Calculating Social Security Contributions

This chapter provides an overview of social security contributions in Brazil and discusses how to:

• Enter GPS establishment information.

• Determine social security contributions.

• Calculate social security (INSS) payments.

Understanding INSS Contributions

The main objective of the INSS (Instituto Nacional do Seguro Social) (Brazilian Social Security Institute) is to provide uniform social security benefits and services to urban and rural populations. This includes cover for sickness, disabled workers, death and the aged. INSS social security contributions are compulsory and binding and are funded through contributions made by companies and employees.

Both employers and employees must make a monthly contribution to social security through the INSS using their own resources to finance the benefits payable to employees. Calculation is in accordance with Institute's table, which is published by INSS.

Viewing Delivered Elements

The PeopleSoft system delivers a query that you can run to view the names of all delivered elements designed for Brazil. Instructions for running the query are provided in the PeopleSoft Enterprise Global Payroll PeopleBook.

See Also

Understanding How to View Delivered Elements

Entering GPS Establishment Information

The INSS payment is made using the GPS (Guia da Previdência Social) (Social Security Payment Form). You set up some of the following establishment details required for the form in the GPS/SEFIP Data group box on the Additional Info - Brazil page (Set Up HRMS, Product Related, Workforce Administration, Establishment BRA, Additional Info - Brazil).

Determining Social Security Contributions

This section discusses how companies, third parties, and employees should contribute to Social Security through the GPS (Guia da Previdência Social) (Social Security Form).

Determining Company Social Security Contributions

Companies and equivalent-status contributors are required to contribute to Social Security through Instituto Nacional do Seguro Social (INSS) (Brazilian Social Security Institute) with their own resources in order to finance the benefits due to workers as follows:

• Application of the 20 percent rate on the total of the compensation subject to INSS contribution (accumulator), without limit, paid or credited to insured individuals at its service and in case of financial institutions and equivalent-status entities an additional contribution of 2.5 percent will also be payable.

• Application of 20 percent rate on the total of compensation or retribution, paid or credited for services rendered to it by insured individual contributor, freelance workers and other individuals without employment bond, and in case of financial institutions and the equivalent-status institutions are subject to an additional contribution of 2.5 percent.

• Contribution intended to finance benefits granted according of the level of occurrence of labor disability as a result of working environmental risks at 1 percent, 2 percent and 3 percent rates by the company with low, medium, or high risk of accident in its main activity, respectively, on the total of compensation subject to INSS contribution (accumulator) paid or credited on any account during the month, to insured employees, freelance workers and resident physicians.

  Rates will be added by 12 percent, 9 percent, or 6 percent, according to the activity in which the company is engaged with, by the insured worker at service of the company, allows the granting of special retirement at 15, 20, or 25 years of contribution, respectively.

• Contribution intended to third parties with variable rate in accordance with the activity developed by the company, applicable on the total of compensation, without limit, paid or credited to employees at its service.

  Rates will be defined according to FPAS code of the company. This field is at the establishment level.

Determining Third-Party Social Security Contributions

Third parties are other entities for which the company pays contribution, such as INCRA, SESC, SENAI, SEBRAE, and education allowance. These contributions are not intended to finance the benefits paid by Social Security, they are collected by INSS and passed over to the respective entities, reflecting directly upon the compensation paid to the employee. Entities for which a company is required to contribute are defined according to the activity developed by it. INSS classifies the company according to the code that identifies the activity developed by the establishment in relation to the Fundo de Previdência e Assistência Social (FPAS) (Pension Fund and Social Assistance). The FPAS defines percentages due to third parties in the GPS. The FPAS code represents the code of the company's activity for INSS classification purposes, which is used to define the percentage of the INSS due to third parties. You set up the code on the Additional Info - Brazil page. With the FPAS code of the establishment, company is informed of the entities for which it has to contribute and the respective rates of contribution.

To determine the amount of the third-party social security contribution, enter a percentage in the SS 3th Party % field on the Additional Info - Brazil page (Set Up HRMS, Product Related, Workforce Administration, Establishment BRA). You must enter an INSS percentage. The third-party calculation base is the total of compensation subject to INSS contribution (accumulator).

If the company has a convention signed with third parties such as SESI, SENAI and EDUCATION ALLOWANCE, payment will be made separately from the GPS (Guia da Previdência Social) (Social Security Form).

Determining Contribution to SAT (Workers' Accident Insurance)

To determine the amount of contribution to the Seguro de Accidents do Trabalho (SAT) (Workers' Accident Insurance), you enter a percentage on the % Accident field on the Additional Info - Brazil page (Set Up HRMS, Product Related, Workforce Administration, Establishment BRA). The calculation base of accident is the total of compensation subject to INSS contribution (accumulator).

The company or equivalent status contributor is required to pay a contribution to finance the special retirement of the employees and the benefits granted because of the degree of occurrence of labor disability as a result of the working environmental risks. Contribution is applicable on the compensation paid, due or credited to the employee, on any account during the month in which the rates are of 1 percent for low risk of work accident, 2 percent for medium risk of work accident, and 3 percent for serious risk of work accident. Rates are defined according to the main activity of the company. The main activity of the company is the activity that engages the highest number of employees of the company.

A company exposing employees to substances harmful to health, whether chemicals, physical, or biological risks susceptible for the granting of special retirement, is subject to the payment of an additional rate. Special retirement will be due, once the waiting period is complied with, to the insured employee that has worked under special conditions that may affect the health or the physical integrity for 15, 20, or 25 years.

