Brazil eSocial Launch Is Postponed Again, But Employers Should Not Ignore It

After agonizing months of uncertainty for employers, on August 31, 2016, Brazil's eSocial Steering Committee issued a new resolution postponing the eSocial digital bookkeeping program's implementation deadlines, the first of which was scheduled for September 2016. Although it likely would have been impossible to implement such a huge program so quickly when companies have had no time to test the system, it is nonetheless a relief to have word of an official postponement.

eSocial

The System of Digital Bookkeeping of Fiscal/Tax, Social Security and Labor Obligations ("eSocial") is a Brazilian federal government project to unify the transmission of employment and work-related data to the following federal government institutions: Caixa Economica Federal, the Brazilian government bank that manages the Employee Savings Fund ("FGTS") system; Social Security Institute ("INSS"); Social Security Ministry ("MPS"); Labor and Employment Ministry ("MTE"); and Internal Revenue Services ("RFB").

The eSocial system will affect all individuals and entities that engage workers, regardless of their size, including rural producers, professionals, employers of domestic workers, and service receivers. These individuals and entities will have to use the eSocial system to record events, payments, and contributions relating to each work/employment relationship. Generally, employers will record in the eSocial system data referring to hiring, leaves, working hours, prior notice of termination, termination, payroll information such as compensation and other payments, payroll taxes, and payments of taxes and contributions, and health and safety information.

Employers already are required to report most of that data, although through several separate systems and in much less detail. The eSocial platform has 43 forms, with 2,392 fields. If a company has 1,000 employees, it will have to send at least 2,000 forms per month, with up to 130 fields each, just relating to payroll.

According to Brazilian authorities, the eSocial tool will simplify and expedite the information process by eliminating duplicated information and forms, such as the distinct filings for tax withholdings, social contributions, and employment data (e.g., GFIP, RAIS, and CAGED), among others. However, it also will allow the authorities (labor, social security, FGTS and internal revenue) to monitor and audit employers, so employers must improve the quality and accuracy of the information provided to...