A complete total cost guide
Hiring in Brazil can deliver senior quality at a lower total cost of ownership when you match structure to reality. This guide explains how CLT/W2 employment works, how PJ/1099 contractors work, what employers actually pay under each model, and how to build a reliable budget for hiring in Brazil. The tone is consultative and practical so both newcomers and advanced leaders can act with confidence. When in doubt, confirm details with local payroll and legal support.
What total cost means when hiring in Brazil
Total cost of ownership is not only the headline salary or rate. It includes statutory items, benefits, taxes, operations, equipment and security, and the management effort required to run a predictable relationship. Your cost mix depends first on the engagement model. CLT/W2 concentrates cost in mandatory employment items. PJ/1099 concentrates cost in a service rate, supported by compliant contracts and reliable payments.
CLT W2 employment in Brazil what you actually pay
CLT is Brazil’s employment regime. It resembles the United States W2 experience but with local specifics that you must budget for.
Base salary and payroll cadence
Salaries are negotiated as a monthly gross amount paid in local currency. Payroll typically runs monthly with a cut off date defined by your provider or Employer of Record.
Paid time off and public holidays
Brazil guarantees 30 calendar days of paid vacation per year after 12 months of work, with the option for the employee to sell up to 10 days back to the employer. Public holidays exist at national, state, and municipal levels, so the exact count varies by city.
Thirteenth salary
A mandatory extra monthly salary typically split across November and December. In budget terms, this is roughly 8.33% of the annual base added to your cost.
Vacation bonus
When the employee takes vacation, the employer pays a statutory bonus equal to 33.33% of one monthly salary. Finance should accrue this monthly to avoid spikes.
FGTS
A employer deposit equal to 8% of monthly gross salary into the employee’s severance fund is mandatory. If you terminate without cause, there is an additional 40% penalty on the FGTS balance. This penalty is not a monthly cost but should be understood for scenario planning.
Social security and payroll taxes
Employer social security contributions apply on payroll and commonly sit around 20% for companies under the general regime, plus risk and third party levies that can add a few percentage points depending on industry and classification. Your payroll provider will calculate exact figures. Plan a working range in the budget and refine with actual quotes.
Health plan and benefits policy
Mid senior and senior CLT hires usually expect private health coverage. Employer cost varies by plan, but a realistic planning range is 100 to 200 USD per month per employee. It is common to include meal or food allowance and commuter support. A practical planning range for meal allowance is 150 to 250 USD per month per employee when offered as a benefit.
Payroll operations
If you use an Employer of Record, you will pay an administration fee in addition to the statutory items above. If you operate your own entity, budget external payroll services and internal accounting time. In both cases, the statutory items remain your economic responsibility.
For fundamentals of these structures, see our explainer on hiring models in Brazil and the decision guide on the best hiring model for a remote team in Brazil.
PJ/1099 contractor in Brazil what you actually pay
PJ means the professional invoices through a personal legal entity for services. When the day to day reality reflects a service relationship focused on deliverables and outcomes, this maps to a United States independent contractor arrangement.
Service rate
You agree a monthly or daily rate based on seniority, scope, and impact. Rates can be denominated in USD for planning and settled in Brazilian reais through a local partner.
Employer taxes
There are no employer side social charges like FGTS or employer social security on your side. The professional handles their own taxation. Your cost is the agreed service rate.
Contracts, invoicing, and payouts
Use clear scopes, confidentiality and IP assignment, data protection, and service level expectations. A reliable local partner runs invoicing and ensures on time payouts in local currency, which supports retention and focus.
PTO as a retention practice
There is no statutory paid vacation for PJ/1099, but successful teams still plan a PTO policy for contractors to sustain performance and retention. A common practice is to offer 10 to 15 business days of paid time off per year and to align national holidays with team norms. Document this in the agreement to avoid ambiguity.
For an end to end view of process quality and budgeting across models, keep the pillar on hiring software engineers in Brazil and Latam close by.
