How To Hire And Pay Employees In Portugal

Portugal is famous for its seafood, popular beaches, music and wine, but it also benefits from its time-zone compatibility, low living cost and excellent employment rate. It has been recognised as a leading destination for providing technology-based services and is known for its large talent pool of technology professionals, open working culture, and high English language proficiency.

Portugal has been reaping the rewards of notable economic recovery in recent years since adopting business-friendly practices, such as making changes to the labour code to increase flexibility.

Even with simplified processes, however, hiring in Portugal without a global partner remains a complex process.

Mandatory 

Portuguese employers are required to offer the following benefits to all full-time employees:

• Basic Insurance
• Maternity and Paternity Leave (Social Security)
• Annual Leave + Holiday
• Wage Guarantee Fund (Social Security)
• Workers compensation insurance (Social Security)
• Pension (Social Security)
• Unemployment (Social Security)

Additional

Some employers like to offer additional benefits to improve employee retention and satisfaction.

• Private Healthcare
• Supplementary Pension
• Public Transport allowance
• Gym
• Hardware

Contract

Contracts in Portugal must be in the local language and can be bilingual. The contract must include:

• Name (Employee and Employer)
• Employee ID number and fiscal tax number
• Salary and holidays entitlement details
• Start Date + Length of employment
• Job Description
• Holiday entitlement
• Holiday pay entitlement
• Trial period
• Termination details
• Remote work clause

Probation Period

A probation period allows both an employer and employee to evaluate the employment match. The probation period is typically 3-9 months but can increase for more senior roles.

For fixed contracts of more than six months, a 30-day probation is applicable.

Healthcare 

Employers are not required to provide healthcare or life insurance. However, many companies will establish this in a collective bargaining agreement.

Social Security 

Social security in Portugal is aimed to support employees and self-employed workers who many lose their income. This includes:

• Sickness Pay
• Disability Fund
• Pension
• Maternity and Paternity
• Unemployment

Maternity Leave

Maternity leave is provided by social security for parents who have contributed for the past 6 months. Expectant mothers are entitled to 120 days, it can be taken all at once, or in 2 separate leaves of 30 days prior to the birth and 90 days after. A minimum mandatory period of 6 weeks must be taken by the mother prior to the birth.

Paternity Leave

Fathers that contributed to social security are entitled to 15 days leave to be used within 30 days of the birth. Five of these days must be used immediately after the birth.

Sickness Leave

Employees in Portugal are entitled to a sickness allowance from the social security system. A sick note issued by a medical professional such as a doctor will need to be submitted to the employer.

The employer will be required to pay the first three days of the absence, with subsequent payments being made by social security.

Most salaried employees are entitled to a maximum of 1095 days’ paid sick leave. There must be a minimum of six months of payments into the social security system to be able to claim. The amount paid varies between 55% and 75% of the employee’s salary, as follows:

As the legal employer, Emerald Technology requires the following employee documents to ensure complete compliance:

• Passport
• Portuguese Identification Card (front and back)
• Social Security number
• IBAN Proof
• Tax Number
• Tax Form

An employee may unilaterally terminate their employment by providing written notice to their employer 30 or 60 days in advance, depending on whether the employee has worked up to or more than 2 years.

The employment contract may increase the notice period by up to six months for an employee who holds a management or executive position, or who has representative or responsibility duties.

An employer cannot unilaterally terminate employment without a just cause. Compliant terminations are listed below:

• Expiry
• Dismissal on disciplinary grounds subject to prior internal dismissal disciplinary procedure
• Collective Dismissal

There are strict processes and notice periods for the various dismissal routes which must be adhered to, to mitigate any risk to the business.

Dismissal of employees who are on parental leave, pregnant or have just had a child is illegal without a favourable opinion from the competent authority.

Notice periods do vary depending on the length of service and also seniority.

Severance

Employees are entitled to severance pay if they are subject to collective dismissal, dismissal from job, redundancy and failure to adapt to job position. This can vary based on seniority and length of service.

Annual Leave 

Full-time employees in Portugal are entitled to a statutory minimum of 22 calendar days' annual leave per annum.

Public Holidays 

Portugal has 13 public holidays.

• New Year's Day
• Good Friday
• Easter Sunday
• Freedom Day
• Labour Day
• Portugal Day
• Corpus Christi
• Assumption Day of our Lady
• Republic Day
• All Saints Day
• Independence Day
• Immaculate Day
• Christmas Day
  
  

Minimum Wage

The minimum wage in Portugal is fixed at €822.5 per month. This is the lowest minimum wage out of all western European countries. The Government raises the minimum wage each year according to the cost of living inflation.

Working Time and Overtime

The standard working week is 40 hours but can vary depending on occupation and contractual agreements.

Overtime maximum limits are set at 48 hours per hour / 150 per year for companies with more than 50 employees, and 175 hours per year for companies with less than 50 employees. Overtime pay is mandatory for employees working outside of their agreed hours.

Salary Payments

Salary payments in Portugal are usually made in 14 instalments - 12 monthly payments and an additional payment in June and December.

Bonus 

Employers are required to pay two additional salaries in June and December.

Income Tax 

The Portuguese tax year runs from January to December. It is the employer’s responsibility to ensure taxes are deducted from an employee’s salary ahead of payment.