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collection of employees’ tax, social security and labor information and
the reporting of that information to the government is undergoing a
significant transformation in Brazil, leaving employers operating in the
country a closing window to ensure the information they have is ready
The Brazilian government’s ambitious recordkeeping transformation
project, known as eSocial, aims to streamline the transmission of
employment-related data to various federal government institutions,
including the internal revenue service, the social security institute,
the labor and employment ministry and the government bank that manages
the national employee savings fund system.
do not know the implementation dates yet, because it will depend on
when the guidelines will be published,” said Renata Neeser, a
shareholder at Littler Mendelson, based in New York City. Neeser
explained that eSocial reporting will go live for large and midsize
employers (those with revenues of over $3.6 million reais in 2014) one
year after the government issues final guidelines. The publication date
for the guidelines is still uncertain, she said. No timeline for small
employers has been published.
“This will have a major impact on multinationals working in Brazil,”
said Maricleier Rennie, global payroll solutions manager for CloudPay, a
provider of multinational payroll technologies and services. All
employers will eventually be required to use eSocial, “bringing great
alterations in comparison with the present system,” she said.
Some of these changes include:
Employers will be required to report specific data related to the
employment relationship, including information relating to hiring,
compensation, working hours, leaves, contract modification, accident
notification, social security payments and contributions, and
Some of the major goals of the eSocial initiative include decreasing
insolvency, tax evasion and fraud; increasing the ability of the
government to inspect employment records; creating a single point of
reference for employees and employers to monitor tax and labor
obligation information; and reducing bureaucratic costs for employers
who “today produce about 70 different forms for the government,” Rennie
“It’s a huge transformation, but, in the long term, it will be very
positive for business in Brazil,” said Marcelo Godinho, a Sao
Paulo-based director at Ernst & Young. Godinho explained that, once
companies invest in the technology and get past the learning curve,
businesses will experience cost reductions from less time and energy
consumption filling out paperwork the old-fashioned way. “The new
obligation is a very good opportunity to reduce the bureaucracy in
Brazil,” he said. “One company in Brazil spends on average 2,600 hours a
year to fulfill obligations just to the tax revenue service. If we
reduce the time spent filling out forms, that’s a great benefit to HR.”
There is no legislative change to the existing employment, tax and
social security laws, reminded Marco Santana, a director at Towers
Watson who is based in Sao Paulo. “No additional duties will be imposed
on employers,” he said. What is changing is the way information on
employees is collected and communicated to government departments. “The
new portal will fundamentally change employer interactions with
government agencies simply by facilitating reporting requirements and
making it easier for the government to ensure compliance,” he said.
Provided the system works as intended, it has the potential to give the
government something closer to real-time intelligence on labor markets,
he added. Employers will benefit from simplified administration and more
data on various aspects of their own operations’ human capital metrics,
Santana said, although there will be administration and operations
costs and the need to adapt company culture to this new level of
eSocial will not only affect the technological operation of
human resources, but it will greatly affect the management culture of
the company, said Lelio Tocchio, an attorney and director of HR
for the Rhind Group, a consultancy based in Sao Paulo. “Information that
presently is not routinely registered will be required,
procedures for admitting new employees and records of working hours
that are not completely compliant with the law should be changed, new
information and records in relation to health and safety will be
adopted, and ultimately the responsibility of the company in respect of
people management will be total,” he said.
The government has said that eSocial is being designed to simplify
and expedite the processing of information by eliminating duplicated
information and forms. However, it will also allow inspection agencies
to monitor and audit employers, said Neeser. Employers should improve
the quality and accuracy of the information provided to avoid penalties,
Rennie agreed, saying that going forward all employment activities
will be open for inspection. “Government audits will no longer be
conducted in person, unless you’re under investigation. They will be
done electronically, and much more frequently than they are today,” she
said. “It is important to point out that failure to comply with obligations will automatically generate hefty fines.”
How Should Employers Prepare for eSocial?
To ensure readiness for eSocial’s go-live date, employers should immediately:
Employment information will be loaded and transmitted almost
immediately after work history events such as being hired, getting
approved for a raise or submitting a leave request, whereas payroll and
social security information will be transmitted on a recurring monthly
basis. But take care with entering information, because “the labor and
payroll info will be matched up to make sure they complement each other
at the end of every payroll period,” said Rennie. “If they don’t match,
you will be penalized.”
Roy Maurer is an online editor/manager for SHRM.
Follow him at @SHRMRoy
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