Brazil: Large Companies Have Until September 2016 To Adopt E-Social System

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By Ed Taylor

June 30—After months of delays, the Brazilian government on June 25 finally announced the timetable for companies to move to the country's new digital system for the reporting of employee data.

Under the E-Social system, information on company employees must be reported online as soon as it becomes available. When a new employee is hired, he or she must be immediately entered into the system and any subsequent changes in status reported within a specified time period. At present, employers have seven days to report new hires. Employers will also be required to maintain up-to-date information on their total payroll, tax and social security payments, and payments for payroll, social security, severance pay, union fees and income taxes must be entered into the system by the seventh day of the following month.

The program will be controlled by a managing committee composed of representatives of the ministries of finance, social security, labor and small business.

Real Time

With this wealth of information, provided practically in real time, tax department auditors will be able to cross check company tax information with data on salaries and benefits paid to employees, and the labor ministry will have immediate access to information on dismissals, vacations, sick leave and overtime pay.

While companies knew what was coming, until June 25 they did not know how much time they had to ensure their compliance with the new system. According to the newly announced timetable, companies with annual sales in 2014 of over $26 million will have until September 2016 to transition to the new system for all labor, social security and tax information and until January 2017 for information on workplace safety and worker health issues.

For companies earning less that $26 million in 2014, the deadlines are January and July 2017, respectively.

Attorneys expressed satisfaction that the deadlines had finally been announced but also warned that companies will have a difficult time meeting them.

“Recent complex changes such as a new calculation for retirement benefits and new rules for unemployment benefits will have to be included in the E-Social,” said attorney Caio Tanuguchi of the law firm Aidar SBZ Attorneys. “Companies will have to adjust, which will demand time and extra costs.”

Bad Timing?

For Helcio Honda, the head of the legal department of Brazil's leading business association, the Sao Paulo State Federation of Industries, the timing of the transition is a major problem given Brazil's slowing economy and a looming recession.

“Our big problem is the current economic situation,” Honda said, adding that companies are now struggling to reduce costs to avoid layoffs and are not prepared to deal with increased expenditures for implementation of the E-Social system.

To contact the reporter on this story: Ed Taylor in Rio de Janeiro at correspondents@bna.com

To contact the editor responsible for this story: Rick Vollmar at rvollmar@bna.com

For more information on Brazilian HR law and regulation, see the Brazil primer.