Article, Brazilian Blog

5 payroll mistakes to avoid in Brazil: Start 2025 right

5 payroll mistakes to avoid in Brazil

Payroll is one of the most critical aspects of managing a business. In Brazil, where labour and tax laws are complex and stringent, making payroll mistakes can lead to hefty fines and legal issues. To help your business start 2025 on the right foot, let’s explore the five most common payroll errors you should avoid.

1. Misunderstanding local tax codes

Brazil’s tax codes are notoriously complex and vary by region. Many businesses fail to properly classify their employees, leading to incorrect tax deductions and filings. For instance, compliance with codes like the National Classification of Economic Activities (CNAE) and the Electronic Service Invoice (NFS-e) is crucial. Misunderstanding these regulations can result in errors that directly affect payroll.

2. Incorrect social security contributions (INSS)

Another common mistake is the miscalculation of Social Security contributions (INSS). These contributions vary depending on employee salary brackets, and any error can result in costly fines or legal complications. Employers must stay updated on rate changes and ensure accurate calculations to avoid future problems.

3. Non-compliance with FGTS

The Severance Indemnity Fund (FGTS) is a mandatory payment for all employees in Brazil. Many businesses either forget or fail to accurately calculate these contributions, which can lead to significant legal risks. Non-compliance with FGTS harms employees and can result in lawsuits against the company.

4. Failure to track employee benefits correctly

Brazilian labour laws mandate several benefits, such as the 13th salary and vacation pay. Employers who do not track these properly risk missing payments or making errors in the final calculations. This not only affects employee morale but can also lead to labour disputes and fines.

5. Unclear Payroll Policies for Contractors vs Employees

Brazil has strict regulations that distinguish contractors from employees. Misclassifying employees can result in significant fines or legal action. Understanding the Consolidation of Labour Laws (CLT) and ensuring payroll policies are clear and strictly followed is essential. Lack of clarity can lead to misunderstandings and legal issues.

How to avoid these mistakes

Implementing a payroll system can be the difference between staying compliant and risking fines. Automated tools like PaySpace by Deel ensure payroll accuracy and compliance with Brazil’s complex laws.

PaySpace by Deel automates tax calculations and integrates legislative changes directly into the product. This keeps your payroll accurate and compliant, protecting your business from legal risks. 

Conclusion

Starting 2025 with accurate payroll is crucial. Avoid common mistakes to ensure compliance and avoid fines. Payroll accuracy isn’t just about compliance; it’s about maintaining employee trust. With the right tools, you can ensure a smooth and successful 2025.

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