Employment
Understanding how a labor market works takes time and can be costly if you’re doing it on your own, as there are various factors involved when hiring in Portugal. Whether you are looking for an EOR (Employer of Record) to hire your employees in Portugal, or trying to understand how to set up your company in Portugal, we have you covered. If you are relocating and will be working in Portugal but keeping your job from a non-Portuguese company, this article is also for you. If you already have a basic understanding of your hiring or employment needs, go ahead and book a free consultation call with us so we can design a tailor-made plan for you that includes EOR, recruitment, hiring, payroll, HR, and team management services on the ground.
6.7%
unemployment rate in Portugal as of October 2023
72.4%
employment rate in Portugal as of second quarter of 2023
61.1%
labor force participation rate in Portugal
1.5%
job vacancy rate in Portugal as of June 2023
€1,369.34
average earnings in Portugal for 2023
20.66%
increase in active job postings (7,874) by June 2023
6.15%
Compound Monthly Growth Rate (CMGR) for new tech job between March-June 2023
8.11%
month-over-month increase in the number of active tech job postings
Employers
An overview of labor laws for hiring in Portugal
In Portugal, employment contracts can be categorized into two primary types: fixed-term contracts and open-ended contracts, each offering distinct durations and employee rights and benefits.
Fixed-Term Contracts:
Fixed-term contracts in Portugal have a predetermined duration, varying from a few months to several years. They are typically meant for temporary or short-term projects, as well as seasonal work. These contracts can be renewed, but their total duration typically cannot exceed three years.
Open-Ended Contracts:
Open-ended contracts, also known as permanent contracts, do not have a predefined duration and aim to provide employees with long-term job security. Both employers and employees can terminate these contracts, but proper notice and valid reasons, such as poor performance or redundancy, are required.
Differences between these two contract types can also be observed in terms of severance and termination conditions. With a fixed-term contract, employment concludes at the end of the predetermined term without any severance pay.
include specific details such as job description, salary, working hours, and notice period. The probationary period is limited to 180 days and is typically shorter for executive or highly qualified positions. Additionally, employers are obligated to adhere to sector-specific collective bargaining agreements, meaning that if you work in a specific sector (like government work), you might be subject to union-related restrictions.
Payroll in Portugal is typically processed on the last working day of each month.
Employers have the responsibility of deducting both social security contributions and income tax from employee wages, covering both the employer's share and the employee's contribution.
By law, employees in Portugal receive 14 salaries, meaning two additional monthly payments referred to as the holiday allowance and Christmas allowance. Employees can choose to receive them in the summer months and in December, or have them split into 12 months and receive a little bit every month with their regular salary.
Similar to any market, payroll in Portugal involves numerous details and considerations. This encompasses aspects such as the calculation and accrual of vacation days and leaves, as well as various other benefits and deductions.
Employer cost overheads in Portugal have 3 main mandatory components (besides the holiday and Christmas allowances):
1. Social security at the rate of 23.75%
2. Work accident insurance at a value of 2.5% to 3.5%
3. Training
In addition, many companies, especially in high talent competition industries, will offer non-mandatory benefits that will increase the actual employer’s costs such as:
• Private health insurance for employees and family members
• Daily meal allowance
• Fitness memberships
• Personal development budget
With adequate knowledge of Portuguese taxation laws and regulations, it is possible to optimize some of these costs and take advantage of legal setups that may be beneficial to both employers and employees.
Set up a call for a free consultation to learn more about the various options available for you to optimize the cost and impact of your benefits plans.
Most salary components are subject to income tax, but there are a few small components that can be paid to employees and are not subject to income tax, such as daily food allowance and travel expenses.
Additionally, there are some items that are deductible or partially deductible for the purpose of personal income tax calculation such as:
• Children’s tuition (subject to kids ages)
• Healthcare
• Insurance
• Some other employee benefits, such as gym and home office equipment
Most salary components are subject to social security tax at the rate of: 23,75% (employer cost) plus 11% (employee cost). Some payments and benefits may not be subject to the social security tax:
• One time payment or bonuses
• Payment towards personal pension funds
• Various tuition fees
• Various employee benefits
In addition, the employer must pay the following taxes and payments for each employee:
• Mandatory labor insurance
• Food allowance
• Training
In Portugal, the termination of an employee's employment must adhere to legal requirements and necessitates the employer to follow a well-defined and documented process. Generally, termination can occur with or without just cause.
