eSocial goes far beyond systems

The closer we get to eSocial’s starting date, the more we discuss the technical issues linked to it; and this is necessary. But we have seen few discussions about the cultural changes that the new system will require of companies - and we are talking about all Brazilian companies.

Since it began to develop in 2007, eSocial has provoked a series of debates about how companies would have to adapt their technological systems, in order to send the information through a single system. However, almost a decade later very little has been said about the cultural changes it will require of companies.

Background

For those who don’t remember, eSocial is a Brazilian government project that will unify the sending of employer and employee data starting in 2018. It is a tool for fiscal obligations, social security and labor obligations. This single system will replace the need to do separate reports for the National Institute of Social Security (INSS, by its acronym in Portuguese), the Federal Internal Revenue Service, the Ministry of Labor and Social Security of Brazil.

The use of the new system will be mandatory, as of January 2018, for all companies that had more than R$ 78 million in revenue in 2016, and for all other companies as of July of the same year. 

Among its main goals, eSocial aims to ensure labor and social security rights, to simplify the fulfillment of obligations by employers and to improve the quality of the information on social security and labor relations received by the federal government.

The eSocial effect

The market’s expectation is that eSocial will reduce bureaucracy and increase corporate responsibility in providing information. The system will have a major impact in corporate management and governance, since eSocial will make labor regulations clearer and more individualized.

First and foremost, it is always good to remember that the system does not change the law. On the contrary, it was created to help comply with the law. This means that it should make certain practices that were common in Brazilian institutions – like companies and employees abusing flexibility with the famous “jeitinho” (the Brazilian way) - quite difficult, if not impossible.

Cases like, for example, when employees are paid for their vacation period but continue working and go on paid vacation at another period, are not illegal actions, but will no longer be possible with eSocial in operation. This is because the whole regulatory environment will be guided by the full operation of functions that are currently adjusted or deviated from its reality. 

The question that must be asked is, in addition to the changes in systems, are the companies culturally and organizationally prepared for eSocial? It is possible that most companies are not and, if that’s the case, they need to get ready now.

 

KEY CULTURAL CHANGES COMING WITH E-SOCIAL

  • Social inclusion of outsourced workers, which are currently marginalized due to lack of participation in company decisions, tax collection, the recognition of their work, etc.;
  • More corporate responsibility regarding the information provided;
  • The need for high levels of governance in the organizations;
  • The end of flexibility of laws and obligations;
  • The elimination of informality and arrangements;
  • The adoption of best practices and compliance with the new rules;
  • Strict compliance to deadlines and to government delivery schedules.

 

 

 

 

 

 

 

 

 

  

 

 

 

From an organizational point of view, companies must view eSocial as a platform for processes restructuring. It will be an important component to eliminate informalities and arrangements, ensuring compliance with the law.

To illustrate, in Europe, it is common to block corporate e-mails outside of business hours or during employees’ vacation period, or also, not allow the employee to enter the company while on vacation. These are points that can be controlled by the new system and for which companies must prepare. 

Taking action

As mentioned before, there are processes and cultural aspects to modify before the arrival of eSocial. It is also necessary to plan how the company will absorb such changes so it avoids facing serious consequences in the future.

Not being properly prepared or maintaining good practices can lead companies to receive labor and social security notices of infractions, in addition to tremendous risk to the company’s finances and reputation. This is because with eSocial, supervision will be simplified, making it easier for the government to audit – and these will be more frequent and stricter.

Alternatively, companies can be prepared, and take the opportunity to ensure the use of best practices and compliance with the new rules. It’s a matter of choice.

Interested in finding out more? Go to www.tmf-group.com/enquiry to make an enquiry.

 
Marco Sottovia
Marco  Sottovia
Opinion

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