Employee Benefits in Portugal: A Guide for Employers

What Are Employee Benefits in Portugal?

When hiring in Portugal, an employee benefits plan should encompass both mandatory and supplemental offerings. In Portugal, mandatory benefits are benefits that employers are legally required to provide to their employees under Portuguese labor law. In contrast, supplemental benefits refer to non-mandatory perks and benefits that employers may offer to employees beyond what is legally required. These benefits are provided at the employer's discretion and are designed to enhance the overall compensation package, improve employee satisfaction, and attract top talent. 

‍

Who Is Entitled to Employee Benefits in Portugal?

Full-time employees are entitled to all mandatory benefits as stipulated by labor laws. Part-time employees may receive prorated benefits based on their working hours. Independent contractors, however, are not automatically entitled to these benefits. In fact, offering benefits to independent contractors can put you at risk of employee misclassification as an employer.

Full-Time vs. Part-Time Employee Benefits

Full-time employees typically work 40 hours per week which are divided into eight hours per day. Whereas part-time employees generally work fewer hours than the full-time standard, often ranging from 20 to 30 hours per week. Part-time hours should be defined in the employment contract and can vary depending on the employer's needs.

Independent contractors in Portugal are not bound by the same working hour regulations as employees, meaning they have flexibility in setting their schedules. Contractors can choose when to work, depending on the nature of their projects and client requirements. They are not subject to the standard 40-hour work week or limitations on daily working hours unless specifically agreed upon in their contract.

‍

Overview Of Employee Benefits In Portugal 

‍

‍

Mandatory Employee Benefits in Portugal 

Mandatory benefits, also known as statutory benefits, include essential social security contributions, worker’s compensation and paid leave. These legally required benefits provide a base level of support for employees. Let’s explore each in more detail:

Social Security Contributions

Employers must contribute to the Portuguese social security system (Segurança Social), which covers a range of protections, including pensions, healthcare, unemployment benefits, and parental leave. Employers are responsible for contributing 23.75% of each employee's gross salary to the social security system. Employees contribute 11% of their gross salary to social security. This amount is automatically deducted from their wages by the employer.

Self-employed individuals are also required to contribute to social security. The standard contribution rate for self-employed workers is 21.4% of their relevant income. 

Contributions to the Social Security system fund a range of benefits, including:

• Pensions: Old-age, disability, and survivors' pensions.
• Unemployment Benefits: Financial support during periods of unemployment.
• Sickness and Maternity Benefits: Support during illness or maternity leave.
• Family Benefits: Assistance for families, such as child benefits.

Employers are responsible for registering their employees with the Social Security system and ensuring timely payment of contributions. Self-employed individuals must register themselves and are responsible for their own contributions. Failure to comply with social security obligations can result in penalties and legal consequences for employers.

Annual Leave

Employees in Portugal are entitled to a minimum of 22 working days of paid annual leave each year (separate from the 13 public holidays). Leave accrues progressively in the first year, allowing employees to take leave after six months of working at an organization. In subsequent years, the full leave entitlement is available at the start of the year. 

Annual leave must typically be used within the year, though it can be carried over to April 30 of the following year. Leave timing is agreed upon with the employer, and employees can take at least 10 consecutive days if desired.

Public Holidays

Portugal observes 13 national public holidays (including New Year’s Day, Good Friday, and Portugal Day) each year, during which employees are entitled to paid time off. If an employee is required to work on a public holiday, they are typically compensated with extra pay or given additional time off.

Maternity Leave in Portugal

Maternity leave is designed to support mothers with paid time off around childbirth and is partially funded through the national Social Security system. New mothers are entitled to 120 days of paid maternity leave, with an option to extend to 150 days in cases of multiple births or health complications. 

Mothers receive 100% of their average salary for 120 days if they opt for the standard leave period. If the leave is extended to 150 days, they receive 80% of their average salary. 

Up to 30 days of maternity leave can be taken before the expected due date, allowing mothers the opportunity to rest before childbirth. Any unused prenatal leave will be added to the postnatal period.

Paternity Leave in Portugal 

Fathers are entitled to paternity leave to support them in caring for their newborns. Fathers are required to take 20 days of paternity leave. Of these, five days must be taken consecutively immediately after the birth of the child, and the remaining days can be taken within six weeks. 

