Employer of Record in Portugal

Hiring in Portugal for the first time can be overwhelming, especially when navigating unfamiliar employment laws. Whether you hire independent contractors, set up a legal entity, or use an EOR service, understanding the local employment landscape is crucial for success. Playroll’s comprehensive guide can help you get started if you're hiring locally or relocating a team member.

Companies can hire employees in Portugal in the following three ways:

• Setting up a local entity. Entity establishment reduces risk exposure and enables direct hiring, but can be costly and time-consuming – making it less practical for companies seeking quick and flexible solutions for hiring in Portugal.
• Partnering with an Employer Of Record. An EOR, like Playroll, is a third-party entity that serves as the legal employer of your international workforce which hires, pays, and manages compliance with Portugal’s labor laws and tax regulations.
• Hiring independent contractors. Hiring contractors gives companies a flexible, affordable alternative to hiring local employees, though it involves unique misclassification risks.

Businesses can only operate smoothly in Portugal if they comply with local labor laws including drafting compliant employment contract agreements and meeting taxation and payroll obligations. Learn more about the employment laws and regulations in Portugal below, to avoid any compliance issues.

Employment Contract Requirements

In Portugal, a written employment contract is legally mandated, specifying details such as:

• Employee's professional category
• Working hours
• Place of work
• Remuneration details

Onboarding Process

We can help you get a new employee started in Portugal quickly, with a minimum onboarding time of just 1-2 working days. The timeline starts once the employee submits all required information onto the Playroll platform and completes any necessary local authority registrations.

For non-nationals, the Right to Work assessment (if applicable) may add up to three extra days. Additional time may be needed for follow-ups on this assessment. Please note, payroll cut-off dates can impact the actual start date. Playroll's payroll cut-off date is the 10th of each month unless otherwise specified.

Working Hours in Portugal

The maximum allowable working time per week in Portugal is set at 40 hours. The maximum weekly and daily working hours may vary based on the specifications outlined in the employment contract or collective bargaining agreements.

Overtime in Portugal

Overtime work in Portugal is defined as any labor carried out beyond the standard 40 hours in a week, and it is sanctioned only under specific circumstances, such as business-related emergencies. When authorized, overtime hours should not surpass two hours per day and are subject to the following compensation structure:

• On standard working days: Employees are entitled to 125% of their normal pay rate for the initial hour of overtime and 137.5% of the normal pay rate for each subsequent hour.
• On rest days and public holidays: Compensation increases to 150% of the regular pay rate, accompanied by an extra paid rest day.

Probation Period in Portugal

In Portugal, the probationary period for permanent employees spans 90 days. However, for roles with high technical or complexity requirements, this period extends to 180 days. Management, directorate, and equivalent responsibility roles have a probationary period of 240 days.

• For fixed-term contracts, the probation period is 15 days when the contract is anticipated to last less than 6 months.
• If the contract duration is equal to or longer than 6 months, the probationary period extends to 30 days.

Fiscal Year in Portugal

1 January- 31 December is the 12-month accounting period that businesses in Portugal use for financial and tax reporting purposes.

Payroll Cycle in Portugal

The payroll cycle in Portugal is usually monthly, with employees being paid before the last day of each month.

Minimum Wage in Portugal

The minimum wage for employees in Portugal is typically 4.73 EUR per hour, amounting to ~820 EUR per month for a typical 40 hour work week.

Bonus Payments in Portugal

In Portugal, there are mandatory 13th and 14th salary payments. The 13th salary is typically paid out in June, designated for holidays, while the 14th salary is paid in December, for Christmas. These additional payments can be distributed incrementally within the 12 regular monthly salaries.

Employer Tax Contributions

Employer payroll contributions are generally estimated at an additional 26.5% on top of the employee salary in Portugal.

Employee Payroll Tax Contributions

In Portugal , the typical estimation for employee payroll contributions cost is around 11%.

