Home 13. Social Security Law

 

13. SOCIAL SECURITY LAW

Authors:

Sabine Ingrid Schuttoff/Adriana May Zaidan -
Xavier, Bernardes, Bragança - Advogados

Maria Lúcia Menezes Gadotti/Patrícia Salviano Teixeira -
Stüssi Neves Advogados

Social Security

13.1. Introduction and purpose of social security

The Brazilian Social Security system comprises an integrated set of actions related to initiatives from the Public Powers and from the Society that are aimed at protecting the rights to health, social security and social assistance. Thus, social security is inserted in a broader concept, which is the concept of social security.

Social Assistance aims to establish a social policy to the disadvantaged party through private and state funded activities envisaging the extension of minor benefits and services, regardless of contribution by the interested party.

Health aims to offer a social and economic policy designed to mitigate risks of illnesses and other complications, affording actions and services to protect and recover the individual.

For its part, the Brazilian National Institute of Social Security is a public institution that, upon the payment of a contribution (fee), aims to assure to its beneficiaries the indispensable means for survival in the event of occurring a contingency established in the law, such as a loss of work capacity, illness, disability, advanced age, death and involuntary unemployment, or even maternity or reclusion.

13.2. Structure of the Brazilian social security system

In Brazil, Social Security is provided through the General Regime of Social Security (RGPS) and the Social Security Systems of the Government Employees (RPPS) and of the soldiers. The general regime is regulated by the Brazilian Federal Constitution and Law 8213/91 and further amendments, implemented by the governmental agency designated National Institute of Social Security (INSS), of the Ministry of Social Security. The supplementary social security is organized independently of the General Regime of Social Security and is optional.

The current Brazilian social security system is based on the so-called plain division system, which is characterized by the transfer of income among individuals of the same generation, whereby the workers in activity finance the inactive workers. The legal grounds of the system is the principle of solidarity (Federal Constitution, article 3, I) and it is publicly managed.

The next section addresses the General Regime of Social Security, which aggregates the employers, employees and independent contractors.

13.3. General Regime of Social Security - RGPS

13.3.1. Beneficiaries

Those who hold the subjective right of taking advantage from the benefits established under the general system are legally designated beneficiaries, covering both the insured individuals and their dependents. The insured parties are individuals that, due to the exercise of an activity or payment of contributions, are bound directly to the General System. Dependents are the individuals whose legal tie existing between them and the insured worker allows the social security protection to be extended to them, by reflection.

A. Insured workers
The individuals insured under Social Security are classified as
(i) compulsorily insured worker and
(ii) optionally insured worker

13.3.1.1. Compulsorily Insured

This regime applies to the following individuals obligated to pay Social Security contributions so that they may obtain pecuniary benefits (retirement, pension, etc.) offered in the Brazilian system:

(i) Employee
This class covers farm and urban workers that have their employment recorded in their Employment and Social Security Record booklet (CTPS), independent workers, directors-employees, that who was elected with a certain term of office, governmental service providers, such as ministers and secretaries, and commissioned workers in general, employees of Brazilian companies established abroad, multinational companies that operate in Brazil, international organizations and diplomatic staffs installed in Brazil. This class does not cover employees that are governed by other specific regimes, such as public employees.

(ii) Domestic servants
Worker that renders services at the house of another person or family, provided that this work is not profit-oriented in benefit of the employer. Domestic servants cover: butlers, nurses, gardeners, drivers, housekeepers, maids and others.

Domestic servants have no rights to receive special retirement, worker's compensation and family allowance.

(iii) Independent workers
Workers that render services to several companies, but are contracted by labor unions and managing agency of man power. This class covers dock workers: foremen, loader, vessel ropers, vessel cleaners and guards. There are independent workers also in the salt and coffee bagging business.

(iv) Individual Taxpayer
The social security taxpayers formerly designated entrepreneurs, independent contractor and those equalized to independent contractors, pursuant to Law 9876 of November 29, 1999 are now considered a single class and designated individual taxpayers, who are engaged in paid work and is considered a compulsory insured under the General Regime of Social Security, being required to be affiliated therein. The following are considered individual taxpayers, among others:
• The worker that renders urban or farm services on a occasional basis (i.e. non-continuously and occasionally, without subordination and work hours schedule) to one or more companies without a binding employment relationship;
• The individual that is engaged, on a self-employed basis, in an urban work activity, with a profit or non-profit purpose;
• The holder of a single individual firm of urban or farm nature;
• The non-employed director and member of a board of officers of a corporation;
• The partners of the general partnership and capital and industry-type companies;
• The manager-partner and the quota holder-partner that receive a fee for their services rendered to the private limited company engaged in urban or farm activities;
• The associate appointed to a directive position of a collective organization, association or legal entity or any nature or purpose;
• The condominium manager or administrator appointed to a directive position of a condominium, provided that a fee is paid for their services;
• Freelance workers;
• Painters, electricians, firemen, plumbers and others that render services to residences on a non-continuous basis, without a binding employment relationship;
• Hairdressers, manicures, estheticians and similar professionals that render services at beauty parlors, on an autonomous basis;
• Itinerant salespersons;
• The worker affiliated to a collective organization who, through the latter, renders services to third parties;
• The worker paid on a per day basis that renders services on a non-continuous basis at the residence of a person or family, without a profit purpose;
• The resident doctor;
• The farm hand that works on a occasional basis, without subordination (tamers, animal castrators, fence repairers etc.);
• The officials and assistants of sport events, in accordance with Law 9.615/98;
• The individual, owner or not, that exploits agribusiness, fishing or mining activities, directly or through others, and assisted by employees used for any reason, even on a non-continuous basis;
• The minister of a religious confession and the member of a sacred institute and of a congregation or religious nature, when maintained by the entity to which they belong, except if it is a compulsory taxpayer to Social Security or another social security system;
• The civil construction worker.