Fathers can also take an additional 5 days of optional paternity leave. New fathers receive 100% of their average salary for the duration of the paternity leave.

Sick Leave

Employees are entitled to paid sick leave, funded by the social security system. Sick leave payments cover a portion of the employee’s regular wage, generally between 55% and 75%, depending on the length of the absence. Sick pay starts from the fourth day of illness. Employees must provide a medical certificate from a certified healthcare provider to qualify for sick leave.

The certificate must be submitted to the employer and the Portuguese social security system to initiate the benefit process. Sick leave benefits are funded through Portugal's social security system. Employers are not directly responsible for covering sick pay, reducing the financial burden on them. In cases of chronic illness or long-term conditions, employees may be eligible for extended sick leave benefits, subject to periodic medical certification.

Workers’ Compensation 

Workers' compensation provides financial and medical support to employees who suffer work-related injuries or occupational illnesses. Employers are required to have workers' compensation insurance to cover medical costs, wage replacement, and, if necessary, disability benefits or death benefits for the employee’s family. 

Injured employees receive medical care and income replacement based on the severity of their disability, while dependents receive financial assistance in cases of workplace fatalities. Employees on workers' compensation leave are protected from dismissal, and the system is regulated by the Portuguese Authority for Working Conditions (Autoridade para as Condições de Trabalho or ACT) to ensure compliance and safeguard employee rights.

‍

Provide Competitive Benefits Packages

Struggling to come up with a compelling employee benefits package? Attract and retain talent globally with Playroll's tailored benefits. Let our experts manage benefits to ensure compliance with local laws and employee satisfaction so you can scale your business globally.

Read More

‍

Supplemental Employee Benefits in Portugal 

Private Health Insurance

While Portugal’s National Health Service (Serviço Nacional de Saúde or SNS) provides universal healthcare, many residents opt for private health insurance to access faster services, a broader range of treatments, and more flexible provider options. 

Many employers offer private health insurance to complement the public healthcare system. This benefit can include coverage for medical, dental, and vision care and is highly valued by employees for the added convenience and range of services. These plans may cover the employee alone or extend to family members, depending on the employer’s policy.

Retirement Plans

In Portugal, employer-sponsored retirement plans, while not mandatory, are a valuable employee benefit that helps attract and retain talent. These plans are typically defined contribution schemes, where both employers and employees contribute to an individual retirement account, often with tax advantages. 

Employers benefit from corporate tax deductions, while employees receive personal tax incentives, especially through a Plano Poupança Reforma (PPR), or Retirement Savings Plan. These plans offer investment flexibility, and potential portability when moving from one employer to another, and can help build long-term financial security. These benefits can help boost employee loyalty and make companies more competitive in the job market.

Meal Allowance

While not mandatory, meal allowances are a common practice in Portugal. Employers often offer a daily meal allowance, either through vouchers or cash, to help cover employees’ daily meal expenses. If provided as cash, the tax-exempt limit for meal allowances is €6.00 per day. When provided as meal vouchers or loaded onto a meal card, the tax-free limit is €9.60 per day. 

Meal allowances within the €6.00 (cash) or €9.60 (voucher) limits are exempt from income tax and social security contributions, making them a cost-effective way to boost take-home pay. For employers, providing meal allowances as vouchers or cards helps reduce payroll tax liabilities while offering an attractive benefit to employees.

Flexible Working Hours

Flexible working hours in Portugal are increasingly common, offering employees options like flexible start and end times, compressed work weeks, remote work, and part-time arrangements. Benefits include higher productivity, improved employee satisfaction, and reduced absenteeism. Remote work requires a formal agreement, and the “right to disconnect” law protects employees from work communications outside of set hours. Flexible working arrangements help employers attract and retain talent while supporting employees' work-life balance.

Additional Paid Time Off 

Additional paid time off (PTO) is a voluntary benefit offered by some employers to support work-life balance and improve job satisfaction. Types of additional PTO include wellness days, special occasion days (e.g., birthdays), extended vacation, and compassionate leave. Some companies offer additional PTO based on performance or tenure, rewarding employee contributions and loyalty.

