Portuguese/BR
Español
One of the most common mistakes new entrepreneurs make in their businesses is mixing personal finances with company finances. Instead of calculating pró-labore based on the work performed, partners often rely solely on profit distribution for their payments.
To help you avoid this issue in your business, we’ll explain the importance of defining pró-labore, the differences in pró-labore for companies under different tax regimes, and how to simply calculate how much a partner should collect each month. Read on!
What Is the Importance of Pró-labore?
Pró-labore is a Latin term meaning “for the work.” It refers to the compensation paid to a partner for the work performed within the company.
This remuneration should be guaranteed to all partners who perform a role in the company, in addition to their share in the profit distribution, which usually occurs at the end of each semester or year. If a partner is also working in a specific role—be it administrative, managerial, or accounting—they should be compensated for that work. This practice is essential to avoid mixing up company finances and to ensure that cost calculations and pricing for products and services are not underestimated.
The importance of paying pró-labore lies in accurately calculating the company’s costs and expenses and in properly compensating partners who contribute to the company’s operations. Partners who work for the company should not rely solely on profit distribution for their income.
Additionally, mixing personal finances with company finances is a common mistake in small and medium-sized businesses and can lead to inexplicable financial imbalances.
What Taxes Apply to Pró-labore?
Unlike the labor charges imposed on formal employment relationships, which are subject to labor laws, pró-labore payments are subject to different types of taxes and contributions that vary depending on the company’s tax regime.
Below, we’ll briefly discuss the differences by tax regime:
Pró-labore for Individual Microentrepreneurs (MEI)
For the legal entity (the company), no additional taxes or contributions are charged due to the simplified tax collection system for microentrepreneurs. However, for the individual partner, Income Tax is applied according to the Federal Revenue Service’s progressive tax table. More details can be found in this official guide for MEIs.
Pró-labore for Companies under the Simples Nacional Regime
For companies under the Simples Nacional regime, as with microentrepreneurs, there are no additional taxes on the legal entity due to the unified tax collection system. However, for the individual partner, 11% of INSS (Social Security) is deducted, along with Income Tax based on the progressive table, which may be withheld directly at the source or deducted from the gross remuneration. For more information, see this detailed Simples Nacional tax guide.
Pró-labore for Companies under the Actual Profit or Presumed Profit Regimes
For companies under the Actual Profit or Presumed Profit regimes, 20% in social charges is levied on the legal entity based on the pró-labore amount. For the individual partner, 11% INSS and Income Tax are also applied according to the progressive table, either withheld directly at the source or deducted from gross remuneration.
Read too: Learn About Simples Nacional’s Monthly and Annual Obligations
How to Calculate Pró-labore for Each Partner?
Calculating the amount to be paid as pró-labore for each partner is simpler than it may seem.
First, list all partners and the respective activities they perform in the company. Next, research the current market rates for professionals performing similar functions in other companies. Finally, calculate the necessary figures, taking into account hours worked, exclusive dedication, vacation, overtime, and other relevant costs. With some negotiation, you and your partners can arrive at a fair pró-labore amount for each role.
Now that you understand the importance of paying pró-labore, why not calculate the costs of each employee or partner for your company? For more information on how to perform this calculation for your business, check out this post on our blog and clear up any doubts!
Read too: Brazilian CPOM: What Your Business Needs to Know
Conclusion
Ensuring that you correctly calculate and distribute pró-labore is essential for maintaining your company’s financial health and for fairly compensating all partners. By doing so, you can avoid the common mistake of mixing personal and business finances, leading to better financial management and more accurate cost calculations.
If you’re looking for professional assistance in managing pró-labore, CLM Controller provides specialized accounting services that help streamline financial processes for companies of all sizes. From tax planning to payroll management, CLM Controller can ensure your business operates smoothly and in full compliance with the law.