(v) Specially Insured
This category covers farm hands that produce in the regime of family economy, without use of salaried labor. It includes spouses, companions and offspring over the age of 16 that work with the family in farm activities. The artisan fisher and Indians engaged in farm activities and their families are also included in this category.

13.3.1.2. Optionally Insured

The General Regime of Social Security (RGPS) also allows the optional affiliation or certain individuals, designated as:

A. Optionally Insured

Individuals over the age of 16 that are not engaged in a paid work activity that falls under the category of compulsorily insured of social security may affiliate themselves to the General Regime of Social Security (RGPS) as optionally insured.
The following categories, among others, are considered optionally insured:
* Housewives;
* The condominium manager that is not paid a fee for his/her services;
* Students;
* The Brazilian that accompanies his/her spouse that works abroad;
* The individual that is no longer a compulsory insured;
* The scholarship holder and the trainee that render services to a company in accordance with Law 6494/77;
* The scholarship holder that is engaged on a full-time basis in research, specialization course, graduation, master's degree or post-graduation, in Brazil or abroad, provided that he/she is not bound to any special regime of social security;
* The convict that is not engaged in any paid work activity or bound to any social security regime;
* The Brazilian resident or domiciled abroad, except if affiliated to a social security regime with which Brazil maintains an international agreement.

As of reference month April 2003 the contribution of the optionally insured worker shall be, regardless of when the worker affiliated with Social Security, the amount he/she stated, observing maximum and minimum salary bases.

B. Dependents

The General Regime of Social Security (RGPS) also covers the dependents that, by rule, are defined as those who economically depend on the insured worker. They are basically classified in three groups:
• Spouse, companion and children under 21, not emancipated or disabled;
• Parents;
• Brothers/sisters under 21, not emancipated or disabled.

Stepchildren or adopted under the age of 21 that are in the custody of the insured worker have the same rights of children, provided that they do not have property for their support and education.
The economical dependence of spouses, companions and children is presumed. In the other cases it must be proven by documents, e.g., income tax return.

To be considered as companion it is necessary to prove the stable relationship with the insured worker. Public Class Action no. 2000.71.00.009347-0 determines that the insured's homosexual companion shall be entitled to a pension in the event of death and benefit of reclusion-aid. In case of dependents on a group, those classified in the next group lose their right to the benefit.

13.3.2. Company and Domestic Employer

These are the party defendants of the jural relation for costs relating to the General Regime (RGPS). The companies deduct the worker's contributions on the payroll, on the revenues and also on the profit, these being the tax basis that are authorized by the Federal Constitution for charging taxes that finance social security.

13.3.3. Benefits

Social Security offers thirteen (13) different types of benefits, including retirement pension, pension payment due to death, maternity leave paid and disability benefit, namely
a) in regard to the Insured Taxpayer:
• Normal age retirement
• Physical disability retirement
• Seniority retirement
• Special retirement
• Disability benefit
• Worker's compensation
• Maternity leave paid
• Family allowance

b) in regard to the Dependents:
• Benefit of reclusion-aid
• Pension payment due to death

c) other benefits:
• Social Service (social security service)
• Professional rehabilitation (social security service)
• Benefit support to retire and deficient person (benefit support)

13.3.3.1. Benefits - Grant and Conditions

The benefits quoted above are granted under the conditions summarized below:

(i) Normal age retirement
This type of retirement is granted to men at the age of 65 and to women upon attaining the age of 60. Farm hands (men) retire at the age of 60 and women at the age of 55. The minimum period of contribution required is 15 years for those who registered with Social Security after July 25, 1991.

In the case of seniority retirement, the male worker is required to have contributed for 35 years and the female worker is required to have contributed for 30 years. Certain categories, such as those of teachers, have a different period of contribution (30 years for males and 25 years for female teachers).

Normal age retirement is irreversible and irrevocable: after the first payment, the insurer can not abdicate the benefit. The worker does not need stop working to request retirement benefit.

(ii) Seniority retirement
Period of contribution means the period of time elapsed since the employment date or initiation in the activity covered by the Urban and Farm Social Security regime, even if prior to the introduction thereof, up to the worker's dismissal or cease of work activity, deducting the periods established by the law such as suspension of the labor contract, interruption of exercise and cease of activities. The seniority retirement is considered irreversible and cannot be waived as from the instance the insured receives the first payment.

It may be in full or partial. To be entitled to a full retirement pension the male worker must prove at least 35 years of contribution payments, 30 years in the case of the female worker. To apply for a proportional retirement pension the worker must fulfill, cumulatively, the following requirements:
a) age: 53 (males); 48 (females);
b) period of contribution: 30 years (males); 25 (females);
c) an additional period of contribution equal to 40% of the period that remained on Dec. 16, 1998 to attain the period of contribution established in section "b".

- Acquired Right
The insured taxpayer that on Dec. 16, 1998 had already worked for 30 or 25 years (males and females, respectively) are entitled to apply for, at any time, a monthly retirement payment proportional to the number of years worked accrued up to such date, calculated based on the 36 monthly contributions paid previously to December 1998 and adjusted up to the date of the application based on the adjustment rates determined in the salary policy. In these cases the inclusion of a period of work subsequent to Dec. 16, 1998 is prohibited for any purposes.
If, however, on Dec. 16, 1998 the insured taxpayer had worked for 30 or 25 years (males and females, respectively) and elects to include the period of contribution subsequent to such date, the monthly retirement payment calculated based on the 36 contributions paid previously to the application shall be subject to the limit-age of 53 (males) and 48 (female workers).

