An Employer of Record (EOR) in Portugal is a company that takes on the responsibility of being the legal employer for a worker. This includes managing payroll, benefits, and other employment-related tasks on behalf of the worker's actual employer.
Discover the key considerations and essential details you should be aware of before opting for an Employer of Record (EOR) in Portugal.
Employment Contracts | Employment Laws | Social Security | Personal Income Tax | Employee Benefits
| Overview | |
| Continent | Europe |
| Country | Portugal |
| Capital | Lisbon |
| Time zone | UTC−01:00 — Azores |
| Total Time zones | 2 |
| Working hours per week | 40 |
| Working week | Monday–Friday |
| Typical hours worked | 8 |
| Personal Tax filing deadline | 30 June of the year following the one the income relates to |
| Financial Year | 1st January to 31st December |
| Currency | Euro (EUR) |
| Date Format | dd/mm/yyyy |
| Fiscal Year | 1 January- 31 December |
Employment Contracts in Portugal
Employment Contract Definition
An employment contract is one whereby an individual undertakes, for remuneration, to provide his or her services to another or others, within the framework of an organization and under the authority of the latter.
Presumption of Employment Contract
If a worker performs their duties in a beneficiary-controlled space, uses the beneficiary's tools, has set working hours, receives regular payments, and holds a leadership position, they are presumed to be an employee even without a formal contract. Employers who misclassify workers face fines, loss of benefits, and exclusion from contracts, with shared financial responsibility alongside associated companies and involved managers.
Presumption of the Employment Contract for Individuals Working on Digital Platforms
Article 12-A establishes a presumption of employment for individuals working on digital platforms if certain conditions are met. These include the platform controlling the provider's work (e.g., setting pay, supervising activity), restricting their autonomy (e.g., choosing clients), and exercising disciplinary power. This applies regardless of any different label used by the parties. While the presumption can be rebutted if the provider proves significant autonomy, it extends to situations where an intermediary acts between them and the platform. This ensures platform workers enjoy the same protections as regular employees, with joint and several liability for the platform and intermediary for worker's rights and social charges.
Employment Contract Information and Requirements
Employment contracts in Portugal must adhere to specific information requirements and deadlines. Employers must provide written information about various aspects of the contract, including company details, job description, pay, working hours, vacation time, termination procedures, and more. This information must be delivered within specific timeframes, with some core details provided within 7 days and other information within 1 month. If the employee works abroad for over a month, additional information about the work location, payment, repatriation, and healthcare must be given before departure. Employers are obligated to update employees about any changes to relevant information in writing before the change takes effect. The same applies to employees who must inform their employer about any changes that may affect their work situation. While a specific form is not generally required for employment contracts, these information and communication requirements ensure transparency and compliance with Portuguese labor laws.
Types of Contracts
- Open-ended contract (Contrato sem termo): This is the most common type of employment contract in Portugal and offers the most stability to employees. It has no predetermined end date and can only be terminated under specific circumstances, such as for just cause or by mutual agreement.
- Fixed-term contract (Contrato a termo): This type of contract has a predetermined end date and can only be renewed twice. It is typically used for temporary or seasonal work.
- Traineeship contract (Contrato de trabalho para estágio): This contract is intended for individuals who are seeking professional training and experience. It has a maximum duration of 12 months and can only be renewed once.
- Part-time contract (Contrato de trabalho a tempo parcial): This contract is for employees who work less than the standard full-time hours. The minimum working hours for part-time employees are 20 hours per week.
Employment Laws in Portugal
Portugal boasts a robust and dynamic legal framework governing the employer-employee relationship. Understanding the key tenets of these employment laws is crucial for both businesses and individuals operating within the country. From establishing the basic principles of employment contracts to outlining regulations for working hours, compensation, and termination, this overview provides a clear and concise introduction to the essential aspects of Portuguese labor law.
Minimum Wages
The minimum wage in Portugal is 760 euros per month
Payroll Cycle
Payroll is processed on a monthly basis, with remuneration for work conducted from the initial to the final day of the month generally disbursed on the last working day of that month.
Probation and Notice Period
The trial period marks the initial phase of implementing the employment contract, allowing both parties to assess their interest in maintaining the agreement. This period, subject to a written agreement, can be excluded.
In indefinite contracts, the trial period varies:
- 90 days for most employees;
- 180 days for employees in roles of technical complexity, high responsibility, or requiring special qualifications, those in positions of trust, and those seeking their first job (excluding those with prior 90-day term contracts);
- 240 days for senior management positions.
For fixed-term contracts:
- 30 days for contracts of six months or more;
- 15 days for contracts less than six months or of unspecified duration not exceeding this limit.
Service commission contracts include a trial period of up to 180 days if stipulated in writing.
