Hiring in Brazil? Here’s what you need to know about pejotização

In October 2025, Brazil’s Supreme Federal Court (STF) held a public hearing to examine pejotização a widespread yet controversial practice of hiring workers as legal entities instead of formal employees.

The hearing brought together nearly 50 perspectives from labor unions, employers, regulators, legal scholars, and economists. At the heart of the debate: where is the line between autonomy and disguised employment, and who bears the consequences when that line is crossed?

For global companies hiring in Brazil or managing remote teams, understanding pejotização isn’t just a legal technicality. It speaks to broader challenges of classification, worker protection, and how to build sustainable workforce models across borders.

What is pejotização?

Pejotização refers to the practice of engaging individuals through their own registered legal entities, known as pessoas jurídicas (PJs), instead of as employees. The arrangement is often framed as contracting, not employment.

For businesses, this can reduce costs and avoid employment obligations. For workers, it may offer higher take-home pay and more flexibility. But problems arise when the contractor arrangement is used to mask what is essentially a full-time, dependent employment relationship.

Why it's controversial

Pejotização sits at the center of a tug-of-war between flexibility and protection.

From a worker protection perspective, it can mean missing out on labor rights like paid time off, severance, unemployment insurance, and social security.

From a business perspective, it can create risk if regulators or courts determine that a contractor should have been hired as an employee, and apply retroactive penalties.

And from a regulatory standpoint, it undermines the state’s ability to enforce labor standards and collect taxes that fund social protections.

The recent STF hearing reflects growing pressure to draw clearer legal boundaries.

While no ruling has been issued yet, it's a signal that scrutiny of contractor models is intensifying, and businesses need to be prepared.

What global companies should do

If you engage contractors in Brazil or operate in countries with similar dynamics, now’s the time to assess your approach:

1. Audit your contractor relationships

   Make sure contractors operate with true independence: control over schedule, ability to work with other clients, and deliverables-based outcomes.

2. Avoid signs of disguised employment

   Watch for red flags like fixed hours, core team integration, or exclusivity, which could trigger reclassification.

3. Stay informed about legal shifts

   Legal frameworks evolve fast. A court ruling, like Brazil’s pending STF decision, can reshape the rules overnight.

4. Use trusted infrastructure like Remote

   Partner with providers that understand the local labor and tax landscape to help you navigate complexity with confidence.

5. Consider a compliant employment structure

   When a role functions like full-time employment, businesses can reduce risk by engaging through a compliant local employment solution, such as an Employer of Record (EOR).

   Remote’s EOR can help facilitate local employment arrangements so that workers receive the benefits and protections they’re entitled to, while companies stay aligned with local labor standards.

How Remote can help

Remote helps you engage contractors in Brazil and beyond, while minimizing classification risks. Here’s how:

• Localized contracts tailored to align with Brazilian law and contractor norms
• Risk and compliance support to reduce exposure to misclassification
• Audit-ready documentation so you're prepared if challenges arise
• Centralized dashboard to manage global teams with clarity and control
  
  

With Remote, you can build distributed teams without compromising on compliance or care.

Hire contractors compliantly with Remote

Pejotização is more than a Brazilian HR issue. It’s a global signal that the debate over labor flexibility and worker rights is far from settled.

Companies that lead with transparency, structure, and compliance will be better positioned to scale across borders, no matter how the legal landscape shifts.

Need help reviewing your contractor setup in Brazil?

Book a call with a Remote expert