CLT vs. PJ: Which is the best hiring model?

CLT vs. PJ: Which is the best work arrangement? Generally, knowing which type of contract is best depends on each worker's needs. See the advantages of each and get your questions answered.

In some cases, employees and employers face a dilemma regarding the most appropriate employment arrangement for each situation. 

Some companies adopt a certain hiring standard and there's nothing to discuss, but in others, it's possible to see which model is best for the employee and choose accordingly. 

First of all, we need to make it clear that there is no rule to define which model is best — CLT or PJ. 

Several variables can influence this decision and its direction. Some points include future goals, stability, growth potential, career plan, etc. 

In other words, the first thing to do is to define your profile by answering some of these questions. Once that's done, the characteristics of each diet will become clearer in relation to your goals. 

Next, it's important to correctly understand the concepts of the two hiring models. 

Keep reading the article to learn more.

CLT vs. PJ: differences

The main difference between the two models is that under the CLT (Consolidation of Labor Laws) regime you have a range of benefits and a formal employment contract, which is more stable, however, you will have a lower net salary.

Under the PJ (legal entity) regime, the net salary is higher, however, you are responsible for providing benefits such as transportation and meal vouchers. 

Working as a self-employed professional (PJ) is not a choice you can make alone.

You can open a CNPJ (Brazilian company registration number) on your own, but the company chooses the registration model; in some cases, it's up to you to choose.

At this point you might be wondering why hire service providers instead of employees; the answer is quite simple. 

The taxes and bureaucracy involved in hiring an employee with a formal employment contract can be double the workload of the employee, which is why the pay is often lower when hired under the CLT (Brazilian labor law). 

When contracting between companies (business-to-business), or as a legal entity (PJ), the client experiences a significant reduction in tax expenses, which directly impacts how much they can afford to pay.

Understand the concepts

CLT: Consolidation of Labor Laws

1. Hiring 

Under the CLT (Consolidation of Labor Laws) model, registration in the work permit marks the beginning of the employment relationship between the company and the employee.

In this case, you are an employee with rights guaranteed by law, but the same laws also allow the employer to have means of controlling the subordinate during working hours. 

2. Stability 

Every employee has labor rights guaranteed by the Consolidation of Labor Laws.

These include paid vacation, 13th-month salary, FGTS (Brazilian severance fund), unemployment insurance, among others. However, some of these benefits are deducted directly from the salary. 

3. CLT Regime 

Flexible work schedules are not a reality for those hired under this type of contract. Under the CLT (Brazilian labor law), the legally mandated work schedule is 8 hours per day and 44 hours per week, including breaks and days off. 

4. Responsibilities under the CLT (Brazilian Labor Law) 

The rights guaranteed by the CLT (Brazilian Labor Law) are deducted directly from the payslip. These deductions serve precisely to cover the government's expenses related to the benefits offered. 

5. Main rights of workers under the CLT (Consolidation of Labor Laws) regime 

• Signed work contract
• Paid vacation 
• Overtime pay 
• Maternity leave 
• Unemployment insurance in case of dismissal.
• FGTS
• INSS 
• 13th salary 
• Work schedule of up to 44 hours per week 

PJ: Legal entity

1. Contracting as a PJ (legal entity) 

The service contract dictates the rules.

Here you are a service provider and the rule is: there cannot be the elements that characterize an employment relationship: subordination, personal service, regularity, and remuneration.

2. Flexibility 

In the PJ (legal entity) model, only what was defined in the contract should be fulfilled.

In other words, it's important to pay attention to the conditions stipulated in the document, as it will define how flexible the routine will be.

Being a service provider is a good option for those who want to set their own hours and work environment.

3. Responsibilities 

The service provider is responsible for your retirement and any other guarantees. In addition to needing to open a company, issue invoices, pay taxes, and hire an accountant.

Ultimately, you will be acting as a company that provides a service to another company.

4. Legalization 

You will be a company that provides services to another company; in other words, you will not become part of its staff. 

This means that its operations are like those of any other company, with all the rights and responsibilities of the category. 

You will need to open a company, pay taxes as a company, and you will not have fixed benefits like... FGTS, vacation, health insurance, among others. 

5. Legal Entity Rights 

The rights of a legal entity are: 

• Social security benefits (maternity leave, retirement, etc.) 
• Issuing an invoice 
• Hiring an employee at the minimum wage for the category. 

CLT vs. PJ: Advantages of each category

CLT 

• Paid weekly rest day; 
• Paid annual leave with an additional third of the salary; 
• Thirteenth salary;
• FGTS (Guarantee Fund for Length of Service); 
• Unemployment insurance and severance pay in case of dismissal without just cause; 
• Maternity and paternity leave;
• Additional pay for unhealthy or dangerous activities; 
• Assistance for children and dependents up to five years of age in daycare centers and preschools. 

PJ

The main advantage of being a PJ (legal entity) is saving on taxes, consequently earning more money. 

Service providers also need to pay taxes, and the amounts vary according to the classifications defined in the company's opening process, such as size and revenue. 

Check out other advantages: 

• Possibility of issuing an invoice; 
• Allow customers different forms of payment; 
• Greater control over schedules, allowing for a better balance between personal and professional life; 
• There are no employee deductions; 
• It allows you to serve more than one customer simultaneously, increasing revenue.

Conclusion 

If you choose to be a CLT employee, make sure you're in a company that guarantees your growth. With a CLT contract, you have the peace of mind of being free from certain commitments; after all, when you're employed, you don't have to worry about taxes, job prospecting, non-payment, etc. 

You can simply focus on doing a good job. However, since you often need to spend more time commuting and work longer shifts, your day may end up being shorter. 

If you decide to become a self-employed professional (PJ), you will benefit from advantages in your service offerings. You will gain more credibility with clients by conducting a legalized activity, while having greater control over your professional life and being able to increase your income. 

This also happens because companies are increasingly hiring legal entities for specific and specialized services. 

Ultimately, the ideal approach is to do some research and analyze your options. Determine which model is most worthwhile. At this point, it's helpful to talk to professionals who follow these models to get guidance.

Take advantage and also read: “Working from Home: how does it work? [The Remote Work Guide]

Nathalia Silva

Journalist, writer, and lover of words.

December 28, 2021