The trial period is adjusted based on the duration of prior contracts for the same job, position, or service agreement. It can be shortened or eliminated by collective labor regulations or written agreement.
During the trial period, termination by either party without prior notice and with just cause is permissible unless stated otherwise in writing. If the trial period surpasses 60 days, the employer's termination requires seven days' notice, increasing to 15 days after 120 days.
Working Hours
The standard working hours have a range of 8 to 40 hours daily and weekly, respectively.
Overtime Pay
In Portugal, overtime rates are as follows:
- First hour: 125% of the regular salary
- Additional hours: 137.5% of the regular salary
- Holidays: 50% of the regular salary
13th Month Pay
In Portugal, employers are obligated to provide employees with two additional months of salary, known as the 13th and 14th salaries. The 13th-month payment is made during Christmas, while the 14th-month payment is made in the summer. Consequently, employees receive 14 payments annually instead of the typical 12. The 13th-month is regarded as vacation pay, and the 14th-month is considered Christmas pay. Employees have the option to receive the 13th and 14th-month salaries integrated into their regular 12 monthly payments.
Termination and Severance Pay
In Portugal, severance pay is not obligatory in termination agreements but is frequently agreed upon. The severance pay amount is contingent on the type of termination:
- Wrongful Termination: If the employer deems reinstating the employee detrimental to the company, compensation is required, ranging from 30 to 60 days of wages per year of service, with a minimum of 6 months of wages.
- Objective Dismissal: In cases of objective dismissal, the employee is entitled to 12 days of base salary plus seniority payments per year of service, with a maximum limit of 12 salaries or 240 times the minimum monthly wage.
- Non-fixed Term Contract: For non-fixed term contracts, during the initial three years, the employee is entitled to 18 days of severance pay. After three years, the entitlement reduces to 12 days of severance pay.
It's important to note that the salary used for calculating compensation cannot exceed €12,700 (20 times the national minimum wage).
Personal Income Tax in Portugal
Individuals classified as residents in Portugal for tax purposes are subject to taxation on their global income, with progressive rates ranging from 14.5% to 48% in 2023.
Non-residents, on the other hand, are only liable for income tax on income derived from Portuguese sources. This includes the portion of remuneration attributable to activities conducted in Portugal and remuneration paid by a Portuguese company or permanent establishment (PE).
In 2023, non-residents face a flat tax rate of 25% on their taxable remuneration. When the taxable income exceeds €7,479, it is segmented into two parts: one equivalent to the limit of the largest bracket within it, subject to the applicable rate in column B for that category, and another, representing the surplus, subject to the rate in column A for the next higher tier.
| Taxable income (euros) | Fees (percentage Normal) (A) | Fees (percentage Average) (B) |
|---|---|---|
| Up to 7,479 | 14.50 | 14.500 |
| From more than 7,479 to 11,284 | 21.00 | 16.692 |
| From more than 11,284 to 15,992 | 26.50 | 19.579 |
| From more than 15,992 to 20,700 | 28.50 | 21.608 |
| From more than 20,700 to 26,355 | 35.00 | 24.482 |
| From more than 26,355 to 38,632 | 37.00 | 28.460 |
| From more than 38,632 to 50,483 | 43.50 | 31.991 |
| From more than 50,483 to 78,834 | 45.00 | 36.669 |
| Higher than 78,834 | 48.00 | - |
Split Rate Application for Taxable Income Exceeding €7,479 in Portugal
This statement details the split rate application for taxable income exceeding €7,479 in the Portuguese tax system. Here's a breakdown of the explanation:
Splitting the Income
- For taxable income above €7,479, it is divided into two parts:
- Part 1: This equals the limit of the largest tax bracket your income entirely fits within. For example, if your income is €10,000, part 1 would be €7,479 (the limit of the first bracket).
- Part 2: This is the remaining surplus income after deducting part 1 from your total income. In the €10,000 example, part 2 would be €2,521 (10,000 - 7,479).
Applying Tax Rates
- Part 1 is taxed using the **average tax rate** (column B) corresponding to the largest bracket it fits within.
- In the €10,000 example, part 1 would be taxed at 16.692% (average rate for the first bracket).
- Part 2 is taxed using the **normal tax rate** (column A) for the next higher tax bracket.
- In the €10,000 example, part 2 would be taxed at 21.00% (normal rate for the second bracket).
Benefits of Split Rate Application
This split rate application ensures a smoother transition between tax brackets, preventing sudden jumps in tax burden for small increases in income.