Individual Income Tax Contributions

In Portugal, individual income tax is applied on an annual basis and follows a progressive rate structure, ranging from 13.25% to 48% as follows:

Pension in Portugal

In Portugal, people receive old-age pensions when they reach the retirement age of 66 years and four months, applicable to both men and women. The pension amount is determined by their social security contributions and earnings history.

Mandatory Leave Entitlement in Portugal

The annual leave entitlement in Portugal is 22 days for a full time worker. These can include public holidays on top of that or within those days, which would otherwise be unpaid.

Public Holidays In Portugal

In Portugal, there's no substitute holiday system, but it's usual to have extended weekends, giving employees longer breaks without using vacation days. Some mandatory holidays may be observed on the following Monday if specified by official legislation. This allows for more flexibility and a better work-life balance.

Paid Time Off in Portugal

Employees in Portugal are entitled to a minimum of 22 paid vacation days per year. During their first year at the company, employees receive two days of leave for each month worked. However, this accrual is capped at 20 days within the initial year, and it begins after completing six months of service.

Maternity Leave In Portugal

Expectant mothers in Portugal who meet eligibility criteria are entitled to 100% of their regular salary, covered by Social Security, for a period of 120 days. To be eligible, an employee must have been employed for a minimum of 80 days within the preceding 12 months before the expected due date. Included in the above, the mother is granted a maximum of 30 voluntary days prior to the birth and 42 days compulsory leave after the birth.

Paternity Leave In Portugal

Fathers are entitled a paternity leave lasting 28 days within the 42 days following the birth of their child. Seven of these days must be taken consecutively immediately after the birth. After completing the initial leave, fathers are still entitled to an additional seven days of leave. These seven days can be taken concurrently with the mother's initial parental leave.

Sick Leave In Portugal

In Portugal, the first three days of sickness are unpaid. After that, if the illness lasts:

• Up to 30 days: 55% of the salary is paid.
• Between 31 and 90 days: 60% of the salary is paid.
• Between 91 and 365 days: 70% of the salary is paid.
• More than 365 days: 75% of the salary is paid.
• To qualify for these payments, the employee needs a doctor's certification and at least six months of employment. The first three days are self-declared to the employer, and from the fourth day onwards, Social Security covers the payments.

Parental Leave In Portugal

In Portugal, after the initial six weeks of maternity leave and 28 days of paternity leave, the couple can decide how to use the next 78 or 108 days. If they take a total of 150 days, they receive 80.00% of their usual pay, and for 120 days, they get 100.00% of their regular salary.

Marriage Leave

In the case of an employee getting married, they are entitled to 15 consecutive days of paid leave.

Care Leave

Employees have the right to 30 days of paid leave per year for providing urgent and essential care for a family member under the age of 12. They are also entitled to 15 days of paid leave for providing care to an older family member.

Family Bereavement

Employees are entitled to 20 days' bereavement leave in the case of the death of a spouse, and 5 days' bereavement leave in the case of the death of a parent.

Termination Process in Portugal

Termination procedures in Portugal adhere to standard protocols, involving notice periods unless an employer can demonstrate substantial grounds for immediate dismissal, typically attributed to misconduct or disobedience. Termination can occur due to:

• Misconduct
• Unsuitable for their job position
• Disciplinary process
• Changes in job requirements

Notice Period in Portugal

Notice periods depend on the type of contract,

• Open-Ended Contracts: 7 days if you've worked less than 6 months or during probation.

• Open-Ended Contracts: 1 month if you've worked between 6 and 48 months.

• Open-Ended Contracts: 2 months if you've worked for more than 2 years.

• Fixed-Term Contracts: 15 days if the contract is for less than 6 months.
• Fixed-Term Contracts: 30 days if the contract is for 6 months or longer.

Severance in Portugal

Employees facing termination due to redundancy or unsuitability for the job are eligible for severance pay, based on the type of employment contract:

• Indefinite-term Contracts: Severance pay is equivalent to 14 days of salary per year of service, capped at 12 months of base pay.
• Fixed-term Contracts: Severance pay is calculated at 24 days per year of service.