- Monthly Benefit Payment
The full retirement is equal to 100% of the benefit wage;
The proportional retirement pension is equal to 70% of the benefit wage plus 5% per complete year of contribution posterior of the minimum period required.

- Benefit wage amount
In regard to those affiliated with Social Security up to November 28, 1999 the benefit wage shall be calculated at the arithmetic average of the highest salary bases, accruing monetary adjustment, equal to at least 80% of the entire period of contribution since the contribution related to the reference month July 1994, multiplied by the social security factor that will be determined based on age, period of contribution, life expectancy (according to the survival expectancy schedule published by IBGE - Brazilian Institute of Geography and Statistics) and contribution rate.
In regard to those affiliated with the Social Security as of November 29, 1999 the benefit wage shall correspond to the simple arithmetic average of the highest salary bases equal to at least 80% of the entire period of contribution and multiplied by the social security factor.
For the purposes of applying the social security factor to the period of contribution paid by the insured taxpayer, the following shall be added:
- 5 years, in the case of females;
- 5 years, in the case of the male teacher that proves period exclusively engaged in teaching at the infant and elementary school levels;
- 10 years, in the case of the female teacher that proves period exclusively engaged in teaching at the infant and elementary school levels.

(iii) Physical disability retirement
This benefit is granted to workers that, due to an illness or accident, are considered by the National Institute of Social Security (INSS)'s medical examination team as disabled for performing their duties or other type of work that enables them to support themselves.

The person that, at the time of affiliation to Social Security, already had the illness or disability that generates the benefit, excepting the disability that results from the aggravation of the illness, is not entitled to physical disability retirement.

In case of illness, to grant of this retirement the worker has to contribute twelve months to Social Security. In case of accident, this grace period is not required, but is necessary to the worker to be enrolled with Social Security.

The grant of this retirement will depend on the assertion of the disability condition through a medical-expert examination, the insured taxpayer being allowed to, at its own expenses, be assisted by his/her self appointed doctor.

The insured worker that is receiving physical disability retirement, regardless of his/her age, is required to submit to a National Institute of Social Security's medical examination on a 2-year basis.

While the insured worker is taking advantage of the physical disability retirement, his/her employer, despite the fact the latter does not pay wages, shall keep the grant of social benefits such as supply of basic food basket, medical assistance, among other, once the Labor Courts have already ratified jurisprudence on such matter.

- Monthly Benefit Amount and Benefit wage
The amount of physical disability retirement is equal to 100% of the benefit wage (which corresponds, in regard to those affiliated with Social Security as of Nov. 29, 1999, to the simple arithmetic average of the highest salary bases equal to 80% of the entire period of contribution), provided that the insured was not receiving the disability benefit.

The benefit wage to which the workers enrolled with up to November 28, 1999 are entitled will reflect the average of the 80% highest salary bases, monetarily indexed, as of July 1994.

Should the worker need permanent support from other person, which is duly attested by the medical examination, the amount of the retirement will be increased up to 25% as of the date of its application. In regard to the specially insured worker that did not elect to contribute optionally, the benefit amount shall be equal to one minimum monthly salary.

(iv) Special retirement
This benefit is granted to the insured worker that worked in conditions harmful to health or physical integrity. To be entitled to a special retirement the work is required to prove, in addition to the work period, effective exposure to physical, biological or combination of harmful elements during the period required for the grant of such benefit (15, 20 or 25 years).

- Benefit Amount

The amount related to the special retirement is equivalent to 100% of the benefit wage. The benefit wage to which the workers enrolled with up to November 28, 1999 are entitled shall reflect the average of the 80% highest salary bases, monetarily indexed, as of July 1994.
The benefit wage shall be the average of the 80% highest salary bases for all the period of contribution for the workers enrolled with as of November 29, 1999.

(v) Disability benefit
This benefit is granted to the insured worker that is impeded from working due to an illness or accident for more than 15 consecutive days. In the case of workers under an employment contract registered in their Employment and Social Security Record Booklet (CTPS), the employer pays the benefit in the first 15 days of the leave and Social Security pays it as of the 16th day of work leave. In the case of the individual taxpayer (entrepreneurs, freelance workers, self-employed workers, among others), Social Security funds the entire illness or accident period (provided that the worker applies for the benefit).

In order to be entitled to the benefit, the worker has to contribute to the Social Security for at least a period of 12 months. Such term will not be required in case of accident of any kind whatsoever (due to employment related accident or accident out of the work). For granting of disability benefit, it is necessary the proof of the disability by means of test performed by the medical examination related to the Social Security.

The worker receiving disability benefit is obliged to perform periodical medical examination and to take part in the professional rehabilitation program, prescribed and financed by the Social Security, otherwise he/she will have the usufruct of the benefit suspended.

Should the Social Security cease to render the social security benefit, the insured worker may lodge an appeal aiming at the maintenance of the receipt of the benefit, pursuant to the allegation he/she is no longer physically capable for work. During the term under which the insured worker's appeal will be appraised up to its decision, the employment contract shall be effective and, therefore, in theory, such insured worker should render his/her labor force and receive wages.

By virtue of the impossibility to return to the work on the part of the insured worker, some companies, in order not to prejudice their employees, have advanced the wages to them during such period, even without rendering of services.

Furthermore, the companies have faced identical situation in the cases of application for automatic extension of benefit, which is available fifteen days before the termination of the benefit to be used by the employee. In general, INSS use to schedule examination for proof of the disability alleged by the employee after the cease of the benefit, and so the employee does not receive, while the expert examination is not carried out, any remuneration of any amount for his/her support. Even in the aforesaid case, the companies, depending on the state-of-fact, have advanced wages related to the period.

