Brazil wants to track labour force statistics online, which means more obligations for employers in the country. Our Brazil payroll team gives us early warning.

Its name sounds like something from a Silicon Valley tech start up, but Brazil's latest payroll regulation changes will help the federal government to collect labour, social security, tax and fiscal information for employees around the country.

Named e-Social - or the Sistema de Escrituração Fiscal Digital das Obrigações Fiscais, Previdenciárias e Trabalhistas – but also known as EFD Social and SPED Payroll, the project will unify information about the employment relationship of all workers in the country. It will require that employers transmit all information referring to their labour force via an online mechanism.

The information will then be registered in a unique database accessible by every government entity it effects, as set out below:

  • Federal Revenue Department (Receita Federal): social security contribution and withholding tax 
  • Social Security Institute/Ministry of Social Welfare (INSS/MPS): employment bonds and contribution wages 
  • Ministry of Labour and Employment (MTE): labour rights and benefits
  • Caixa Econômica Federal Bank: Guarantee Fund for Length of Service (FGTS)

This is not a legislation change as such, but does mean an additional reporting requirement for Brazillian employers.

Why is it needed?

As the world at large demands more and more transparency in markets, we will see more initiatives such as e-Social in Latin America. It's designed to tighten evasion of taxes and fraud while providing more warning bells for risk. It will formalise work and social security procedures and improve access to workers' rights in both areas.

In short, it's a shot across the bow for corruption and fraud in Brazil.

Be prepared to get e-Social

It's also been a bit troubled to date, with start dates set and then pulled on a few occasions. At the time of publication there wase no exact date for implementation yet set, but we do know it is coming and so recommend that employers be ready.

If you are running a payroll in Brazil, regardless of size of organisation or workforce, use this time to get prepared:

  • Start to reconcile your data now
  • Design your processes and workflows for inputting information to the portal
  • Identify risks in your internal procedures and propose changes if needed
  • Ensure all employee data is up to date

Most importantly, though, make sure you keep informed on the government processes, or work with a third party supplier who can keep you informed of regulation updates. All employers in Brazil will need to be ready to roll when e-Social is finally switched on.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.