When terminating an employee without just cause, the employer must comply with notice period and severance regulations. Effective April 2023, the regulations for employees with an unfixed-term contract are as follows:
Notice period:
• During the probation period (limited to 6 months and specified in the contract): 15 days
• Up to 2 years of employment: 30 days
• More than 2 years of employment: 60 days
Severance pay:
• Within the first 3 years: 18 days' base salary and other monthly fixed amounts
• After 3 years: 12 days' base salary for each full year of work.
The amount of severance pay is subject to an annual cap set by law. Severance pay is considered taxable income and is subject to social security contributions.
It is crucial to note that changes in these regulations are not uncommon in Portugal, and compliance with the regulations is mandatory, requiring professional guidance due to the nuances and specific details involved. For instance, collective dismissals have separate regulations and clear guidelines for their definition.
Employers must also adhere to various other regulations, including data protection and privacy laws such as the General Data Protection Regulation (GDPR) and the Portuguese Data Protection Law. Additionally, implementing discrimination and harassment policies is essential.
Portugal is known for being one of the more affordable countries in Western Europe. When comparing average salaries among countries in the region, Portugal's rates are comparatively lower.
As of January 2024, the minimum wage in Portugal is set at € 820 per month, which includes the provision for two mandatory extra salaries, effectively resulting in 14 payments annually. Meanwhile, the average salary in 2023 was recorded at € 1,269, a figure derived from income data reported to Social Security in 2022.
To obtain accurate salary benchmarking information in Portugal, you can refer to the following sources:
1. Mercer Total Compensations 2023 (paid report)
2. Landing Jobs: for Tech Careers in Portugal (free report)
3. Paylab Portugal: generic but useful information
4. Recruitment agencies often offer guidance and insights when embarking on a project.
Many companies that lack internal recruitment teams rely on recruitment agencies to assist in sourcing and hiring talented individuals.
Moviinn offers recruitment services through its platform, providing support for locating and recruiting top talent.
When it comes to job listings in Portugal, these are the most popular websites:
1. Linkedin
2. NetEmprego
3. Sapo Emprego
4. Indeed
5. Expresso Emprego
When you engage our EOR (Employer of Record) service and hire a team in Portugal, our trusted partners will provide comprehensive HR-related services for your local team, assuming full responsibility for managing ongoing HR tasks based on your preferences and configuration. Our services cover a wide range of areas, including:
• Employee Onboarding: We handle paperwork completion, provide orientation and training, and facilitate seamless integration into the company culture.
• Compensation and Benefits: Our expertise includes analyzing market data, establishing salary structures, administering employee benefits, and ensuring compliance with relevant regulations.
• Employee Relations: We actively contribute to fostering positive employee relations by addressing concerns, mediating conflicts, and offering guidance on workplace policies and procedures. Additionally, we develop and implement employee engagement initiatives such as events, birthday parties, special moments, and workshops to promote a positive work environment.
• HR Policies and Compliance: We enforce our client's HR policies and procedures to ensure legal compliance and equitable treatment of employees. Our team stays updated on employment laws and regulations, addresses grievances, and handles disciplinary matters following established protocols.
• HR Data Management: We meticulously maintain employee records, including personal information, employment contracts, and performance evaluations. When utilizing our clients' software (ATS or HR systems), we prioritize data accuracy, confidentiality, and security.
• Employee Engagement and Well-being: Our focus extends to promoting employee engagement and well-being by implementing initiatives aligned with our clients' HR policies. This encompasses activities such as team-building exercises, wellness programs, and employee feedback mechanisms.
For further details and information, please feel free to contact our specialists and schedule a call.
When you have a team that’s not located in the same country as you, it may become beneficial to have a trusted partner, like an Employer of Record, on the ground, close to your team to take care of day to day matters and support, such as:
• Office related support
• Support employees need as regards to their day to day needs
• Purchasing IT equipment for clients and providing maintenance support
• Administrative support
• Managing national and international travel arrangements, including reservations, ticket purchases, and travel insurance, among other related support
• Event management and organization
• Assisting with the integration of international staff in Portugal through our cross cultural training specialist
For further details and information, please feel free to contact our specialists or schedule a call.
