Benchmark Glance, Brazilian Employee Benefits, January 2016

If you are a human resource professional charged with managing employee benefits, you are likely always on the lookout for local compensation and benefit benchmark data. To help our human resource stakeholders meet this challenge, Asinta offers a glance at health and welfare benchmarking insights from one of our local partners.

Below is Asinta’s Benchmark Glance at what Brazilian employers in the mid-market most commonly offer employees.*

Healthcare Recommendation: See Healthcare under Statutory Benefits, Paid Time Off, & Holidays below.

Dental Recommendation:  See Healthcare under Statutory Benefits, Paid Time Off, & Holidays below.

Vision Recommendation: Not a benefit provided to Brazilian employees.

Retirement Recommendation: Provide at a later date unless promised as part of the hiring package.

Most employer-sponsored retirement plans integrate retirement benefits with social security benefits.  A defined contribution plan is integrated with social security by means of a step-rated formula, and often provides a matching contribution.  Typically employees may contribute from 4% to 6%, and companies’ match 100% and 200% of employee contributions up to 6%.

Employee contributions are tax deductible (up to 12% of salary).  Employer contributions are tax deductible (up to 20% of salary).  Benefits are generally taxed.  An alternate tax regime can be elected by employers who established a plan after 2004.

Pensions under private DC retirement plans are typically paid as a combination of a fixed monthly lifetime annuity and a percentage of the account balance.

Disability Recommendation: A typical private life insurance policy’s disability rider provides a lump sum benefit of 24x monthly base salary in the event of permanent and total disability.

Recommendation: Provide the following benefit level (MBS – Monthly Base Salary):

• Death: 24x MBS
• Accidental Death: 48x MBS;
• Total or partial accidental Disability: up to 24x MBS;
• Total or Partial Illness Disability: up to 24x MBS;

Disability income insurance applies in the event of both occupational and non-occupational incapacity.

After 15 days of paid sick leave, companies typically supplement the social security benefits to a total of 100% of an employee’s salary for the first three months, reducing to a total of 75% for the following three months.  Further payments may be made at the company’s discretion.

Private retirement plans also offer disability benefits.  For defined contribution plans, the total and permanent disability benefit is calculated based on the total account balance and paid as either a monthly lifetime annuity or a percentage of the account balance.

Life, AD&D Insurance Recommendation: As part of the employer-sponsored benefits program, it is common practice to offer life, AD&D insurance to all employees and for it to be fully employer-sponsored.

A company’s life insurance coverage typically includes death of any cause, accidental death and total disability benefits of up to 24x the insured’s monthly base salary for any type of accidents and illnesses, including those that are work-related.

Minimum number of employees eligible for a group insurance contract: 1 (one)

Estimated cost of plan as a percentage of covered payroll: 40%

‘Typical’ Paid Time Off (PTO) Practice (to include vacation, sick days, & holidays): For normal leave, statutory paid annual leave is provided for 30 days and may be reduced where the employee has unjustified absences. In addition, statutory paid leave is provided in prescribed circumstances, including:

• death – two days in case of the death of a spouse, partner, child, parent or sibling
• marriage – three days
• childbirth – one day

Maternity leave is provided for 120 days (may be extended due to medical reasons by a maximum of two weeks before the expected childbirth and two weeks after childbirth). Employment is protected for up to five months after childbirth.

Paternity leave is provided for five days from the date of childbirth.

Local Pre-requisites (‘perks’) Recommendation: None recommended.

Eligibility & Cost Sharing Recommendation: Employees listed on payroll and direct dependents should be considered eligible for insured benefits plans.

Due to legislation (law 9656/98), SCIATH always recommends the employer fully sponsor the medical and dental plans given future liability incurred by allowing employee contribution.

Under 9656/98 if employees are required to pay a portion of the monthly medical/dental premium or premium for the dependents, the employer must allow qualifying laid-off and retired employees to continue participating in the medical/dental plan. 

Benefit Plan Implementation Recommendation: Expect a minimum of 15 business days for underwriting approval. Additional medical testing may be required to issue insurance above guaranteed issue amounts. Then, employers should allow at least 30 days from the time the quotes are accepted before coverage goes into effect.

Taxation Recommendation: Employer contributions to company sponsored insurance and retirement programs generally are tax deductible up to maximum limits.

A Glance at Statutory Benefits, Paid Time Off, & Holidays in Brazil

Every country has a variety of mandatory contributions, health, and welfare benefits that employers must either contribute to, or make available to, their employees. Here are some guidelines for Brazil.

