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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
- 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
AgreementsOnboarding ProcessVisaMinimum WagePayroll CycleAnnual BonusHealth BenefitsWorking Hours and OvertimeLeavesSocial SecurityTaxes for EmployersTaxes for EmployeesProbationTerminationSeverance PayEmployees or ContractorsFinal 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 2023)
- New Year's Day (1st January)
- Good Friday (7th April)
- Easter Sunday (9th April)
- Liberty Day (25th April)
- Labor Day (1st May)
- Corpus Christi (8th 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.
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