 

- Benefit Amount

It is equivalent to 91% of the benefit wage. The special insured worker (farm hand) is entitled to a minimum wage, if he/she has not contributed according to his/her option. The benefit wage of the workers enrolled with up to November 28, 1999 will be equivalent to the average of the 80% highest salary bases, monetarily indexed, as of July 1994. For the workers enrolled with as of November 29, 1999, the benefit wage shall be the average of the 80% highest salary bases for all the period of contribution.

According to the collective work conventions, certain classes establish the completion, (most of the cases) restricted to a given period, of the amount of the social security benefit, in order to keep the wage received by the employee in full.

(vi) Worker's compensation
This benefit is paid to the worker that suffers an accident whose consequences reduce his/her work capacity. It is granted to the insured worker that was receiving disability benefit. The employed worker, the independent worker and the specially insured worker are entitled to the worker's compensation. The domestic servants, the individual taxpayer and the optional taxpayer are not entitled thereto. In order to be eligible to the grant of the worker's compensation, it is not required a minimum period of contribution, however, the worker shall act as insured and prove, by means of medical examination of the Social Security, his/her inability to continue to perform everyday tasks.
The worker's compensation, for its nature related to indemnity, may be piled up together with other benefits financed by the Social Security, except for retirement. The benefit ceases to be paid when the worker retires from employment.

- Benefit Amount
It is equivalent to 50% of the benefit wage which provides ground to disability benefit until the month prior to the commencement of the worker's compensation.

(vii) Benefit of reclusion-aid
The dependents of the insured worker that is incarcerated for any reason are entitled to the benefit of reclusion-aid during the entire reclusion period. The benefit will be paid if the worker is not receiving a salary from the company, disability benefit, retirement or bonus for continued services.

- Benefit Amount
The benefit of reclusion-aid is equivalent to the average of the 80% best wages as of the year of 1994, provided the last wage does not exceed R$ 752.12.

(viii) Pension payment due to death
This benefit is paid to the worker's family upon his/her death. In order to obtain this pension, no minimum period of contribution is required, however, it is required that the death has happened when the worker had the status of insured.

- Benefit Amount
It is equivalent to 100% of the amount for the retirement the insured worker used to receive until his/her death or which he/she would be entitled to in case of physical disability retirement. In case the worker has more than one dependent, the pension payment due to death will be equally divided among everyone. Should one of the dependents loose his/her right to benefit, his/her portion will be divided among the others.
The pension payment due to death left by farm hands is of one minimum wage.

(ix) Maternity leave
The company shall afford to the remuneration of the maternity leave payable to the pregnant employee as well as compensate the amount along with the amount payable for purposes of compensation of the contribution levied upon the payrolls and other incomes paid or assured, for any purpose, to the individual who renders service to that company. The company shall keep the payment slips and the corresponding certificates for a period of ten (10) years.

The female workers that pay contributions to Social Security are entitled to a maternity leave during the 120-day period in which they are not required to work for having given birth to a child. This benefit was extended to foster mothers, according to provisions of Law under number 10421/2002, pursuant to the following proportion:
a) for the period of one hundred twenty (120) days, if the adoptive child is one (01) year old;
b) for the period of sixty (60) days, if the adoptive child is between one (01) and four (04) years old;
c) for the period of thirty (30) days, if the adoptive child is from four (04) to eight (08) years old;

The insured female employee (i) having fixed wage will receive the total amount of the monthly remuneration; (ii) having variable wage will receive the equivalent to the salary average of the six previous months; (iii) having wage over the salary ceiling of the Ministry of the Supreme Tribunal Court will receive the maternity leave restricted to that ceiling, fixed at twenty-four thousand and five hundred (R$ 24,500.00) reais [Brazilian currency], pursuant to Law under number 11143, dated July 26th, 2005.

The independent female worker will receive the wage equivalent to the last month of work, provided, however, that the ceiling of the Ministry of the Supreme Tribunal Court is considered.

For the female domestic servant, the maternity leave is equivalent to the last salary base, provided the minimum and maximum limits of the salary base for the Social Security are considered. The female farm hand is entitled to a minimum wage.

The female individual taxpayer and that facultative will be entitled to remuneration equivalent to 1/12 of the amount of the 12 last salary bases settled in a period not exceeding 15 months, provided the maximum limit of the benefits is considered.

(x) Family allowance
This benefit is paid to workers that earn a monthly salary of up to R$ 752.12 to assist in the support of their children aged 14 at most or handicapped. The stepchildren and children under the worker's custody that do not have sufficient means for their self-support are equalized to the worker's own children.
According to Administrative Rule under number 77, dated November 03, 2008, the amount of the family allowance will be of R$ 25.66 per at most a 14-year-old child (incomplete age) or handicapped, for that worker receiving up to R$ 500.40. For the worker receiving from R$ 500.41 to R$ 752.12, the amount of the family allowance per a 14-year-old child (incomplete age) or handicapped will be of R$ 18.08.

13.3.3.2. Condition for Usufruct: Affiliation and Grace Period

A. Affiliation

To be entitled to these retirements or to any other benefit proposed by the Social Security (INSS), the worker must be affiliated thereto, pay the contributions each month and fulfill the grace periods established for each type of benefit.

- How to become affiliated to Social Security
• The worker hired under an employment contract annotated in the worker's Employment and Social Security Record booklet (CTPS) is affiliated upon the signing of the employment contract. The independent contractor must affiliate as an individual taxpayer. The minimum contribution is equal to 20% of the minimum salary. The affiliation may be accomplished through the website www.previdencia.gov.br or the toll-free phone number 135 (Call Center). The call is free of charges. Alternatively, it may be done at a Social Security office, submitting Identification Card, Tax Roll (CPF) and proof of address.