Employee Benefits in Portugal
Mandatory Employee Benefits in Portugal
| Benefits | Description |
|---|---|
| State-Sponsored Social Benefits | Portugal's social security system, Segurança Social, offers essential benefits such as healthcare, incapacity insurance, and unemployment benefits. Eligibility depends on compulsory social security contributions, shared between employees and employers. |
| Employee Contribution | 11% of gross salary |
| Employer Contribution (For-Profit) | 23.75% of gross monthly salary |
| Employer Contribution (Non-Profit) | 22.3% of gross monthly salary |
| Annual Leave | Minimum of 22 fully paid leave days per year, in addition to 13 public holidays |
| Sick Leave | Up to 1,095 days of paid sick leave. Employer covers the first three days, and social security covers subsequent days |
| Initial Parental Leave | Working parents are entitled to 120-150 days, including Maternity Leave (72 days) and Paternity Leave (25 days). Extended for multiple births |
| Extended Parental Leave | Parents can extend Initial Parental Leave by up to three months, with social security paying 25% of the parent's usual pay |
| Health Benefits | Free or low-cost healthcare through the National Health Service (SNS), often supplemented by private health insurance from employers |
| Retirement & Incapacity Benefits | Old-age pension, invalidity pension, survivor's pension provided by the Portuguese social security scheme |
| Other Social Benefits | Various government-provided benefits such as housing subsidies, childcare support, and unemployment benefits |
| Workers Compensation Insurance | Employers must provide insurance covering work-related injuries or illnesses. Benefits depend on the severity of the injury/illness |
| Wage Guarantee | Protects employee wages in case of employer bankruptcy, covering up to six months of unpaid salaries, severance pay, and other benefits |
| Meal Allowance | Capped at €5.20 per day for public administration employees. Private sector employees receive tax-free meal allowances, up to €5.20 daily in cash or €8.32 through lunch tickets or meal vouchers |
| Holiday Pay & Christmas Bonus | Holiday pay is an extra full month's salary paid in June every year. Christmas bonus (14th salary) is paid by December 15th, proportional to the employment duration in the year |
| Overtime Compensation | Employees under formal contracts eligible for overtime pay for working beyond eight hours daily or 40 hours weekly. Overtime pay includes hourly rate plus additional percentages based on working conditions |
| Night-Time Work Compensation | Night employees eligible for 25% higher remuneration for working at night between 10 pm - 7 am. Compensation rates may vary based on collective bargaining agreements |
| Mandatory Professional Training | Full-time workers entitled to 40 hours of professional training annually |
These benefits ensure a comprehensive package for employees in Portugal, covering various aspects of their well-being, work-life balance, and financial security.
Holidays in Portugal:
- January 1: New Year's Day
- April 2: Good Friday
- April 4: Easter
- April 25: Freedom Day
- May 1: Labour Day
- June 3: Corpus Christi (Second Thursday after Whitsun)
- June 10: Portugal Day (National Day)
- August 15: Assumption Day
- October 5: Republic Day
- November 1: All Saints' Day
- December 1: Restoration of Independence
- December 8: Immaculate Conception Day
- December 25: Christmas Day
Regional Holidays:
- May 24: Day of the Azores (celebrated in Azores)
- June 13: Feast of St. Anthony (Lisbon)
- June 24: Feast of St. John the Baptist (Porto)
- July 1: Madeira Day (Madeira)
- December 26: Christmas Holiday
Choosing an Employer of Record (EOR) in Portugal proves to be a strategic decision for companies with global aspirations. By entrusting crucial responsibilities like adherence to local employment laws, management of payroll intricacies, and ensuring compliance to the EOR, businesses can seamlessly extend their operations to Portugal without the complexities associated with establishing a legal entity. This collaborative alliance empowers companies to focus on their primary goals and expansion plans, guaranteeing that their workforce in Portugal functions in full compliance with local regulations. The EOR streamlines international employment processes, providing adept assistance in maneuvering through the nuanced terrain of Portuguese employment regulations.
Southern Europe: EOR Greece | EOR Italy | EOR Spain | EOR Portugal
Social Security in Portugal
Social Security Contributions
Social Security is a system designed to safeguard fundamental rights and equal opportunities by providing benefits and support for various life circumstances such as illness, parenthood, unemployment, and disability. This system is applicable to both Portuguese and foreign citizens who contribute to Portugal.
Contributions to Social Security are made by both employees and the self-employed.
For employees, the Social Security amount is automatically deducted from their salary by the employer. The contribution, equivalent to 11% of the gross salary (total income without deductions), is deducted automatically.
As for self-employed individuals, they are responsible for the contribution payment, due between the 10th and 20th of the month following the relevant month. Payment methods include Multibanco, the Treasury Office of Social Security, Homebanking, and Direct Debit through the Segurança Social Direta (Social Security Direct) service.
Employers are obligated to register employees with Social Security, providing essential information such as address, NISS, civil identification documents, and Tax Identification Number (NIF).
Self-employed workers may be exempt from Social Security contributions under certain conditions. Detailed information on exemption conditions and the application process is available.