How To Hire And Pay Employees In Portugal

Emerald Technology's guide to hiring employees in Portugal.

CURRENCY

Euro is the official currency of Portugal. Its currency symbol is €, EUR.

CAPITAL CITY

Lisbon, The Republic of Portugal Capital. It has the largest population of 10.6 Million residents.

LANGUAGE

Portuguese is the official and national language of Portugal and is widely spoken by most of the population.

POPULATION The current population of Portugal is 10.31 Million in 2020 based on World bank numbers.
PAYROLL FREQUENCY The payroll cycle in Portugal is generally monthly and employees have 14 months of salaries.
PUBLIC HOLIDAYS Portugal has 13 public holidays per year, whose dates vary.

GROW YOUR TEAM IN PORTUGAL

NO ENTITY, NO PROBLEM

To start growing your team in Portugal, you must establish a local entity- including an account with a local bank, a local office and an address registered as a subsidiary. This allows you to manage payroll, tax, benefits and compliance for your employees, but can take several months. 

Emerald can hire and payroll your workers, quickly and compliantly with their ready to go entity. Make growing your team simple with Emerald as a global partner.

PROS AND CONS OF HIRING IN PORTUGAL

Portugal is famous for its seafood, popular beaches, music and wine, but it also benefits from its time-zone compatibility, low living cost and excellent employment rate. It has been recognised as a leading destination for providing technology-based services. Known for its large talent pool for technology professionals, open working culture and it attracts business from its high English language proficiency.

It has also been reaping the rewards of notable economic recovery in recent years since adopting business-friendly practices, such as making changes to their labour code which increased flexibility within the whole system.

Even with simplified processes and new changes, hiring in Portugal without a global partner can still be a complex process.

WHY PORTUGAL IS GOOD FOR REMOTE WORKERS

Remote working in Portugal has increased significantly, which can be put down to low living costs for employees and the multiple visa and residency permits available. Portugal has been recognised by Kayak, the world’s leading travel search engine as the #1 remote working destination.

Most European countries have strict rules on citizenship, but in Portugal you get the opportunity for citizenship after only five years of residency, which can be a great option for non-EU nationals.

There is not a specific remote working visa in Portugal, therefore, residing in the country for longer that 183 days, you are classed as a tax resident and will be required to file and pay tax in Portugal. We go into more detail about the different work visas available in Portugal in the Employing Foreign Nationals in Portugal segment.

START GROWING YOUR REMOTE TEAM NOW

WORKING TIME AND OVERTIME IN PORTUGAL

The standard working week is 40 hours per week. However, this may vary depending on occupation and what is included in the contract of employment. 

Overtime maximum limits are set up to 48 hours per week and 150 hours per year for an employee working for a company with more than 50 employees. A company with less than 50 employees, the maximum limit is 175 hours per year. 

If an employee works more than 5 consecutive hours they will be entitled to an unpaid break of 1 hour. A rest period of 11 hours is required between 2 working days. 

ANNUAL LEAVE AND PORTUGAL'S PUBLIC HOLIDAYS

Full-time employees are entitled to a statutory minimum of 22 calendar days' annual leave per annum (pro rata for part-time employees). 

Portugal has 13 public holidays, they are listed below: 

January 1st: New Year's Day (Dia de Ano Novo)
April 15th: Good Friday (Secta-feira Santa)
April 17th: Easter Sunday (Pascoa)
April 25th: Freedom Day (Dia da Liberdade)
May 1st: Labour Day (Dia do Trabalhador)
June 10th: Portugal Day (Dia de Portugal)

June 16th: Corpus Christi (Corpo de Deus)
August 15th: Assumption Day of Our Lady (Assuncao de N.a Senhora)
October 5th: Our Implementation of the Republic (Implantacao da Republica)
November 1st: All Saints Day (Dia de Todos os Santos)
December 1st: Restoration of Independence Day (Restauracao de Independencia)
December 8th: Immaculate Day (Dia da Imaculada Conceicao)
December 25th: Christmas Day (Natal)

PROBATION PERIOD IN PORTUGAL

Probation periods in Portugal are between 3-9 months. The more senior or technical the position, the longer the probation usually is. 

