Hiring Talent And Managing Payroll In Portugal

Hiring in Portugal? Read on to find out the employment norms (like taxes, payroll and benefits) and EOR (Employer on Record) norms in Portugal.

Employment Norms in Portugal

Portugal is among the most prosperous European countries, with a high GDP and a strong economic growth rate. The country has robust laws that protect employees' rights and ensure fair treatment. These employee-friendly laws attract many skilled immigrants from around the world. However, it's important to understand the country's employment norms to gain maximum benefits from business expansion in Portugal.

General Information:

The Currency of Portugal is Euro.
Lisbon is the capital of Portugal.
Portuguese is the official language of Portugal. Documentation should be done in Portuguese to be considered legally valid.
Portugal's 2021 GDP was reported at 253.66 billion.

The Portuguese Labor Code (Código do Trabalho) governs employment and labor laws in Portugal.

Table of Contents

Select Section

Agreements
Onboarding Process
Visa
Minimum Wage
Payroll Cycle
Annual Bonus
Health Benefits
Working Hours and Overtime
Leaves
Social Security
Taxes for Employers
Taxes for Employees
Probation
Termination
Severance Pay
Employees or Contractors
Final Words

Agreements Onboarding Process Visa Minimum Wage Payroll Cycle Annual Bonus Health Benefits Working Hours and Overtime Leaves Social Security Taxes for Employers Taxes for Employees Probation Termination Severance Pay Employees or Contractors Final Words

Agreements

Contracts in Portugal can be either verbal or in writing, but some types, including temporary, part-time, remote work, and contracts with non-EU workers, must be in writing.
Contracts are typically open-ended, but temporary contracts may be used for short-term projects or to replace absent employees.
Fixed-term contracts can be signed for up to 2 years and renewed twice after the expiration date.
A contract should include details such as employee name, commencement date, duration and type of employment, trial period conditions, termination clause, payment and bonuses, and a remote work clause.

Onboarding Process

EOR agencies in Portugal typically complete the onboarding process within 4-7 business days and streamline the process through paperwork related to tax, banking, and labor laws.
They also handle local authorities for payments, social security, and employee benefits. However, onboarding time can vary depending on the chosen EOR agency.
Additionally, some companies in Portugal require non-disclosure agreements during the onboarding process for privacy reasons.

Visa

There are two types of work visas in Portugal.

Short-term Visa for contracts of less than 6 months. However, this can be extended for a year if an employee is engaged in scientific research, academic teaching, specialized professional act, or training offered by WTO members.
Long Term Visa for contracts of more than 6 months.

Nationals of the European Union and European Economic Area nationals do not require work visas to work in Portugal.

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Minimum Wage

The standard minimum wage for employees is 705 EUR per month.

Payroll Cycle

The payroll cycle is monthly.
The employees are paid a day before the month's end.

Annual Bonus

The Annual Bonus of the 13th month is paid by 15 December every year.
Employees receive an additional holiday bonus equal to one month's pay before vacation leave.

Health Benefits

Serviço Nacional de Saúde (SNS) provides health benefits in Portugal.
It covers all medical institutions under the Ministry of Health.
Besides, it provides universal coverage, special occupation-based health schemes, or voluntary private health insurance.
SNS is generally free and promotes equal access to all Portuguese residents.
The following receive SNS services in Portugal.
- Portuguese Nationals
- EU Nationals
- Portugal Residents
- Asylum seekers and refugees
- Stateless people residing in Portugal.

Working Hours and Overtime

Work hours: In Portugal, the standard workweek is from Monday to Friday, consisting of 8 hours per day and 40 hours per week.
Break: Employers are allowed about 1-2 hours of a break after 5 hours of continuous work.e is more than 9 hours.
Overtime: Overtime payment is mandatory.
For 1st Hour = 125% of the hourly pay
For hours followed by the first = 137.5% of the hourly pay
Weekends and holidays = 150% of the hourly pay

Leaves

Sick Leave

Employees should contribute to social security for 6 months to enjoy sick leave. But the first 3 days are not paid.
Afterward, the payment is done as:
- 3-30 days = 55%
- 31-90 days = 60%
- 91-365 days = 70%
- Above 365 days = 75%

Parental leaves

Female employees in Portugal are granted 120-150 days of maternal leave, 30 days of which should be taken before childbirth, and paid 80-100% from social security.
Male employees are granted 10 days of paternal leave within 30 days of delivery, 5 days immediately after childbirth and 10 consecutive days within the female's maternity period.

