Hiring someone temporarily to do a job might be the most suitable solution in many cases, but attention is needed to avoid problems with Brazilian employment law.
Many companies in Brazil prefer to hire temporary workers and freelancers instead of hiring a registered employee. A study by the Instituto Brasileiro de Geografia e Estatística (IBGE, or Brazilian Institute of Geography and Statistics) proves that nearly one out of four people working for private companies in Brazil are not registered employees.
The lack of formal registration can be seen more often within informal jobs, domestic workers and with positions in industries such as Technology and Communications.
The preference for freelancers happens for various reasons. By hiring someone without registering them with the Ministry of Labor, several expenses do not have to be covered, such as working benefits, paid leave, vacation, termination fees etc; all of these would otherwise be mandatory. It might also be quicker to hire a freela or frila – like they say in Brazil – when searching for someone to do a specific and punctual job.
However, there are various setbacks. The hiring company do not have any kind of exclusivity over the freelancer’s work. Also, in many cases, a job carried out by a freelancer is not seen this way by the court and by Código de Leis do Trabalho (CLT or Labor Laws Code), so the contractor ends up paying all the benefits and taxes that they were trying to avoid in the first place.
Types of employment in Brazil
The main difference between regular employees and freelancers in Brazil is basically the type of relationship between the individual and the contracting company.
Regular employees need to be registered under CLT rules, receiving a monthly salary for the services provided to a company. The employee must follow the rules and values set by that corporation. The employee also has several working rights and is eligible for any benefits offered by the contractor.
Freelancers are characterized by the lack of strict employment bonds with the contractor. They have no rights or benefits granted by CLT, but there is usually more flexibility and the freelancer does not have to follow the contracting company’s directives and should treat the contracting company as a customer.
Legal risks of hiring freelancers
In order to make sure you are hiring a freelancer and not another regular employee, some precautions should be taken. The general advice is to avoid anything that can be seen as part of an employment bond between the contracting company and the temporary worker.
Treating a freelancer like a regular worker might be a big mistake. Some companies set fixed working hours, treat the freelancer as a subordinate, and even grant a personal company e-mail address. All of these can be seen as employment bonds and can possibly trigger legal problems further on.
Also make sure the functions, tasks and goals of the freelancer are clearly defined in a contract. A freelancer should not be hired to simply fill the space left by a previous employee, but to perform a specific service, for a specific period.
Having a copy of important documents relating to the freelancer’s activity is also a way to avoid further problems. It is recommended to store copies of papers issued by the municipal registry office or by Instituto Nacional do Seguro Social (INSS, or Social Security National Institute) showing that the freelancer is an autonomous worker or an individual taxpayer.
A copy of payment receipts is also important to eventually prove that the relationship between the contractor and the freelancer was not under CLT rules. Copies of receipts showing that taxes like the ones on services (Impostos sobre Serviços, or ISS) were paid are also relevant.
And remember: companies are prohibited from giving benefits to freelancers, but they can reimburse expenses related to the job. So, many companies provide additional money to be used for transportation and food, for example. Just make sure, by written contract, that this amount is listed as a reimbursement, and always keep the payment receipts.