Fixed contracts of more than 6 months, a 30 day probation is applicable. 

RESIGNATION AND DISMISSAL IN PORTUGAL

The employee may unilaterally terminate the employment contract by giving the employer a notice in writing at least 30 or 60 days in advance, depending on whether the employee has worked up to 2 years or more than 2 years. 

The employment contract may increase the notice period by up to 6 months, if an employee who holds a management or executive position, or one who has representative or responsibility duties. 

An employer cannot unilaterally terminate employment without a just cause. The following situations can apply to termination:

Expiry, dismissal on disciplinary grounds subject to prior internal dismissal disciplinary procedure, collective dismissal e.g restructure, economical, dismissal for failure to adapt to a working position. There are strict processes, procedures, and notice periods for the various dismissal routes which will need to be adhered, to mitigate any risk to the business. 

Notice periods do vary depending on length of service and also seniority. Employees will also be entitled to severance pay if they are subject to collective dismissal, dismissal from job, redundancy and failure to adapt to the job position. Again, this can vary based on seniority and length of service. 

Collective dismissals notice periods: 

  • A 15-day prior notice period for employees whose seniority is less than 1 year.
  • 30-day prior notice period for employees whose seniority is between 1 year but less than 5 years.
  • A 60 day prior notice period for employees whose seniority is between 5 years but less than 10 years.
  • A 75 day prior notice period for employees whose seniority is 10 years or over.

Individual dismissal notice periods:

Generally, the notice periods for individual dismissals are in line with the collective dismissal notice periods. 

An employee and employer could also agree to terminate the employment, known as a separation agreement which will need to be provided in writing. An employee does have 7 days to revoke a termination agreement form the date of signing. The only exception is when this has been signed in the presence of a notary. 

Women that have given birth in the last 120 days and employees on paternity leave has special protection from termination. Therefore, dismissal of any employees in these categories is illegal without a favourable opinion from the competent authority (Comissao para a lgualdade no Trabalho e no Emrego -CITE). If this CITE's opinion is not in favour, then the employer can only proceed with dismissal by obtaining a court decision recognising the validity of the reasoning. 

READY TO HIRE YOUR EMPLOYEES IN PORTUGAL?

RESTRICITIVE COVENANTS

The Portuguese Labour Code has a subsection on clauses that limit the freedom of work. These include, among others, provisions on non-competition covenants and minimum permanence duration agreement. Agreements to restrict the activity of employees during employment or after contract termination are allowed under certain terms and conditions. Exclusivity clauses during employment are allowed as are non-compete agreements to produce effects after the termination of the contract. 

PORTUGAL'S MATERNITY AND PATERNITY LEAVE

In nutshell, maternity leave can be taken all at once, or in 2 separate leaves of 30 days prior to the birth and 90 days after. Employees that have twins are entitled to an additional 30 days.

Expectant mothers are entitled to 120 days maternity leave (licenca maternidade). A minimum mandatory period of 6 weeks must be taken by the mother following the birth. 

Fathers are entitled to 15 days paternity leave (licenca de paternidade) to be used within 30 days of the birth. Five of these days must be used immediately after the birth.

Maternity and paternity leave is paid for by social security and compensates for salary not received during this period. 

SICKNESS LEAVE IN PORTUGAL

Employees in Portugal are entitled to a sickness allowance form the social security system. A sick note issued by a medical professional such as a doctor will need to be submitted to the employer. 

The employer will be required to pay the first 3 days of the absence, after this payment falls with social security. 

