For foreign investors and business owners, understanding the complexities of payroll in Brazil can seem like a complex challenge. Among the various mandatory charges and benefits within the local labor laws, one concept often generates questions for those accustomed to European or North American hiring models: the 13th salary.

Unlike a discretionary “performance bonus,” which is common in other countries, the 13th salary is a fixed legal obligation. To ensure compliance and a healthy cash flow when managing your payroll in Brazil, it is fundamental to understand how this benefit works.

In this guide, Europartner explains everything you need to know about this bonus, its tax impacts, and how to manage it from an accounting perspective.

Payroll in Brazil: what is the 13th salary?

Established in 1962, the 13th salary, technically called the “Christmas Bonus” (Gratificação Natalina), is a mandatory extra payment granted to every employee with formal employment (CLT regime).

Simply put: if the year has 12 months, Brazilian legislation requires the company to pay an additional salary at the end of the year, totaling 13 monthly payments (not counting the vacation bonus).

The value corresponds to 1/12 (one-twelfth) of the remuneration due in December for each month of service in the corresponding year. In other words, if the employee worked the entire year, they receive a full extra salary. If they were hired in the middle of the year, they receive it proportionally.

13th salary: who is entitled to it?

Every worker hired under the CLT (Consolidation of Labor Laws) regime is entitled, including:

• Urban and rural workers;
• Domestic employees;
• Temporary workers.

Golden rule: to count as a “worked month” in the proportional calculation, the employee must have worked at least 15 days in that specific month.

The payment schedule for the 13th salary

For the foreign business owner, cash flow is an important point. Brazilian law determines that the payment is not made all at once (although it can be in specific situations), but rather divided into two mandatory installments:

1st Installment (Advance)

• Deadline: must be paid between February 1st and November 30th.
• Value: corresponds to 50% of the salary from the month prior to payment.
• Important detail: in this installment, there are no deductions for taxes or social security (INSS/IRRF). The employee receives half of the gross salary “clean.”
• Note: many employers choose to pay this installment together with the employee’s vacation, if requested by the employee.

2nd Installment (Settlement)

• Deadline: must be paid strictly by December 20th.
• Value: this is the remaining balance of December’s remuneration.
• Taxation: it is in this installment that deductions occur. The calculation of taxes (INSS – Social Security and Income Tax) is based on the total value of the 13th salary, and the amount advanced in the 1st installment is deducted here.

Read: Payroll and tax in Brazil: comprehensive guide for employers

13th salary: tax impacts and charges

This is where accounting management needs to be precise. The 13th salary is not exempt from charges. For the company, the cost goes beyond the nominal value paid to the employee.

The following apply to the 13th salary:

1. FGTS (Severance Indemnity Fund): the company must deposit 8% regarding the value of the 13th salary (applies to both the 1st and 2nd installments).
2. INSS (Social Security): deducted from the employee in the 2nd installment, but the company must also pay the employer’s share (if applicable to the company’s tax regime) on this amount.
3. IRRF (Withholding Income Tax): deducted from the employee in the 2nd installment. The 13th salary has exclusive taxation, meaning it is not added to the salaries of other months for the annual tax calculation.

Payroll in Brazil: what if the employee is terminated?

In Brazil, contract termination is detailed. If the employee is dismissed without “just cause”, or if they resign, they are entitled to receive the 13th salary proportional to the months worked in that year up to the departure date.

The only exception is “dismissal for just cause” (misconduct), in which the employee loses the right to the proportional 13th salary.

Read –  Payroll in Brazil: why BPO is your solution for compliance and efficiency

Financial planning for international companies

For foreign companies operating in Brazil, the most common mistake is not provisioning these amounts monthly.

Imagine a company that bills in Dollars or Euros and has expenses in Brazilian Reais. If the company does not set aside 1/12 of the payroll every month in its accounting, it will reach November and December with a payroll that is, in practice, double the normal amount.

Europartner’s recommendation is: treat the 13th salary as a monthly cost in your management accounting (provision). This avoids surprises at the end of the fiscal year and maintains the financial health of the Brazilian subsidiary.

How Europartner can help

The 13th salary is a historical achievement for Brazilian workers and a non-negotiable reality for any company wishing to operate in the country. Although it adds a layer of cost and administrative complexity, it is fully manageable with the right support.

For foreign investors, the secret is not to fear the legislation, but to have local partners who guarantee compliance.

Europartner specializes in accounting and financial management for international companies in Brazil. We handle all the complexity of payroll, tax calculation, and HR compliance, allowing you to focus on expanding your business.

Do you need help structuring your operation or reviewing your payroll in Brazil? 

Contact us let our team of specialists talk to you.