Professional Development and Training

In Portugal, professional development and training benefits are popular among employers to support employee skill growth and career advancement. Common offerings include workshops, certifications, industry events, mentorship, and language classes. Professional development also attracts top talent and can provide tax advantages for employers, making it a valuable addition to compensation packages. 

‍

Tax Implications of Employee Benefits in Portugal 

In Portugal, employers can optimize their compensation packages by offering certain employee benefits that receive favorable tax treatment. These tax-efficient benefits not only improve employee satisfaction but also provide financial advantages for both employers and employees. Key benefits with tax incentives include:

• Health and Life Insurance: Employer contributions for collective health and life insurance plans are exempt from social security contributions.
• Education and Training: Expenses for employee training relevant to the company are deductible for corporate tax purposes.
• Transportation Allowances: Tax-exempt allowances or reimbursements for public transit helps support employees that are commuting.
• Profit-Sharing and Bonuses: Profit-sharing bonuses are partially tax-exempt up to €4,100 in 2024, if certain conditions are met.
• Stock Options and Share Plans: These plans receive favorable tax treatment if specific holding conditions are satisfied.
• Childcare Support: Employer-sponsored childcare can be tax-deductible for employers and tax-exempt for employees under certain conditions.
• Housing Allowances: From 2024 to 2026, employer-provided housing up to the Rental Support Program ceiling is exempt from Personal Income Tax and Social Security, with exclusions for company stakeholders.

‍

Legal Considerations for Employee Benefits in Portugal

Employers must provide mandatory benefits, such as social security, public holidays, and parental leave, and ensure voluntary benefits like health insurance follow regulations. Additionally, accurate records of benefits, payroll, and tax data must be reported to authorities, particularly for tax-exempt benefits, to avoid audits and financial penalties. 

Failing to comply can lead to fines, back payments, and increased scrutiny, potentially harming the employer's reputation and workforce stability. Sounds complex? Partnering with global employment experts like Playroll removes the red tape from distributing benefits to your global team, so you can focus on your business.

‍

Additional Benefits in Portugal to Attract Talent

In Portugal, many employers offer additional perks beyond mandatory and supplemental benefits to make their companies more attractive to top talent. Here are some popular perks that improve the employee experience and help attract and retain skilled professionals:

Wellness Programs and Gym Memberships

Wellness benefits, such as gym memberships, yoga classes, mental health support, and wellness reimbursements, are valued by employees. These programs show that the employer cares about their health and well-being, which can be a strong differentiator.

Transportation Subsidies

Employers may provide transportation allowances or reimbursements for public transit passes, reducing commuting costs for employees. Some companies offer company cars or fuel allowances for employees who need to travel for work.

Childcare Support

Childcare assistance, such as childcare vouchers, subsidies for daycare, or even on-site childcare, is highly valued by working parents. This benefit helps attract talent seeking family support and demonstrates a family-friendly work environment.

Performance Bonuses and Profit-Sharing

Performance-based bonuses or profit-sharing arrangements allow employees to benefit from the company’s success. These incentives align employee goals with company performance and provide extra financial motivation.

‍

How Benefits Impact Employee Cost

In Portugal, employee benefits significantly influence the total cost of employment. Employers are mandated to contribute to social security and often provide additional benefits, which collectively increase the overall expense of hiring.

Employers must contribute 23.75% of an employee's gross salary to social security and approximately 1% for labor accident insurance, adding around 24.75% to the base salary. Many companies also offer supplemental benefits, such as private health insurance (€20 to €100 per month), meal allowances (up to €9.60 per day), and transportation subsidies. Including these additional benefits, the total employment cost can rise by 30% to 40% or more, depending on the specific package offered.

For a detailed comparison of employment costs across regions, use Playroll’s free employee cost calculator.

‍

Provide Competitive Employee Benefits in Portugal with Playroll

Playroll offers a centralized platform to simplify hiring and employee benefits management in Portugal, covering onboarding, payroll, and compliance with local regulations. Through Playroll, companies can provide localized benefits packages, ensure accurate payroll processing, and maintain compliance with Portuguese labor laws. 

Employees benefit from a self-service portal for accessing pay and benefits information, while Playroll's on-the-ground employment experts help attract top talent by delivering competitive and compliant benefits.

Book a chat with our team to find out how we can help you attract and retain world-class talent in Portugal.

‍