Most salaried employees are entitled to at a maximum is 1095 days of paid sick leave. There must be a minimum of 6 months payments into the social security system to be able to claim. The amount paid varies between 55% to 75% of the salary:

  • For the first 30 days, this is 55%
  • 31-90 days is 60%
  • 91-365 days is 70%
  • 361+ days is 75%

SOCIAL SECURITY IN PORTUGAL

Social security (Seguranca Social) in Portugal is a contributory scheme aimed to provide support to employees and self-employed who many lose their income due to a variety of factors such as sickness, maternity, paternity, unemployment, occupational diseases, disability, old age and death. 

Before employment takes place an employer will be required to report the hiring of the employee and the main contractual terms to the social security office through its official website (Seguranca Social Directa). The employer will also need to inform any termination or suspension of employment, as well as any change on the agreed type of contract e.g fixed term, permanent. 

HEALTHCARE AND INSURANCE

The employer does not have a duty to provide any benefits such as life insurance and health insurance. However, many companies will establish this in collective bargaining agreements and will be required to apply these accordingly. Some companies will also offer these on an individual basis or with certain groups of employees. These may also be issued in accordance with any benefit policies issued and adopted by the relevant company that the employee works for. If they are provided, they may be subject to social security contributions paid monthly by both the employee and employer. 

Employers are required to be in possession of insurance for the protection of employees against work related accidents.

EXPENSES IN PORTUGAL

It is common for Portuguese employers to provide a monthly allowance or meal card for lunch, which is usually paid per working day and is between €4.80 - €7.60 per day. 

Employers could also be responsible for providing necessary equipment for remote working. 

Employment of

FOREIGN NATIONALS IN PORTUGAL

All foreign citizens require a work visa to work in Portugal. It has different types of work visas, which you can discover more about here.
Salary Taxes

MINIMUM WAGE IN PORTUGAL

In 2022, the national minimum wage in Portugal remained fixed at €822.5 per month, that is €9,870 per year. This is the lowest minimum wage out of all western European countries.

The Government raises the minimum wage each year according to the cost of living inflation.

Salaries are divided into 14 payments instead of 12. The extra 2 are provided as a Christmas and holiday bonus as a 50% split across 12 payments and the other 50% will be due on specific dates. It cannot be issued as a 100% in the 12 month payments.

PORTUGAL'S INCOME TAX

The Portuguese tax year runs from January to December. It is the employer's responsibility to ensure taxes are paid from salaries before payments are made to employees. Portugal's income ranges from 14.5% - 48%, based on an employee's income. 

SALARY PAYMENTS IN PORTUGAL

Salaried in Portugal are often paid in 14 instalments, 12 monthly payments and an additional payment in June and December. However, this can differ among companies and collective agreements.

SOCIAL SECURITY CONTRIBUTIONS IN PORTUGAL

Social security contributions in Portugal are the responsibility of the employer to deduct from an employees salary before payment. Both the employer and employee are subject to social security contributions. The total contributions currently stand at approx. 34.75%. The employer contributes 23.75% and the employee 11%. 

Payment of an additional 1% must be contributed for the Work Compensation Funds (Fundo de Compesacao do Trabalho and Fundo de Garantia de Compensacao do Trabhalo). The employer may bear the costs of contributing either under a public capitalisation scheme or under a supplementary scheme for voluntary personal insurance (in the form of pension savings plans, life assurance, etc) to any employee or group of employees.

There is also a public capitalisation scheme under which an employee can voluntarily complement it's old-age pension amount through the payment of additional contributions during working ages, that are converted into retirement certificates. The value of contribution may be 2.4% or 6% (the latter only if the subscriber is over 50 years old) of the contribution base (as settled out in the context of compulsory contributions), according to the subscriber's choice. 

The total amount of contribution and income generates by the capitalisation will be available at the date of the subscriber's retirement, who may also choose to convert it into an annuity or to transfer it to children or spouse, if they are subscribers too. 

WORKER MISCLASSIFICATION IN PORTUGAL

Similar to other countries, Portugal has strict rules on classifying individual contractors and full-time employees differently. Misclassifying your workers can put your business at risk of fines.

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