Brazil: Mandatory Digital System for Employee Data Initiated

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By Ed Taylor

The end of a four-year countdown to the start of Brazil's new digital system for employee information is now only a month away for most Brazilian employers.

Called E-Social, the system was required for companies with annual revenues in excess of $21 million as of June 8. For all other private companies, required adoption is July 16.

The transition to the new system was announced in 2014 and was supposed to be completed the next year. The difficulties employers faced in preparing for the system, however, resulted in successive delays.

Integrated Data

Under the new system, employee information must be registered online as soon as it becomes available. To be compliant with E-Social, companies have to provide information from their human resources, finance, and legal departments, requiring integration of diverse company data.

On the government side, the system is composed of the federal revenue service, the labor ministry, the social security administration, the Federal Savings Bank, and the social security ministry, all of which will share the information contained in the system.

Information on new employees must be reported before they start work, and any changes in employee data must be reported immediately.

Company payments for payroll, social security, severance pay, union fees, and income taxes must be entered into the system by the seventh day of the month following payment. With this wealth of information, government tax auditors can cross check company tax information with data on salaries and benefits paid to employees. The labor ministry has immediate access to information on dismissals, vacations, sick leave, and overtime pay.

Step by Step

These requirements will be gradually phased in. Only in September will companies be required to provide specific data on individual employees, according to Rosangela Tavares, a manager with the Seteco accounting firm. In November, employers will be required to provide complete payroll information for each employee.

“If a company has 200 employees, that will be 200 files,” Tavares said.

Providing incorrect information could result in fines.

“The data has to be provided with rigorous correctness because this has judicial validity,” Tavares told Bloomberg Law June 13. “The employer is making itself responsible for the information it supplies.”

Employers have taken various actions to ensure compliance. The business consulting firm Wiabiliza surveyed 740 companies and found that 70 percent of them had instituted E-Social training sessions for their human resources departments, 68 percent had hired specialists to handle the new system, and 41 percent had contracted outside consultants.

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

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

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