Determining Employee Social Security Contributions

Every employee is required to contribute towards Social Security. The company discounts the amount of the contribution from the employee's compensation and the calculation is made through the application of percentages in a noncumulative manner, on the monthly contribution salary. When calculating a contribution note always the maximum limit of contribution salary as the employee's contribution, unlike the contribution due by the company that is applicable on the total of compensation is restricted to the maximum limit. For example, if the maximum limit for contribution salary starting from June of 2000 is BRL 1.328,25 (maximum limit set forth by the government at company level, applying to all employees) and the employee's compensation is BRL 3.000,00, the contribution due by employee will be calculated considering only the limit of BRL 1.328,25. Employee's contribution salary consists of the compensation actually paid or credited on any account, during the month, by one or more companies, including earnings paid in kind.

Determining Maternity Allowance Contributions

Although the maternity allowance is a social security benefit, it also constitutes the employee contribution salary. Therefore, contribution will be payable by both, employer and employee, on the values paid on the account of Maternity Allowance. Maternity Allowance may be paid directly by Social Security or the company if it has a convention signed with the INSS.

Determining Family Allowance Contributions

Family Allowance is a social security benefit paid by the company, with the respective reimbursement by the INSS. Reimbursement occurs through GPS (Guia da Previdência Social) (Social Security Form). Only employees with compensation up to BRL 429,00 (maximum limit stated by the government at company level, that is, for all employees) are entitled to receive Family Allowance. Current value of the family allowance quota is of BRL 10,31.

Determining Contributions For Contracting Independent Workers

Companies are required to contribute with 20 percent rate on the value of services rendered by independent workers. Contribution must be paid together with other company contributions through GPS.

Determining Contributions for Compensation Paid to Businessmen

A contribution of 20 percent rate is applicable on values paid on the account of compensation to insured businessmen. Contribution must be paid together with company's other contributions through the GPS form.

Calculating Social Security (INSS) Payments

This section discusses how the system calculates social security (INSS) per employee.

Calculating INSS - Salary for Contribution

Deduction INSS SAL CON (INSS - Salary for Contribution) uses an amount calculation rule, where the amount is determined by formula IN FM SAL CONTR. Formula IN FM SAL CONTR (INSS Salary for Contrib. Calc) calculates the INSS salary contributions as the minimum of variable IN VR LIM INSS (legal limit for INSS) and accumulator INSS BASE TOTAL (Social Security Accumulator).

Deduction INSS SAL CON (INSS - Salary for Contribution) is a "dummy" deduction, created to keep this amount and also for demonstration.

The INSS BASE TOTAL accumulator contains all the employee earnings that contribute towards INSS.

The base calculation amount (accumulator) is compared to the (legal) limit amount for contribution and is used as the contribution amount if the base is less than or equal to the limit.

Note. You have to keep both the total base of employees and the amount base for contribution values for reporting requirements.

If the INSS BASE TOTAL accumulator is less than the limit, in variable IN VR LIM INSS, then accumulator INSS BASE TOTAL ⇒ deduction INSS SAL CON. If accumulator INSS BASE TOTAL is greater than the limit in variable IN VR LIM INSS, then IN VR LIM INSS ⇒ deduction INSS SAL CON.

Calculating INSS with the INBR% INSS Bracket

The INBR% INSS bracket (INSS Table) is defined according to the contribution salary calculation.

There are different percentages that must be applied to the contribution salary and they are defined according to contribution salary ranges. There are two INSS contribution amounts obtained through different percentages. One is deducted from the employee and the other is deducted for income tax.

The INSS amount is (Contribution Salary) × (bracket percentage ÷100).

When the INSS BASE TOTAL accumulator includes the employee total base, a "dummy" deduction— INSS SAL CON—is used to ensure that the amount is considered in the contribution calculation.

Calculating INSS for CPMF

Deduction INSS uses a Base × Percent Calculation Rule where the Base is determined by deduction INSS SAL CON (INSS - Salary for Contribution) and the percentage is determined by variable IN VR % INSS CPMF (Percentage - INSS/CPMF) in bracket INBR% INSS . The deduction adds to the TOTAL DESCONTOS N (Deductions Total Not Maintained) accumulator.

CPMF has expired, so the system defines the same percentage for the bracket result and for the IN VR PCT INS CPMF variable, used to calculate the INSS deduction.

Calculating INSS for Income Tax

Deduction INSS-CALC IR (INSS for Income Tax) uses a Base × Percent Calculation Rule where the Base is determined by deduction INSS SAL CON (INSS - Salary for Contribution) and the percentage is determined by bracket IN BR % INSS (INSS Table). The deduction contributes to the IR DEDUÇÕES (Income Tax Deductions) accumulator and corresponds to the INSS amount calculated by using the normal legal percentage.

This is a "dummy" deduction and the amount is deductible for Income Tax and is used for legal reports.

Calculating INSS for Special Retirement

All of the deductions—IN GPS APO15 (SS – Retirement, 15 Years), IN GPS APO20 (SS – Retirement, 20 Years) and IN GPS APO25 (SS- Retirement, 25 Years)—use a Base × Percent Calculation Rule where the Base is determined by accumulator INSS BASE TOTAL and the percentage is determined by the related variables, respectively IN VR SAT % 15, IN VR SAT % 20 and IN VR SAT % 25.

The deductions also use the related Generation Controls—IN GC VERIF APO 15, GC VERIF APO 20, and GC VERIF APO 25, respectively.

According to the SEFIP Risk Level value on the Payee Parameters page, one of these three dummy deductions should be calculated. If the value is Default, the default value can be found on the Position/Jobcode Parms BRA page. These default values can de defined per position, per location and associated job code, per location, or per job code. You build the rules that define how the system should handle these values, in case of different options for location and job.

Note. The percentage variables are automatically populated by the system.