B. Grace period for usufruct of the benefits

The grace period corresponds to the minimum number of monthly contributions that are required to grant the beneficiary the benefit, such contributions being considered as of the first day of the months in which the contribution is due. In the case of insured employee and independent worker, the grace period is counted as of the date of affiliation to the Regime of Social Security. In regard to the insured domestic servant, individual, special and optional taxpayers the grace period is counted as of the date of payment of the first contribution timely paid, not being considered for this purpose the contributions lately paid related to former period of contribution. The grace period varies according to the benefit claimed, as follows:

- disability benefit: 12 monthly contributions;
- physical disability retirement: 12 monthly contributions;
- worker's compensation: no grace period is required;
- Normal age retirement: 180 monthly contributions;
- seniority retirement: 180 monthly contributions;
- special retirement: 180 monthly contributions;
- maternity leave: no grace period in regard to female employed workers, female domestic servants and female independent workers; 10 monthly contributions in the case of female individual and optional taxpayers and 10 months of farm work for female farm hands;
- family allowance: none;
- pension payment due to death: none;
- benefit of reclusion-aid: none.

The characteristics above refer to the insured workers associated to the General Regime of Social Security after July 24, 1991, date that is later to the publication of Law number 8213/91. The grace period of normal age and seniority retirements for the workers enrolled with up to July 24, 1991 will follow the schedule below and take into consideration the year in which the insured worker implemented all the conditions required so as to achieve the benefit:

 

  

Year For The Implementation Of The Conditions	Number Of Months Required
2002	126 months
2003	132 months
2004	138 months
2005	144 months
2006	150 months
2007	156 months
2008	162 months
2009	168 months
2010	174 months
2011	180 months

 

 13.3.4. Funding Means and Salary base

The social security system, whether in its general scope or in the other specific regimes of the public employees, currently has a contributive character. This means that the insured workers must contribute to finance the social security benefits. However, other social security contributions may be performed indirectly. The Federal Constitution, in the indication of the possible sources for financing social security, lists not only the social contributions that the employer pays based on the payroll and the insured worker's contribution, but also the company's contributions based on the income or revenues and on the profit, and on the revenues of lotteries.

The following contributions are intended exclusively for financing social security: the company's contribution based on the wages that it pays to the insured workers under its employment at a rate of 20%, with the exception of financial institutions, to which apply a higher rate of 22.5%, and of farm producers (2% to be levied upon the gross revenue regarding the commercialization of the farm production); the contribution of domestic employers (12% of the salary base) and the contribution of the insured workers, either in the condition of employee or independent worker (8%, 9% and 11% of the salary base), individual taxpayer (20% of the contribution salary), specially insured (farm producer and artisan fisher) that exercise an activity under a family economy regime, at the rate of 2.1% to be levied upon the gross revenue regarding the commercialization of the farm production) or optionally insured (20%, observing the minimum and maximum limits of the salary base).

The Social Contribution on Net Income (CSLL), at 9% on the adjusted net profit of the company and the Contribution for Social Security (COFINS), in which the tax basis is the company's revenues, at 3% to 7.6%, are intended for financing social security as a whole. On the other hand, the result of the Social Integration Programs and Public Servant Fund (PIS-PASEP), whose rates vary between 0.65% to 1.65%, is intended exclusively use of the Fund of Assistance for Workers (FAT), answerable for the unemployment compensation.

Structure of the Social Security Funding

 

  

 

 

A. Contribution payable by the Employer

The percentage of the employee's contribution varies between 8%, 9% and 11% over the salary base, and the higher the wages, the higher the percentage. These contributions are withheld at source by the employer.

The companies that hire services of individual taxpayers shall contribute, in the course of the month, with 20% over the aggregate of the remunerations paid or credited for any purpose to such insured workers - excepting legal entities, industrial, business entities, lessors and providers of certain services, entities that have adopted the Brazilian Unified Tax Collection System (Simples Nacional), which will collect the quoted contribution over reduced rates and through a single document, which shall encompass all taxes payable by the company, as further itemized.

The contribution payable by the employer shall be calculated at twenty percent (20%) over the total of the remunerations paid during the month to the employees, and this contribution may be increased by other contributions, as set out in the following schedule:

 

Contribution	Rate for payment purposes (%)
General Contribution to the INSS	20
Contribution for funding employment related accidents	varies between 1 to 3 (depending on the risk of the company’s line of business)
Contribution for education	2.5
Contribution to the National Rural Training Service (SENAR)	2.25
Contribution to Apprentice Programs (SENAI1, SENAC2, SENAT3)	Varies according to legal entity’s classification
Contribution to Social Programs (SESI4, SESC5, SEST6, SEBRAE7)	SEBRAE: varies between 0.3 to 0.6 (depending on the company’s line of business) others: 1.5%

 

[1National Service of Industrial Apprenticeship; 2National Service of Commercial Apprenticeship; 3National Service for Transport Apprenticeship; 4Industry Social Service; 5Social Service of Industry; 6Social Service of Transport and 7Brazilian Micro and Small Business Support Service.]

Decree number 6042/07 settled Article 14 of Law number 10666/03, which discusses on the conformability of the rates of SAT (Employment related accident compensation), by virtue of the assessment of work accident and social security factor (Fator Acidentário Previdenciário - FAP).

Such legislation allows the increase of the rate related to SAT or RAT (Work Environmental Risk) at rates of 2%, 4% or 6%, on the condition that the company does not invest in prevention and control of employment related accidents and according to the history of diseases and employment related accidents occurred.

Also the application of FAP may even be beneficial to the company that, once duly proved and pursuant to the criteria for assessment and surveillance of Labor and Employment Ministry, invests capital in labor insurance policies, this way decreasing the rate pertaining to SAT at 0.5%.

