Calculate net salary in Brazil
Want to onboard an employee in Latin America ?
Net salary is the actual amount an employee gets towards his services provided to his employer. It is pivotal to understand and know how to calculate the net salary in Brazil. After all, in order to avoid penalty and fees, you must run an accurate and legal payroll. And, part of that requires you to know the gross to net calculation.
In this article we will explain how to calculate the net salary in Brazil. See the steps below:
Step 1 : Determine the gross salary
In order to figure out how much net pay you or your employee will receive, you need to know the gross pay. The gross monthly income will always be larger than the net income because it does not include any deductions. Some deductions are mandatory and others are voluntary choices. In this guide, only mandatory deductions are explained.
It is to be noted that, in Brazil, the gross salary is always the monthly gross salary.
Step 2: Calculate all deductions
To calculate the net salary in Brazil, you need to subtract mandatory payroll contributions and taxes. Required deductions include but are not limited to:
- INSS – Social security contribution
- IR – Individual tax income
INSS – Social security contribution
The first calculation corresponds to the amount that goes to Social Security. From your gross salary, the deduction is made according to the following table:
Social security contributions paid by employees are capped at BRL R$ 908,86 per month.
Example: Employee receiving a gross monthly salary of R$ 2500.
- 1212 x 7,5% = 90,9
- (2427,35 – 1212,01) * 9% = 109,4
- (2500 – 2427,36) * 12% = 8,7
In total, the INSS deduction states at R$90,9 + R$109,4 + R$8,7 = R$ 209 per month.
IR – Individual Income Tax
The second calculation corresponds to the individual income tax that the employee has to pay. You must deduct the INSS from the gross salary to correctly calculate the individual income tax (IR). Find below the IR contribution table
Example: Employee receiving a gross monthly salary of R$ 2500. You will have to deduct R$209 for the INSS.
- Calculate the calculation basis: R$2500 – R$209 = R$2291
- Calculate the IR: (2291 – 1903,99) * 7,5% = 29,03
In total, the IR deduction states at R$ 29,03 per month.
Step 3 : Calculate for net salary in Brazil
When you have your gross pay and the sum of your deductions, calculating your net pay is relatively easy. To do this, subtract your deductions from your gross pay. Use the following formula to calculate your net pay:
NET PAY = GROSS PAY – DEDUCTIONS
Example: Employee receiving a gross monthly salary of R$ 2500.
Net pay = 2500 – ( 209 + 29,03) = 2261,97
The net salary will be R$ 2261,97
Simplify payroll and taxes in Brazil with Europortage
Don’t let the complexities of running payroll in Brazil stop you from engaging top local talent and building your dream team in the country. With the right partner, hiring and paying employees in Brazil is easy.
Europortage’s EOR solution makes it simple for global companies to hire and pay talent in Latin America, including Brazil, without establishing local entities or risking noncompliance.
Lean on us to hire, pay, and manage your employees in Brazil so you can build a distributed workforce in the country with ease.