Brazilian Social Security Pensions Requirements (such as Retirement, Survivors and Disability):

1. Retirement, Survivors, and Disability Pension

Administered by the Instituto Nacional do Seguro Social (INSS).

Social security benefits are based on the individual’s benefit salary, which is equal to the average of 80% of the two greatest contributive salaries from 1994 onwards for employees registered with the INSS before 28 November 1999, and the average of all years’ contributive salaries for those registered after that date.  The maximum benefit is equal to the current maximum contributive salary of BRL 3,912.20 as of 2013.  Social security benefit payments are made 13 times per year.

2. Old Age Pension

To be eligible for old age pension benefits, the insured must be at least 65 years of age if male or 60 years of age if female. Starting in 2011, a minimum of 180 months of contributions is also required.

The old age pension is equal to 70% of the benefit salary plus 1% of the benefit salary for every 12 months of contributions, up to a maximum of 100%.

3. Special Pension

A special pension is payable to employees in excessively fatiguing, unhealthy, or dangerous occupations if contributions have been paid for 15, 20, or 25 years.  The benefit equals 100% of the benefit salary.

4. Fundo de Garantia do Tempo de Serviço (FGTS)

The accumulated funds in the employee’s FGTS account are payable upon retirement.

Healthcare Requirements: Via the Brazilian social security system, universal healthcare coverage is provided on a decentralized regional and local basis with coordination by the country’s Unified Health System(SUS).

About 3/4 of the population receives their healthcare from the public system.

In the contributory system, public health care is provided through INSS healthcare facilities or approved healthcare providers.

The quality of care is generally considered poor in rural areas.  In urban areas, the quality of care is adequate in most cases.  In many cases, there are long waiting periods for some forms of medical care, such as routine examinations and non-emergency medical treatment.

Private Health and Dental insurance in Brazil is regulated by a government body called Agencia Nacional de Saude (ANS). The ANS determines the standard coverage (minimum coverage) that applies to every health insurance carrier in Brazil. As a result, coverage provided by every carrier is very similar (almost equal). What differentiate one carrier from another is the network of hospitals/clinics/doctors provided and the value of refunds for procedures done outside the referenced network.

Brazilian Sick Leave Requirements: Employees in Brazil are entitled to 15 days of sick leave paid by employers at full pay.  Medical certification of illness is required and employees must present signed doctor’s medical certificates to their employers in order for sick leave to be granted.  After 15 days, social security pays cash sickness benefits to insured employees for up to two years during which period employees are on unpaid leave.

Maternity, Paternity or Paternal Leave:

1. Maternity Leave

Employers must provide 120 days of paid maternity leave to women covered by social security in case the of pregnancy; for adoptive mothers, the leave period is 120 days if the adopted child is less than 1 year old, 60 days if the adopted child is between 1 and 4 years old, and 30 days if the child is between 4 and 8 years old.

The employer is responsible for the payment of the benefit, which is then deducted by the employer from social security contributions.

2. Maternity Protection

Protection from dismissal due to pregnancy is given from the date that the pregnancy has been reported to the employer until five months after confinement.  If the employee is dismissed, she must be reinstated and paid for the time missed since termination.

Brazilian labor law requires employers with 30 or more female employees to provide daycare or payment in lieu thereof to employees with children less than 6 months of age.  Collective agreements may require additional childcare credits, typically for children up to 3 years old.

3. Paternity Benefit and Family Allowances

Employers are required to provide at least 5 days of paternity leave to employees who become fathers.  Employers are required to pay for paternity benefits and family allowances. They are however later reimbursed by social security.

Worker’s Compensation Requirements: In Brazil benefits for occupational injury and illness are provided by the Brazilian social security system.  Employees are covered for injuries incurred while working or commuting to and from work, and for illnesses contracted due to working conditions. Medical expenses are covered by INSS as well.

Workers’ compensation pensions are paid 13x per year.  Medical care is provided as in the case of short-term and long-term disability.

In the initial phase of the accident or illness that renders the insured unable to work for more than 15 consecutive days, he/she is covered under the “Auxilio Doença” (short-term disability). If the insured becomes partially yet permanently disabled, he/she receives an indemnity called  “Auxilio

For salary continuation, employers are required to pay for the first 15 days of leave due to a work-related accident or illness.

Unemployment Insurance Requirements: Employment contracts may be terminated for dismissal with or without just cause:

• by the employee;
• by the employer;
• by mutual agreement between the employer and the employee;
• Due to an event constituting force majeure;

 A dismissal without just cause entitles the terminated employee to indemnity or severance pay.