Financial institutions, commercial leasing companies, financial cooperatives, insurance and capitalization companies, independent insurance agents will pay an additional of 2.5% over the remunerations paid or credited to the insured employees that work for them, thus totaling a contribution of 22.5%.

Further, the employers must pay a contribution at the rate of 20% over the total of the remunerations paid to business directors and independent contractors.

A.1 Brazilian Unified Tax Collection System (Simples Nacional)

Simples Nacional, the taxation system most useful for micro and small companies, created by Declaratory Statute under number 123/07, substituted the former "Simples Federal" [Federal Taxation System], thus bringing a set of important alterations to those that have adopted such system.

The main feature of Simples Nacional is the possibility of collection, upon a unique collection system, of taxes and contributions within the federal, state and municipal scopes.

The former Simples Federal also used to establish the possibility of unified collection of taxes within the scopes of the three entities. So as to achieve such integration, however, it was necessary to enter into convention thereto between the Union and the State or the interested Municipality.

The legal entities as micro and small companies that have adopted Simples Nacional, depending on their activity , will normally contribute to the Social Security at a rate of 20% over the payroll (partners and employees), pursuant to the provisions of Declaratory Statute number 123/2006. The companies performing activities different from those above described will collect the employer's contribution to INSS; they will note rates quite inferior to those provided for in Law number 8212/91. Such rates will be defined in conformity with the amount of the taxpayer's annual gross revenue.

A.2 Contribution to INSS of Farm Producer as Legal Entity or Individual - Specially insured worker and Agribusiness

The social contributions to be levied upon the gross revenue arising out of the commercialization of farm production (whether industrialized or not) substitute those social contributions levied upon the payroll pertaining to the insured employees and independent workers, as such contributions are found set forth in Subsections I and II of Article 22, Law number 8212, dated 1991. According to the schedule below those contributions will be payable by: (i) farm producers acting as legal entity and individual; (ii) agribusinesses, excepting: a) pisciculture, crab culture, pig breeding farm and poultry raising-related entities, and b) those incorporated under agribusiness cooperatives, which perform the activities described in item "a" above:

 

Taxpayer	Legal Basis	Contribution to INSS	RAT
Farm Producer as Legal Entity	Law no. 8870/94, Article 25	2.5% (over the billing)	0.1% (over the billing)
Farm Producer as Individual – Specially Insured worker	Article 25 of Law no. 8212/91	2.00% (over the gross revenue arising out of commercialization of the production)	0.1% (over the billing)
Agribusiness	Article 22 of Law no. 8212/91	2.5% (over the billing)	0.1% (over the billing)

 The farm producer, including the agribusiness, shall collect, in addition to the contributions to be levied upon the commercialization of the farm production, the contributions: (i) abated from the insured employees, independent workers and individual taxpayers, which are levied upon the aggregate of the amounts paid, due or credited, for any purpose, in the curse of the month, as the case may be; (ii) levied upon the gross amount of the formal bill of sale or the invoice of rendering of services connected to members of a cooperative society, both of them issued by labor cooperative; (iii) payable to other entities or funds, levied upon the aggregate of remunerations paid, due or credited, for any purpose, in the curse of the month, to insured employees and independent workers; (iv) - finally, such contributions shall be abated from the independent carrier according to the terms set forth in Subsection II, Paragraph 10, Article 139 of Normative Instruction [IN] number 03/2005.

A.3 Social Security liabilities for the Civil Construction

The companies hiring services rendered upon assignment of labor force or contract job are jointly responsible for the accomplishment of the main social security liability for the civil construction. Such companies shall withhold eleven percent (11%) from the gross amount of the formal bill of sale, invoice or receipt of rendering of service, and collect to INSS the amount withheld on behalf of the company hired.

B. Individual and Optional Taxpayers
B.1 Withholding of the Social Security contribution of the "Individual Taxpayer" by the company - Reduction at source.

As of the contributions accrued in the reference month April 2003, which fell due in May 2003, the obligation to pay the Individual Taxpayer's contributions was transferred from the Individual Taxpayer to the company that pay the services of these professionals. This system was effective until the reference month March 2003, in which the payment thereof fell due in the current month April 2003.

Accordingly, the companies are obligated to pay the social security contribution of the individual taxpayer that works for them, by deducting it from the salary at the rate of 11% of the total remuneration paid, due or credited to these insured workers and to pay the total amount deducted jointly with the company's contributions, until the 10th day of the month subsequent to the reference month, the maturity date being extended to the next business day when the 10th day falls on a day in which banks are not open.

- Workers' Productive Cooperatives and Companies that have adopted the SIMPLES Nacional and Social Welfare Charities

The new system for withholding the contributions of the insured "Individual Taxpayers" also applies to (i) the workers' productive cooperative, in regard to the social security contribution due by the individual taxpayer, member of the cooperative society, to be levied upon the quota to distributed to him/her concerning the rendering of service, (ii) the companies that have elected the tax regime designated "Integrated System of Payment of Taxes and Contributions of the Micro and Small-Sized Companies (SIMPLES) (iii) the Social Welfare Charities - exempted from payment of the employer's social contributions - are also obligated to withhold 20% of the remuneration paid, due or credited to the Individual Taxpayer under his/her hire, observing the maximum limit of the salary base.

B.2 Contribution payable by the "Individual Taxpayer" - Exclusive cases

The contribution payable by the "Individual Taxpayer" is now under the responsibility of the company that is the service user. However, if the total monthly remuneration received by the "Individual Taxpayer" for the services rendered to one or more companies is less than the minimum limit of the salary base (i.e. 1 Minimum Salary), the insured worker is required to pay directly the complementary contribution due on the difference between the minimum limit of the salary base and the total remuneration received in the month, applying on the supplementary installment a twenty percent (20%) rate.

