Supreme Federal Court Justice Gilmar Mendes has suspended all legal proceedings in the country discussing the so-called “pejotização” (social worker hiring). The measure seeks to standardize understanding of the legality of hiring workers as legal entities when, in practice, they exhibit typical characteristics of an employment relationship.
The decision reignited the debate over the impact of this model on Social Security revenue. In an opinion submitted to the Supreme Court, the PGFN (National Treasury Attorney General’s Office) warned that the pejotization directly compromises the funding of the Social Security system and tax collection.
According to the agency, by formalizing hiring through legal entities (PJs), both contractors and professionals fail to pay labor and social security taxes, resulting in billions in losses to the public coffers. It is estimated that if this model expands and reaches half of all formally employed workers, the impact could exceed R$380 billion.
The opinion also highlights that this practice mainly affects professionals with higher qualifications and salaries, worsening the tax and social security effects.
Given this scenario, it’s crucial that companies and freelancers be aware of the legal limits that differentiate legitimate service provision from disguised employment. There are legal and structural elements that allow for the safe hiring of legal entities, as long as legal requirements are met.
Therefore, if your company works with service providers hired as legal entities, it is essential to review these contracts preventively.