Currency planning and rate or salary reviews
Most United States teams benchmark compensation in USD and settle in BRL to reduce friction for professionals. Agree a review cycle that accounts for performance and market movement. Common review checkpoints are every 6 or 12 months. For CLT/W2, align to an annual cycle and pro rate thirteenth salary and vacation bonus accruals each month. For PJ/1099, keep reviews tied to scope and impact to preserve the link between cost and outcomes. Paying in USD is often seen as a differentiator by senior candidates, especially when combined with predictable payout dates and transparent review policies.
Two worked examples you can adapt
Replace the assumptions with your numbers and confirm with your payroll provider or Employer of Record before committing to budgets.
Example A: Senior Software Engineer in Brazil as PJ/1099 contractor
Assumptions
Annual service rate between 40,000 and 60,000 USD
No employer social charges, no FGTS, no thirteenth salary, no vacation bonus
Optional contractor PTO policy of 10 to 15 business days for retention
Estimated annual employer cost
40,000 to 60,000 USD
This equals the agreed service rate. If you choose to provide equipment or a stipend, budget separately. There are no employer statutory taxes on top under PJ/1099.
Fit
Speed, flexibility, and cost tied directly to delivery. Suitable for nearshore squads and platform work.
Example B: Senior Software Engineer as CLT/W2 through an Employer of Record
Assumptions
Annual base salary 50,000 USD
Thirteenth salary 8.33% of annual base
Vacation bonus 33.33% of one monthly salary
Employer social security working assumption 20% applied to salary plus thirteenth and vacation bonus
FGTS 8% applied to salary plus thirteenth and vacation bonus
Health plan 150 USD per month
Meal allowance 200 USD per month
EOR administration fee varies by vendor and is not included below
Step by step estimate
- Base salary per year
50,000 USD - Thirteenth salary at 8.33%
4,167 USD - Vacation bonus at 33.33% of one monthly salary
1,389 USD - Employer social security at 20% on salary plus thirteenth plus vacation bonus
11,111 USD - FGTS at 8% on salary plus thirteenth plus vacation bonus
4,444 USD - Health plan per year
1,800 USD - Meal allowance per year
2,400 USD
Estimated annual employer cost before EOR admin fee
75,311 USD
Notes
Social security add ons can vary by industry and classification. Your provider will calculate exact figures. The FGTS termination penalty of 40% applies only in terminations without cause and is not a monthly cost. EOR administration fees are additional.
Fit
Traditional employment experience with benefits and a long horizon. Suitable for engineering managers, principal roles, and key system owners.
Cost comparison in one view
PJ/1099 at 40,000 to 60,000 USD per year usually delivers a lower total cost of ownership and the fastest time to start.
CLT/W2 at a 50,000 USD base in this example results in roughly 75,000 USD in annual employer cost before any EOR administration fee, due to statutory items that are part of the Brazilian employment model.
The decision is not only cost. It is also about the working reality you need. If you require statutory benefits and an employment package, CLT/W2 is appropriate. If you need speed, flexibility, and a service relationship aligned to outcomes, PJ/1099 is usually the best fit.
A short checklist before hiring in Brazil
Do you need statutory benefits and a traditional employment experience?
If yes, CLT/W2 is the likely path. If no, PJ/1099 is typically the best model.
Do you have a clear service scope and collaboration windows?
If yes, PJ/1099 aligns well. If not, CLT/W2 gives more structure through standard policies.
Do you require long term retention?
If yes, both models work well when expectations, compensation progression, and collaboration norms are well defined.
Do you need to start quickly with senior capacity at a lean cost
If yes, PJ/1099 with a reliable local partner is usually faster.
Do you have a payroll provider or Employer of Record ready?
If yes, you can proceed with CLT/W2. If not, start with PJ/1099 while you evaluate providers.
Helpful references to go deeper
If you want to understand each model in detail, start with our overview of hiring models in Brazil.
If you are deciding which model fits your scenario, review the best hiring model for a remote team in Brazil.
If you are budgeting a squad, see the analysis on the cost to hire a software engineer in Brazil.
For an end to end process view from sourcing to offer, keep the pillar on hiring software engineers in Brazil and Latam close by.
