When hiring remote software engineers in Latin America, understanding how local employment models work can save you time, reduce legal risk, and simplify operations. Brazil, the region’s largest tech market, offers two primary ways of engaging professionals: CLT and PJ. For international companies, choosing the right model is not just about cost. It directly impacts flexibility, compliance, and scalability.
Understanding CLT (W2): Brazil’s full-time employment model
CLT, short for Consolidação das Leis do Trabalho, is Brazil’s standard labor contract. It is comparable to the W2 structure in the United States. Under CLT, employers are responsible for a range of benefits including vacation pay, government pension, health insurance, and severance. This model provides stability for the employee, but it also comes with high employer costs and regulatory obligations.
CLT can be a good fit for local companies hiring in-office staff. However, for international organizations, the administrative and legal demands often outweigh the benefits. CLT requires setting up a legal entity in Brazil, managing in-country HR, and complying with local labor laws, which are typically not aligned with the structure of cross-border hiring.
Understanding PJ (1099): The contractor model
PJ, or Pessoa Jurídica, is the preferred model for hiring remote engineers in Brazil. It is similar to the 1099 contractor approach in the U.S. Under this model, professionals operate through their own legal entity (such as MEI or LTDA), issue monthly invoices, and handle their own taxes and benefits.
The PJ model offers several clear advantages:
- No local entity or employer obligations
- Fixed and predictable monthly costs
- Full compliance through a contractor framework
- Greater flexibility to scale your team
Most Brazilian developers working with U.S. and European clients are already familiar with the PJ model and often prefer it. It gives them access to international opportunities and more autonomy over their careers.
Why PJ aligns with global hiring strategies
The PJ structure is consistent with contractor-first hiring practices in other Latin American markets like Argentina, Colombia, and Mexico. For U.S. companies, this approach provides important benefits:
- No need to offer local benefits like health insurance or 401(k)
- No Brazilian payroll taxes or employer liabilities
- Flexibility to ramp teams up or down as needed
- Compatibility with standard contractor management systems
This is particularly relevant for building nearshore teams in roles such as backend development, QA, DevOps, or design, where timezone compatibility and fast onboarding are essential.
The role of a local partner
Companies can engage contractors through a direct hire or work with a local partner. Even with the PJ model, managing contracts, compliance, and payments correctly is key. A trusted local partner brings the legal infrastructure and operational knowledge to ensure all documentation and onboarding are aligned with Brazilian regulations.
There are also cultural and practical considerations. For example, expectations around PTO, national holidays, and sick leave may differ from other countries. A local partner can help manage these nuances, providing a smoother experience for both the company and the professional.
This model allows international companies to tap into top-tier Brazilian talent without setting up local operations, while maintaining legal clarity and operational efficiency.
