Brazil continues to be in the limelight as future host to the World Cup in 2014 and the Summer Olympics in 2016. The country has also become known as a social media mecca, both because its culture is innately social, and because China, another top business expansion market, blocks usage of social media channels, making Brazil especially attractive. Twitter recently opened an office in Sao Paulo, but others have decided to stay away. Why? Because the barriers to entry are high and operating in Brazil is difficult and complex.
Annually the employers’ association and the employees’ unions renegotiate terms of the collective bargaining agreements. The most common change resulting from these negotiations relates to increases in wage levels due to inflation, economic indicators and several other issues. Each union has their own calendar schedule for these negotiations, but some are effective January 1st.
Final negotiations are often not completed until several months after the scheduled date, but it is important to note that the negotiated salary increase can be retroactive. The percentage increase varies from year to year, however in recent years it has increased between 3-7%.
If a company grants an employee a salary increase separate from the union increase, it is possible the union could require that their increase be paid in addition to the already granted company increase. For example, if a company grants a 5% increase and then the union later publishes a required 7% increase, the company may be allowed to pay only the difference between the Union’s required increase and the increase already awarded. However, this allowance may vary by union. It is possible some unions could require the full 7% increase on top of any prior increases that were awarded, creating a significant unplanned expense.
The Americas Advisory Team at High Street Partners specializes in the intricacies of doing business in Brazil, as well as in all countries from Canada to Argentina.