to as “the 13th salary.” Think of it as a mandated holiday bonus. Employees are not entitled to just 12 months of pay; they also get an extra month’s salary at the end of the year.

The law requiring payment of the 13th salary has been on the books since 1962. It requires that employers pay their employees an additional month of salary by November 30. There’s an option to pay one half by November 30 and the other half by December 20.

It’s a strange concept for non-Brazilians, but it’s ingrained in the local culture. It’s simply part of the price of doing business in Brazil. So keep this in mind when you start your company and hire workers. You’ll want to make sure you’ve included these extra expenses in your budget.