B.3. Contractor Individual Taxpayer

The obligation to pay the social security contribution of the individual taxpayer under his/her hire does not apply in the case of contracting by another individual taxpayer that is equalized to a company or by a farm producer (individual) or by a foreign diplomatic missions and career consular posts.

This also does not apply to the hiring of a Brazilian civilian that works abroad for an official international organization of which Brazil is an effective member.

B.4. Obligations of the Companies and Proof of Deduction

As aforesaid, the company is obligated to pay the social security contribution of the individual taxpayers under his/her hire upon deduction in the remuneration paid, due or credited to this insured worker, and to pay the total of the deductions jointly with the company's contributions by the 2nd day of the month subsequent to the reference month, the deadline thereof being extended to the next business day when the 2nd day of the month falls on a day in which banks are not open.

The companies that pay remuneration to an individual taxpayer is required to provide to the individual a receipt for the service rendered, by indicating, in addition to the salary amounts and the social security deduction, its complete identification, including its taxpayer registration number (CNPJ) and the individual taxpayer's registration number with the National Institute of Social Security (INSS).

The company shall keep on file for 10 years copies of the receipts of payment or the statement provided by the individual taxpayer for purposes of submission to the INSS, upon request.

B.5. Simultaneous Activities and Obligations of the Individual Taxpayer

The individual taxpayer that renders services within the same month to more than one company is required to inform to each company the amount or amounts received against which the contribution deduction is due, upon presentation of the payment receipt for the purpose of observing the maximum salary base.
The insured individual taxpayer that renders services and simultaneously works as an insured employee or independent worker shall, for the purposes of observing the maximum contribution salary amount, present to the company for which the worker is an employee, to the Workmanship Management Agency (OGMO), in the case of independent port worker, or to the hiring company, in the case of independent port worker, the foregoing payment receipt.

The individual taxpayer shall keep a copy of the declaration mentioned above jointly with the payment receipts for the purposes of presenting to the Social Security, at request.

B.6. GFIP

The contributions quoted above shall be informed through the Severance Indemnity Fund for Employees Collection Form and Social Security Information (GFIP), according to the instructions established in the GFIP Instruction Manual.

The contributions that are deducted from individual taxpayers cannot be parceled.

The company that remunerates an individual taxpayer that has proved the rendering of services to other companies or that has been engaged, simultaneously, in an activity as an insured employee or independent worker, in the same month, shall inform the occurrence of several payment sources by using the GFIP.

C. Employee, including domestic servants and independent workers.
The contribution of these insured workers is calculated by applying the corresponding rate, on a non-cumulative basis, over the worker's monthly salary base, according to the following schedule, for payment as of March 1, 2008:

Wage-earner worker, including domestic servants:

  

 

 

Note:
Whenever an insured employee and domestic servant have more than employment relationship, the remunerations shall be added for the proper classification in the foregoing schedule, observing the maximum contribution limit. This rule also applies to the remunerations of the independent worker.
In the cases of remuneration of the Christmas bonus, this payment shall not be added to the monthly compensation for the purposes of classification in the schedule of salary bases, i.e., the rate shall apply over the amounts separately.

The domestic employer contributes differently to Social Security, paying on a monthly basis 12% of the salary base of his/her domestic servant(s), while other employers pay based on the payroll. It is incumbent on the employer to pay on a monthly basis to Social Security his/her contributions as well as the workers'; such contributions will be deducted from the monthly salary.

The deduction against the worker shall follow the salary base schedule. The contributions of the domestic employer and the domestic servants shall be paid through a proper payment slip (Social Security Payment Slip - GPS), observing the payment codes when filling it out.

The domestic servant does not deserve the Employee's Dismissal Fund - FGTS -, notwithstanding, should the employer decide to collect FGTS for his/her domestic servant, he/she shall fill out the CEI (INSS Specific Registration) and the GFIP (Severance Indemnity Fund for Employees Collection Form and Social Security Information). Notwithstanding the collection of FGTS on the part of the domestic employer is optional, once the collection is performed, the employer is obliged to continue to perform the contributions until the termination of the labor contract.

Following the annotation of the labor contract in the domestic servant's Employment and Social Security Record booklet (CTPS), the employer shall register the worker with the Social Security through the Internet or a Social Security agency. In order to register, the worker's CTPS booklet recorded with the employment, the worker's and the employer's identification documents are required.
If the female domestic servant (maid) is on a maternity leave, the employer shall pay to Social Security only the employer's quota.

C. Specially Insured Taxpayers

The contribution of the specially insured worker corresponds to 2.3% to be levied upon the gross revenue regarding the commercialization of the farm production. This percentage is comprised of the following contributions:

-2.0% to Social Security;
-0.1% for financing the benefits that are granted based on the extent of labor disability that results from the environmental risks associated with the labor (SAT); and
-0.2% to SENAR (National Rural Apprenticeship Service).

Whenever the specially insured worker sells his/her farm production to a company buyer, consumer or consignee, the latter will be subrogated in the obligation of deducting against the producer and paying the corresponding Social Security contribution.

In addition to this compulsory obligation, the specially insured worker may also contribute optionally, applying the rate of 20% or 11% (in case the worker elects the exclusion of seniority retirement benefits) over the corresponding salary base (optionally insured), in order to be entitled to the social security benefits in amounts of more than one minimum monthly wage.

D. Low Income Employees

According to the Constitutional Amendment no. 47, dated July 5, 2005, a new law must be created in order to treat of a special system of social security inclusion regarding the extension of its benefits to low income employees and to employees without personal income who work exclusively at home performing domestic jobs, when from a low income family. The Federal Government has adopted some measures of social security inclusion for such workers, however, up to the moment, no law has regulated such Constitutional Article.