 The Brazilian government mandates that all employers fund a severance pay plan according to the Fundo de Garantia do Tempo de Serviço (FGTS) at a contribution rate of 8% of their employees’ monthly salaries.  Contributions are paid into the Caixa Economica Federal (the Central Savings Bank).  The money is paid into accounts in the name of each employee.  These accounts are credited with 3% annual interest plus a monthly adjustment for inflation.  The system is administered by the FGTS, which reports to a high-level executive council.

The accumulated amount in the employee’s account is paid to the employee upon the end of their employment relationship for any reason (including death, disability, discharge, and unemployment) and upon retirement.

The employee’s FGTS account is transferable to the next employer if the employee changes jobs voluntarily.

Termination Indemnities Requirements: If an employee in Brazil is dismissed without just cause (including non-voluntary retirement), the employer must minimally pay:

• A penalty of 40% of the balance in the employee’s FGTS account;
• An additional 10% to cover the employee’s tax obligation to the government;
• A minimum of 1 month of salary if no notice was provided to the employee;

Pro-rata payment of the annual bonus plus a cash payment for any unused vacation time and bonuses. Employment contracts may be terminated for dismissal with or without just cause, by the employee, by mutual agreement between the employer and the employee, or due to an event constituting force majeure.  A dismissal without just cause entitles the terminated employee to indemnity or severance pay.

Vacation/Annual Leave In Brazil, employees with up to 5 unexcused absences receive a minimum of 30 calendar days’ paid vacation every year after one year of service.  Vacation days depend on the number of unexcused absences according to the following table:

The following absences are excused and do not qualify towards calculating vacation days: maternity leave, work injury, illness resulting in cash sickness benefits, bereavement leave, marriage leave, or any other leave authorized by the employer.

The 30 days of vacation are counted to include weekends and holidays; for instance, an employee going on vacation on 1 May should return on 31 May.

A mandatory cash bonus equal to one-third the employee’s monthly salary is payable in addition to the full pay during vacation leave. It is mandatory that employers provide vacation pay, including bonus, at least 2 days prior to the beginning of the vacation period.

Also, it should be noted that, according to the labor law, employees have the right to convert one-third (approximately 33%) of their paid vacation (normally up to 10 days) into pay in lieu of vacation, which the employer must pay no later than 15 days before the end of the accrual period.  Any unused vacation time does not roll over, and employers must pay it out at the end of the calendar year at double time rates.

Brazilian Bereavement Leave Requirements: Statutorily, an employee is entitled to a paid bereavement leave of 2 consecutive working days in case of death of a spouse, child, and direct relatives, such as parents and siblings. However, bereavement leave may last up to 5 days, depending on collective agreements, which may also include grandparents as eligible relatives.

Marriage Leave Requirements: Employees are entitled to a paid leave for marriage of 3 consecutive working days.

Voluntary Blood Donation Requirements: Employees in Brazil are entitled to one day of paid leave every 12 months for voluntary blood donations. A certificate must be requested by the employee from the donor’s center in order to justify the absence.

Electoral Registration Requirements: Employees are entitled to 2 days of paid leave, consecutive or not, for electoral registration.

Brazilian Military Service Requirements: All employees subject to mandatory military service are entitled to paid leave for the duration of said service.

“Vestibular” Examination Requirements: All employees are entitled to paid leave during the days they can prove to have been taking university admission examinations (Exame Vestibular).

Court Proceedings Requirements: Employees are entitled to paid leave for the duration of time they are required to participate in court proceedings.

Union Official Meetings Requirements: All employees who are Union representatives are entitled to paid leave for each day that they participate in official government meetings.

Parental or Family Leave Requirements:  Employers are required to provide at least 5 days of paternity leave to employees who become fathers.  Employers are required to pay for paternity benefits and family allowances. They are however later reimbursed by social security.

And remember, employee benefits are changing all the time. If you are seeking qualified help for researching, reviewing, brokering, or implementing benefits in Brazil, please contact us and we will respond to you within two business days.

*Note: All benchmark comments provided are offered by our partners as informed generalizations regarding a specific country’s current labor market conditions and requirements. No specific industry or job description are targeted in these recommendations. Recommendations offered in Asinta’s Benchmark Glace are guidelines that will help you to form a solid picture of what benefits you will mostly likely need to research and implement locally. For your specific industry or particular positions, these guidelines may be too general to inform your final purchasing decisions but instead will offer you a good place to begin your research.