Managing employees in Portugal requires an understanding of the workplace culture. Here’s a glimpse into Portugal’s work culture:
• The Portuguese work culture tends to be formal and hierarchical. Most of the time, only people in high positions have a say in any matter, and lower level employees don’t
• In office preference: Portugal prefers in-office work setups to remote or work from home options. This could be due to a lack of trust in employees, or not adapting to the new ways of remote working
• Work-life balance: this depends on each company’s work culture and management. Some companies insist on fixed hours, with everyone starting at the same time and leaving the office at the end of the work day (5pm or 6pm), while some are more flexible, allowing employees to start late and also finish late.
If you’re looking for higher-level employees for your team in Portugal, we got you covered. We’ve partnered with a highly experienced executive search firm, which is a part of a pan european group/network of experts.
Our partner will work with you to identify, assess, and recruit top-level executives for your organization. And throughout the different stages of the project, we are committed to ensuring that you find the right candidate for the job.
An executive search project includes the following scope of work and stages:
• Needs assessment: The organization assesses its requirements and identifies the specific qualifications, experience, and competencies required for the executive position. This involves understanding the strategic goals, cultural fit, and unique challenges of the organization.
• Job description and profile development: Based on the needs assessment, a comprehensive job description and profile are created, outlining the responsibilities, qualifications, and desired attributes of the ideal candidate. This document serves as a reference point throughout the search process.
• Search strategy: A search strategy is developed to identify potential candidates. This may involve a combination of approaches, such as utilizing executive search firms, engaging in networking, leveraging industry contacts, advertising the position, and utilizing online platforms or databases.
• Candidate identification and evaluation: Potential candidates are identified and evaluated against the established criteria. This includes reviewing resumes, conducting initial interviews, and assessing their qualifications, experience, leadership style, cultural fit, and potential for success in the role.
• Selection and assessment: A shortlist of candidates is selected for further assessment, which may involve additional interviews, reference checks, and psychometric assessments. This process helps to determine the most suitable candidate for the executive position.
• Presentation and decision-making: The top candidates are presented to the hiring committee or key stakeholders within the organization. The decision-makers evaluate the candidates based on their fit with the organization's requirements, vision, and long-term objectives.
• Offer and onboarding: Once the final candidate is selected, an offer is extended, negotiations may occur, and a comprehensive onboarding process is initiated to facilitate a smooth transition for the new executive. This includes orientation, familiarization with the organization's culture, team integration, and setting expectations for performance.
In certain situations, a company may opt to relocate an entire team rather than individual employees. This approach may be chosen when starting business operations in Portugal and aiming to establish a team with experienced staff, or when taking on new projects or clients in the country.
In this case, you would need to look into benchmark requirements, visas and work permits for the team members, relocation services, among other things. Moviinn offers a comprehensive range of services to support businesses seeking to relocate their entire teams.
Employees
Working in Portugal: Employee rights and protection
In Portugal, employees with a contract (i.e. not freelance workers) are entitled to several rights and protection. Here is a list of all the legal things to know about working in Portugal as an employee.
1. Employment Contract: Employees have the right to a written employment contract that outlines their working conditions, job description, salary, and other relevant terms. The contract should be in Portuguese and signed by both parties, though most contracts are written in both Portuguese and English for foreigners. Keep in mind that it’s the employee’s duty to ensure that the Portuguese version is accurate, because in court cases only the Portuguese version has any hold.
2. Minimum Wage. Employees can’t earn less than the minimum wage.
3. Maximum Working Hours: The standard working week in Portugal is 40 hours, with a maximum of 8 hours per day. Overtime work may be allowed, but it must be compensated at a higher rate, and is subject to legal limits.
4. Annual Leave: Employees are entitled to paid annual leave, which is typically 22 working days per year. Additional days may be granted based on the employee's age, length of service, collective agreements, or at the company’s discretion.
5. Public Holidays: There are several public holidays in Portugal, and employees have the right to a paid day off on these designated dates.
6. Protection Against Discrimination: Employees are protected against discrimination based on factors such as gender, age, race, religion, sexual orientation, and disability. Discrimination in hiring, promotion, pay, and working conditions is strictly prohibited.