13.4. International agreements of social security

The Brazilian Social Security has executed several agreements with several States in order to make feasible for the insured workers and their dependents, whether residing or temporarily established in other nations, to take advantage of numberless social security benefits.

The intent of such international agreements is to assure the Social Security rights set forth in legislations of the signatory countries, specified in the corresponding agreement, to the workers and legal dependents, whether residing or temporarily established in other agreeing countries subject to the Social Security systems of such agreeing countries, as provided under the corresponding act.

The international treaties concerning social security issues executed by Brazil aim at assuring the Social Security rights as set forth in the laws of both agreeing countries, specified in the corresponding agreement, to the workers and legal dependents, whether residing or temporarily established in other agreeing countries.

Nowadays, Brazil maintains agreements of such nature with Argentina, Cape Verde, Spain, Greece, Chile, Italy, Luxembourg, Uruguay and Portugal, besides the multilateral agreement of Social Security with the Mercosur, Southern Common Market, entered into with Argentina, Uruguay and Paraguay.

13.5. Supplementary pension plans

In the private pension plans the benefits are funded through a capitalization regime, i.e., amounts accumulate throughout the worker's productive labor life so that they may be used at retirement.

The private pension institute is still optional in Brazil, the employer having the option to extend this benefit to his/her employees.

Basically, there are two types of supplementary pension plans:

(i) Unlisted Supplementary Pension Plans, which may only be organized in the form of a foundation or non-profit company and exclusively offered to the employees of a company or group of companies, to the public employees of the Federal Government, States and Municipalities, the latter designated sponsors, in addition to the affiliated or members of professional, class or segment organizations, designated institutors.

(ii) Listed Supplementary Pension Plans, in which the managing entities thereof are organized under the form of a Brazilian corporation (sociedade anônima) with the corporate purpose of establishing and operating benefit plans that have the nature of pension, extended in the form of continuous compensation or paid in a lump sum, which may cover any type of individual. This group includes the so-called PGBL and VGBL Plans. The PGBL (Free Generating Benefit Plan) is a fixed contribution type pension plan that affords greater flexibility and offers greater transparency to the participants since the yield, rates and equity are published daily by the press. The main feature of this plan is the full transfer of the yield of the Funds without any guarantee of adjustment or minimum yield in the deferral period. In other words, the entire yield generated in the capital accumulation period is transferred to the affiliate, less costs.

It is worthy to note that the government stimulates the creation of such plans by extending favorable tax and labor treatment.

a) Labor Aspects
In regard to the labor aspects, the Labor Code (CLT) was amended in 2001 to expressly EXCLUDE from the definition of salary the private pension plan granted by the employer (CLT, article 458, paragraph 2), among other items.

b) Tax Aspects
The aspects must be analyzed under the prism of the (a) individual taxpayer and (b) the corporate taxpayer; in both cases the current laws establish certain tax benefits.

- Individual taxpayer
According to the tax laws, the contributions to Private Pension Plans that are similar to Social Security may be deducted from Individual Income Tax up to the limit of 12% of the participant's gross annual income.

However, the redemption and the sums received are considered income and, thus, taxed according to the progressive Individual Income Tax rate. The tax applies over the total income and/or redemption amount. The redemptions and incomes received must be informed in the Annual Income Tax Return.

- Corporate taxpayer
According to Law 9.532/97 the company that offers Private Pension Plans to its workers may deduct the installment of contributions as operational expenses. Such deduction is limited to 20% of the total of the workers' wages and compensation paid to the directors under the Plan.

13.6. FGTS - Employee's Dismissal Fund

The FGTS is a binding and compulsory bank deposit in favor of the worker that may only be operated in certain cases. It is deposited by the employer in favor of the employee and it corresponds to 8% of the employee's monthly salary.

These deposits are intended to form a type of saving fund for the worker, who may be withdrawn in specific cases, namely:

(i) severance;
(ii) cases of severe illness;
(iii) retirement;
(iv) payment of purchase of dwelling for own use, etc.

In the event of death of the worker, the FGTS shall be paid to the worker's dependents.

In the cases of severance, the employer shall pay, as indemnity, an additional 50% of the existing deposits in the FGTS account.

13.7. Professional Profile for Social Security Purposes (PPP)

Since January 1, 2004, Social Security requires the companies that expose their employees to toxic chemicals, physical and biological elements the so-called Professional Profile for Social Security Purposes (PPP) based on an environmental conditions survey. It consists of an individual chronological-labor document of the worker, presented in a form established by INSS, which informs the worker's exposure to toxic agents and gathers administrative, environmental and biological information during the entire period in which the worker worked for the company. The PPP guides the process of recognition of special retirement developed by the Technical Record of Environmental Working Conditions (LTCAT) and provides biological monitoring results obtained based on the Occupational Health and Medical Control Program (PCMSO) and in the Environmental Risk Prevention Programs (PPRA).

The declaration of false information in the PPP characterizes the felony of false statements (article 297 of the Penal Code).

The information stated in the PPP is private statements of the worker, and discrimination practices resulting from its requirement by others and also its disclosure to third parties, except where required by the relevant governmental authorities, consist of crime foreseen in Law 9029/95.

13.8. RPPS - Social Security System of Public Employees

In general, pursuant to the overhaul of the social security system, implemented by Constitutional Amendment (EC) no. 41 of Dec. 19, 2003 and Constitutional Amendment no. 47 of July 05, 2005, the social security system that applies to public employees was thenceforth characterized as follows:

 :: Current Active Public Employees

 

:: Current Retired Public Employees and Pensioners

 

: Social Security workers

 

:: Future Pension holders

 

:: Future Public Employees

*source – Social Security Ministry website 

 

 

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