Hire employees in Portugal

Portugal’s low employment costs and the country’s strategic position in proximity to other EU markets make the small republic situated in the West of the Iberian Peninsula a very attractive destination for international companies looking to recruit remote workers. Especially in engineering and business, the country offers foreign recruiters a large talent pool to choose from.

Employment contracts in Portugal are generally considered to be permanent and do not need to be in writing in order to be legally valid – except for some contract types such as fixed-term or part-time contracts. However, where no written contract is put in place, employers are obligated to provide their newly hired employees with at least a written document outlining the basic terms of employment including:

• Date of commencement

• Workplace

• Job title, duties and responsibilities

• Basic salary as well as other compensation or benefits

• Working hours

• Total number of holidays

• Notice periods for employment termination

• Applicable collective agreements

Similar minimum requirements apply in cases where the parties decide to put a written employment contract in place. Portuguese law does not require employment contracts to be in Portuguese. They may be composed in a foreign language as long as the employee understands what is said in the contract.

Probation Period

The length of an employee’s probation period depends on the position. While employees in normal positions are usually subject to probation periods of up to 90 days, probation periods for employees who exercise a high responsibility role or who occupy a management position can extend to up to 180 or even 240 days.

Different probation periods apply for fixed-term contracts:

• 15 days for temporary contracts of less than six months

• 30 days for temporary contracts of more than six months

Working Hours and Breaks

A standard working week in Portugal is 40 hours with five eight-hour days which is also the maximum employees are generally allowed to work.

During an eight-hour day, the employee must have a break of at least one hour – but no more than two hours – after five hours of consecutive work. Rest periods between two working days cannot be shorter than eleven hours and an employee should get at least one rest day per week.

Overtime

Any work performed beyond 40 hours within one week is considered overtime and is only possible under certain conditions such as business-related emergencies. Where permitted, overtime work must not exceed two hours per day and is to be compensated as follows:

• on standard working days: 125% of normal pay rate for the first hour worked overtime and 137.5% of normal pay rate for every additional hour

• on rest days and public holidays: 150% of normal pay rate as well as an additional paid rest day

Employees in Portugal must be paid at least once per month. However, pay dates are set by the employer.

Minimum Wage

The national minimum wage in Portugal is currently (February 2023) fixed at EUR 760 per month when counting 14 salary payments per year. In some industries, collective agreements may provide for higher minimum wages.

Sick Pay

Employees who are unable to work because of illness or injury are entitled to sick leave during which they receive payments from the Portuguese social security.

Rates of sick leave benefits are set as follows:

• 0% during the first three days

• 55% between days 4 and 30

• 60% between days 31 and 90

• 70% between days 91 and 365 days

• 75% for long-term incapacity to work exceeding 365 days

The period during which an employee can receive sick pay is limited to 1,095 days.

Bonuses

Employees in Portugal are not only entitled to a 13th but also to a 14th salary which are paid in form of a Christmas bonus – to be paid no later than the 15h of December – and a holiday bonus – to be paid in June.

Employees and employers in Portugal are subject to the following tax and social security contribution rates (last review February 2023):

Taxes

Employers

21%

---

• 21% corporate tax rate

• 23% VAT (standard rate) – except for Madeira region (22%) and Azores (16%)

Employees

up to 48%

---

• Individual income tax rates range from 14.5% to 48% *

• additional solidarity rates of 2.5% and 5% apply to income exceeding EUR 80,000 and EUR 250,000

Social security

Employers

around 26%

---

• 23.75% to social security including family, pension and unemployment benefits

• 1% to Portuguese Wage Guarantee Fund – applicable only to employees hired after 2013

• plus additional insurance for occupational accidents

Employees

11%

---

11% of employee’s gross salary to social security

Please note that the social security contributions indicated above do not necessarily reflect the actual employment costs. These may differ depending on the employment contract and due to other factors (e.g. 13th and 14th salary, health insurance allowances, accrual for severance pay, etc.).

Annual Leave

Employees in Portugal must receive at least 22 paid vacation days per year. During their first year at the company, employees receive two days of leave for each month they have worked – after having completed six months of service and limited to 20 days within the first year.

In addition, Portugal observes 13 public holidays, plus one optional holiday as well as some municipal holidays.

Maternity Leave and Paternity Leave

There are no specific maternity or paternity leave regulations included in Portuguese labour law. Instead, both parents are entitled to so-called initial parental leave which can be either 120 or 150 days – an extension of another 30 days is possible if both parents share the leave or in case of multiple births. Pregnant employees are allowed to take up to 30 days of leave before birth and must take at least 42 days of leave after birth.

20 to 25 days of this initial parental leave are exclusively reserved for the father. Five days must be taken immediately after birth and the rest within the following six weeks. The remaining parental leave can either be taken solely by either mother or father or be shared between both parents.

During initial parental leave, parents receive benefits from Portuguese social security equal to:

• 100% of their normal wages for parental leave extending to 120 days

• 80% of their normal wages for parental leave extending to 150 days

• 83% of their normal wages for shared parental leave extending to 180 days

The government is currently discussing changes to the parental leave regulations. Under the new rules, 28 days of paternity leave (to be taken within the first 42 days after the birth) would be mandatory.

Parental Leave

After the initial parental leave is used up, parents are entitled to further parental leave until the child is six years old under one of the following schemes:

• three months of parental leave taken in one block

• reduction of daily working hours to part-time standards during twelve months

• a combination of both which, in sum, cannot be more than three months of parental leave

While on extended parental leave, mothers and fathers receive statutory benefits from social security amounting to 25% of their usual wages.

Additional Leave and Benefits

In addition to the above mentioned leave entitlements, employees may take time off from work due to one of the following reasons:

• necessity to care for sick or injured children and family members: 15 to 30 days of paid leave depending on the child’s age, severity of the injury etc.

• marriage: 15 days of paid leave

• death of a close family member or spouse: two to five consecutive days of paid leave

In addition to employment termination by default – i.e. in case of a fixed-term contract – resignation and mutual agreement, employment in Portugal may be terminated due to one of the following reasons (non-exhaustive list):

• collective dismissal or other business-related reasons such as staff reduction or liquidation

• redundancy

• breach of employment contract

• employee’s underperformance – must be continuous

• employee’s incapability to adapt to new role

• summary dismissal due to gross misconduct

Notice periods depend on the employee’s length of service and are set as follows:

For fixed-term contracts, employers have to respect notice periods ranging from 15 to 30 days, depending on the length of the contract.

No notice must be given during an employee’s probation period. Employees who are dismissed for objective reasons are entitled to severance pay which can be either 12, 18 or 20 days’ or even one full month’s salary for each year of completed service plus a seniority bonus where applicable.