One of the first surprises for foreign companies building teams in Brazil is the real cost of hiring under the CLT regime. The net salary received by the employee represents less than half of the total cost borne by the employer.

Charges such as FGTS, employer INSS contributions, paid vacation with a one-third bonus, 13th salary, transportation allowance, and meal allowance are legal obligations—not optional benefits. Combined, these costs represent between 70% and 100% of the gross salary as additional employer expenses.

• 70%: Minimum additional labor cost over gross salary

• CLT: Consolidation of Labor Laws, a regulatory framework with over 900 articles

• 40%: Fine over FGTS balance in case of termination without cause

• Notice period: Proportional to tenure, can exceed 90 days for long-term employees

The termination cost no one puts in the budget

If hiring is already surprising due to its cost structure, termination is often the biggest shock. A dismissal without cause requires payment of: outstanding salary, accrued and proportional vacation, proportional 13th salary, a 40% fine on FGTS, and notice period.

For employees with more than two years in the company, termination costs can easily exceed six months of gross salary.

In Brazil, the employment relationship begins with hiring and ends with termination. Planning only the beginning without considering the cost and process of the end is one of the most common—and most expensive—mistakes for foreign companies.

Alternatives that may make sense depending on your operating model

For companies in a testing phase or with small teams, models such as independent contractors (PJ), employer of record (EOR), or hiring through a local partner can reduce short-term labor exposure. The decision between CLT, PJ, or EOR should be based on the nature of the work, the duration of engagement, and the company’s long-term strategy in Brazil.

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