7. Health and Safety: Employers are required to provide a safe and healthy work environment, including necessary safety equipment and training. Employees have the right to report hazardous conditions and refuse work that poses a serious risk to their health and safety.
8. Social Security Benefits: Employees are entitled to social security benefits, including healthcare, unemployment benefits, and retirement pensions. Employers and employees make contributions to the social security system to fund these benefits.
9. Parental Leave: Parents have the right to parental leave to care for their children until they reach a certain age. During this period, employment is protected, and the employee may receive financial support.
10. Maternity and Paternity Rights: See details below.
The legal requirement in Portugal is a minimum of 22 vacation days, in addition to 12 public holidays. It is mandatory for employees to take at least 15 days of their annual leave within the corresponding year, while the remaining days can roll over until April of the following year. Note that Portuguese law explicitly prohibits employers from offering monetary compensation in exchange for surrendering paid-leave days.
One notable regulation in Portugal pertains to employees declaring their intended vacation days for the entire year, prior to a certain date which changes every year, set by the government (usually some time between March and May). Although many employers provide flexibility in this regard, the formal requirement of reporting vacation days still applies in some companies, and it must be documented in the company's records by the specified deadline.
Pregnant women have the right to take a maximum of 30 days of pre-delivery leave and a minimum of 6 compulsory weeks of post-delivery leave, which falls within the range of 17 to 21 weeks. The initial 6 weeks following childbirth are obligatory for the mother, while the remaining 11 or 15 weeks can be divided between both parents.
Fathers are entitled to 28 days’ leave, taken consecutively or non-consecutively, with at least 7 of these after the baby’s birth. The first 7 days must be taken consecutively and immediately after the birth. The remaining 21 days must be taken within 6 weeks (42 days) of the birth.
Fathers are also entitled to a further 7 working days of voluntary leave, taken consecutively or non-consecutively, taken at the same time as the mother.
When employed in Portugal, you are obliged to contribute 11% of your gross salary towards social security payments. Additionally, your employer is responsible for contributing the remaining social security payment, set at 23.75%. However, certain payments and benefits may be exempt from social security contributions, such as one-time bonuses and specific limits on daily food allowances.
Your employer is required to deduct your social security contribution from your salary and remit it directly to the social security authority on your behalf. Social security serves as a means for individuals to save for their pension. While private pension funds are less common in Portugal, some offer tax and social security benefits.
The tax year in Portugal follows the calendar year, from January 1st to December 31st.
The amount of personal income tax an individual is required to pay in Portugal is based on their taxable income, which encompasses various sources of income such as employment earnings, rental income, and others. To calculate taxable income, allowable deductions and tax credits are subtracted from the total income earned.
Certain expenses, such as qualifying health expenses, charitable donations, and employee benefits like meals allowance, can be deducted from taxable income. Tax credits are also available for specific expenditures like education expenses and mortgage interest payments.
Portugal also offers a tax benefit for Non-habitual Residents (NHR), which entail that any foreigner or Portuguese citizen moving to Portugal after not having lived here for the last 5 years is entitled to a tax benefit of only 20% income tax, regardless of income level. However, the NHR program is due to terminate by December 31st, 2023.
There is also a solidarity tax, ranging from 2.5% to 5%, applicable to salaries exceeding €80,000 per year.
To understand your tax obligations, you can check out the following tools:
1. Access the updated progressive tax steps and thresholds for personal income tax through this link.
2. Find a reliable gross-net calculator on Doutor Financas.
We highly recommend consulting our tax specialist to obtain a more accurate simulation tailored to your specific circumstances.
If you reside in Portugal and are considered a tax resident, it is highly likely that you will need to annually file tax returns by June of the following year. The tax authorities will use the information provided in your tax return to calculate the amount of tax you owe, or if a refund is to be issued to you.
There are several stages and key dates to be aware of regarding personal income tax in Portugal:
1. By January, it is important to ensure that all relevant personal details that may impact your tax liability are accurately updated in the tax portal. This includes information such as the number of dependents, marital status, place of residence, and others.
2. In May or June (specific schedule published by the government each year), the personal income tax declaration is required to be submitted through the tax portal.
3. Typically, within a few weeks, the government will determine the amount of tax you owe. It is possible to divide your tax liability into multiple payments, although this will result in an increased total amount due because of added interest.