Annual Leaves

Annual leave of 22 days is granted to all employees.

Public Holidays (for the Calendar year 2024)

Some dates may vary based on official notifications and traditional calendars.

New Year's Day - 1st January
Good Friday - 29th March
Easter Sunday - 31st March
Liberty Day - 25th April
Labor Day - 1st May
Corpus Christi - 30th May
National Day - 10th June
Saint Anthony's Day - 13th June
Assumption Day - 15th August
Implantation of the Republic - 5th October
All Saints' Day - 1st November
Independence Restoration Day - 1st December
Feast of the Immaculate Conception - 8th December
Christmas Day - 25th December

Public Holidays (for the Calendar year 2025)

Some dates may vary based on official notifications and traditional calendars.

New Year's Day - 1st January
Good Friday - 19th April
Easter Sunday - 20th April
Liberty Day - 25th April
Labor Day - 1st May
Corpus Christi - 19th June
National Day - 10th June
Saint Anthony's Day - 13th June
Assumption Day - 15th August
Implantation of the Republic - 5th October
All Saints' Day - 1st November
Independence Restoration Day - 1st December
Feast of the Immaculate Conception - 8th December
Christmas Day - 25th December

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Taxes for Employers

The corporate tax rate in Portugal is 21% of the taxable profits.
Similarly, the estimated employer cost is about 23.25%.
In Portugal, the tax is charged on worldwide income.
The country grants tax credits for foreign taxes paid on foreign source income.
Besides, the employer needs to pay the taxes under the following headings;
- Social Security = 23.75%
- Wage Guarantee fund = 1.0%
- Work-related injury = 1.4%
- Labor accident insurance = 1.75%
- Health at work = 120 Euros
- Work Safety = 30 Euros
- Work Medicine = 14.40 Euros

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Taxes for Employees

All residents of Portugal are required to pay income tax at a progressive rate.
Non-residents are taxed at the rate of 25 % on the income earned from the Portuguese source.

The individual income tax rate in Portugal is as follows.

EUR 0 - 7,116.00 = 14.5%
EUR 7,116.00 - 10,736.00 = 23%
EUR 10,736.00 - 15,216.00 = 26.5%
EUR 15,216.00 - 19,696.00 = 28.5%
EUR 19,696.00 - 25,076.00 = 35%
EUR 25,076.00 - 36,757.00 = 37%
EUR 36,757.00 - 48,033.00 = 43%
EUR 48,033.00 - 75,009.00 = 45%
EUR Above 75,009.00 = 48%
For income above 75,009.00, employees are required to pay an additional solidarity rate between 2.5- 5%

The payroll taxes for employees are as follows.

Social Security = 11%

Probation

Probation periods in Portugal vary based on contract type and job position. Indefinite contracts have a 90-day probation period, while higher positions have a 180-day probation period.
Managerial/executive positions have a 240-day period, and fixed-term contracts have 15-30 day periods depending on the duration of the contract. Probation periods are not typical in Portugal.

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Termination

Termination of an employee in Portugal can happen:
- Voluntarily by the employee
- Upon Mutual Consent
- Unilaterally by the Employer
- Expiry of the contract
- Misconduct by the employee
- Collectively due to bankruptcy

Severance Pay

Severance pay is calculated as:

For less than 3 years of service = fraction of 18 days of salary
For 3 years of service = 18 days of salary

Severance pay should not exceed 20 times the guaranteed minimum salary and 12 times the employee's salary.

Employees or Contractors

The Portuguese Labor Code (Código do Trabalho) distinguishes between employees and contractors.
Employees and contractors are treated differently in benefits and tax schemes.
Employers who misclassify employees and contractors face penalties and fines.

Final Words

Portugal EOR guidelines protect workers' rights. It mandates bonuses, social security, tax schemes and other employment norms and work standards. You should comply with these norms for a successful business.