Many individuals choose to hire a tax specialist or accountant to assist with the preparation and filing of their personal income tax declaration. If you would like to talk to our tax specialist, book a free consultation call with us.
The online tax portal in Portugal is called "Portal das Finanças". It is the official website maintained by the Portuguese Tax and Customs Authority (Autoridade Tributária e Aduaneira) and serves as a centralized platform for various tax-related activities.
Some useful operations that you may perform on the site include:
1. Submit tax returns: Individuals can file their personal income tax returns online through the portal.
2. Check tax obligations: Taxpayers can review their tax obligations, including outstanding payments and deadlines.
3. Access tax forms: The portal provides access to various tax forms, allowing users to download and submit them as required.
4. Make tax payments: Taxpayers can conveniently pay their taxes online through different payment methods available on the portal.
5. View tax refunds: Individuals can track the status of their tax refunds and receive updates on the portal.
6. Request certificates: Users can request various tax-related certificates, such as proof of residence or tax identification.
7. Consult tax information: The portal offers access to detailed tax information, including legislation, guidelines, and FAQs.
8. Communicate with tax authorities: Users can send inquiries, requests for information, or communicate with tax authorities through the portal's messaging system.
9. Access e-invoicing services: Businesses can utilize the portal to manage electronic invoicing and submit invoice-related information.
10. Obtain tax credentials: Users can obtain or renew their digital certificates and tax credentials necessary for online transactions with the tax authorities.
The Portuguese online tax portal stands out due to its comprehensive range of services and the emphasis on digitalization. It is user-friendly, provides a lot of information, and integrates many tax related services, allowing users to manage multiple tax obligations from a single platform.
However, to take full advantage of the portal and its capabilities you have to have an advanced level of Portuguese as the website is not available in English. Even if you want to email staff members, you will need to communicate in Portuguese.
Most Portuguese individuals primarily save for their pension by contributing to the social security system. Private pension funds are not common in Portugal, although some employers may offer to contribute partially to one.
Common Questions about Employment in Portugal
The national minimum wage in Portugal is € 820 per month as of January 2024. This represents a significant increase from the previous rate of € 760 in 2023 and is considered the largest increase ever recorded, with a rise of 7.9%.
In Portugal, the calculation of the annual minimum wage is based on 14 payments per year. This is a common practice in several European countries, where additional payments are made usually in the form of a Christmas bonus and a vacation bonus.
Social Security costs in Portugal are shared between employers and employees. The exact rates may vary, but typically, employers contribute around 23.75% of the employee's gross salary, and employees contribute around 11% of their gross salary. These contributions fund various social benefits, including healthcare and pensions.
Registering with Social Security in Portugal provides access to various benefits, including healthcare, maternity and paternity benefits, unemployment benefits, and retirement pensions. It also ensures compliance with social security regulations, which is essential for both employers and employees.
In Portugal, the notice periods for termination of employment contracts vary based on the type of dismissal and the length of service of the employee. These are as follows:
Objective Dismissal: The notice period for objective dismissal (e.g., redundancy) depends on the employee's length of service with the company:
• Less than or equal to one year: 15 days
• Greater than one year and less than five years: 30 days
• Greater than five years and less than ten years: 60 days
• Greater than or equal to ten years: 75 days
Collective Dismissal: For collective dismissals, the employer must observe the following notice periods:
• Less than 1 year of service: 15 days
• 1 to 5 years of service: 30 days
• 5 to 10 years of service: 60 days
• More than 10 years of service: 75 days
Resignation: When an employee resigns, the notice period varies based on the duration of employment:
• Less than two years: 30 days
• More than two years: 60 days
For fixed-term contracts, the notice period is either 30 or 15 days, depending on whether the contractual duration is at least six months or less.
Working with an Employer of Record in Portugal offers several advantages, especially for foreign businesses or individuals:
• Compliance: EORs ensure compliance with local employment laws and regulations.
• Administrative Support: EORs handle payroll, tax withholding, and other administrative tasks, reducing the administrative burden on employers.
• Flexibility: EORs provide flexibility for short-term or project-based employment without the need to establish a legal entity.
• Local Expertise: EORs have local expertise and can navigate complex employment regulations, helping employers avoid legal pitfalls.