Portugal has become one of Europe's most attractive markets for international hiring. With competitive labor costs, strong English proficiency, and a growing technology sector, the country offers employers access to highly qualified talent across a range of industries.
But hiring in Portugal comes with unique requirements employers need to understand. From mandatory holiday and Christmas allowances, often referred to as the 13th and 14th-month salary, to local payroll, leave, and termination regulations, compliance is an important part of building a team in the country.
Whether you're hiring your first employee in Portugal or exploring expansion into the European market, this guide covers the key employment laws, payroll requirements, employee benefits, and hiring options employers should know.
Key Takeaways
- Portugal combines a highly educated workforce, strong English proficiency, and lower labor costs than many Western European countries.
- Employees are generally entitled to 22 working days of paid annual leave each year, in addition to public holidays.
- Employment termination is regulated and may require notice periods, formal procedures, and severance payments.
- Companies can hire employees in Portugal without establishing a local entity by partnering with an Employer of Record (EOR).
Why Hire Employees in Portugal?
Portugal has steadily established itself as one of Europe's leading hiring markets for international companies.
The country produces a steady pipeline of skilled professionals through its universities and technical institutions, particularly in fields such as software engineering, business, finance, marketing, and customer support. Lisbon and Porto have become major technology hubs, attracting both startups and multinational companies.
Many Portuguese professionals also have strong English-language skills, making collaboration easier for global organizations.
Portugal's location is another advantage. Operating in the Western European Time Zone allows employees to overlap with both European and North American teams, making cross-border collaboration more efficient.
Another advantage is affordability. While salaries have increased in recent years, employers can often access high-quality talent at lower rates than in countries like Germany, France, the Netherlands, or the United Kingdom.
Companies frequently hire in Portugal for roles such as:
- Software developers
- Product managers
- Customer support specialists
- Marketing professionals
- Finance and accounting professionals
- Operations and administrative staff
For organizations looking to balance talent quality, affordability, and scalability, Portugal remains one of Europe's most attractive markets for international hiring.
Employment Contracts and Labor Laws
Employment relationships in Portugal are governed primarily by the Portuguese Labor Code, which establishes minimum standards and employee protections.
Unlike some countries where individual employment agreements can override statutory requirements, many Portuguese labor law provisions are mandatory. Employers generally cannot waive employee rights through contracts, even if both parties agree.
Portuguese labor regulations governs:
- Employment contracts
- Working hours
- Overtime compensation
- Annual leave
- Family-related leave
- Employee termination
- Workplace protections
- Collective bargaining agreements
Employment Contracts
Permanent employment contracts are the most common form of employment in Portugal.
While some employment contracts may be agreed to verbally, written agreements are strongly recommended and required for certain arrangements, including fixed-term and part-time employment.
Employment contracts should generally include:
- Employee and employer information
- Job title and responsibilities
- Employment start date
- Work location
- Compensation details
- Working hours
- Leave entitlements
- Probation period
- Notice requirements
Portuguese law also allows employers to use fixed-term contracts in certain circumstances, such as for temporary projects or to replace an employee on leave. However, these contracts are subject to specific rules regarding duration, renewals, and permissible use cases. Employers should ensure they have a valid business reason for using a fixed-term arrangement, as misuse can create compliance risks.
Contracts may be written in a language the employee understands, although Portuguese versions are commonly used.
Probation Periods
The standard probation period for most employees is 90 days.
However, longer probation periods may apply in certain circumstances:
- 180 days for positions involving technical complexity, trust, or significant responsibility
- 240 days for senior management and executive roles
Shorter probation periods generally apply to fixed-term contracts.
During the probation period, employers and employees may terminate the relationship more easily than after it ends, although notice obligations may still apply depending on the circumstances.
Working Hours and Overtime
The standard working schedule in Portugal is:
- 8 hours per day
- 40 hours per week
These limits apply to most employees, although certain managerial and autonomous roles may qualify for exemptions.
Employers should maintain accurate records of working hours, including for remote employees.
Overtime
Overtime is permitted under specific circumstances but must generally be compensated at a higher rate than normal working hours.
Additional compensation requirements may apply when overtime is performed:
- Outside normal working hours
- On weekly rest days
- On public holidays
Because overtime regulations can be complex, employers should establish clear policies and ensure managers understand local requirements before approving additional hours.
Payroll, Taxes, and the 13th and 14th Salary
Employers hiring in Portugal should be aware that compensation extends beyond monthly salary.
In addition to wages, companies must account for Social Security contributions, mandatory holiday and Christmas allowances, insurance requirements, and other employment-related costs. As a result, the total cost of employment exceeds an employee's gross annual salary.
Payroll in Portugal differs from that in many countries because employers must account for mandatory allowances, statutory contributions, and payroll tax obligations, in addition to base salary. One of the most notable requirements is the country's holiday and Christmas allowances, which can significantly impact total compensation costs.
Holiday and Christmas Allowances
Employees are generally entitled to two additional salary payments each year:
- A holiday allowance
- A Christmas allowance
These payments, commonly referred to as the 13th- and 14th-month salaries, are generally equivalent to one month's base salary each. As a result, employees often receive the equivalent of 14 months of salary over the course of a year.
For example, an employee earning €3,000 per month would typically receive:
- €36,000 in regular salary payments
- €3,000 holiday allowance
- €3,000 Christmas allowance
This brings their annual gross compensation to €42,000.
Because these additional payments are mandatory, employers should account for them when calculating compensation packages and forecasting employment costs.
Employer Contributions
In addition to salary and mandatory allowances, employers are responsible for making statutory contributions on behalf of employees. These contributions help fund multiple social programs, including:
- Retirement pensions
- Unemployment benefits
- Parental benefits
- Disability programs
- Other social welfare initiatives
Employers should also budget for employment-related expenses such as Social Security contributions, insurance requirements, mandatory allowances, and payroll administration costs.
Income Tax Withholding
Employers must withhold income tax from employee wages and remit payments to the appropriate authorities. Tax obligations vary depending on factors such as income level, residency status, and personal circumstances.
Because payroll compliance can be complex, many international employers choose to work with local experts or an Employer of Record to ensure payroll, tax withholding, and statutory contributions are handled correctly.
Employee Benefits and Leave
Portuguese employees are entitled to a range of statutory benefits and leave protections.
Understanding these requirements is essential for maintaining compliance and building competitive compensation packages.
Annual Leave
Employees are generally entitled to 22 working days of paid annual leave each year.
During the first year of employment, leave accrues based on time worked, subject to statutory limits.
Sick Leave
Employees who meet eligibility requirements may receive sickness benefits through Portugal's Social Security system.
Employers should establish clear procedures for reporting absences and submitting supporting documentation when required.
Maternity, Paternity, and Parental Leave
Portugal provides statutory maternity, paternity, and parental leave benefits through the Social Security system, subject to eligibility requirements.
Eligible employees may receive paid leave following the birth or adoption of a child, with the duration and level of compensation varying depending on the type of leave taken and individual circumstances.
Other Types of Leave
Employees may also qualify for leave related to:
- Marriage
- Bereavement
- Family caregiving responsibilities
- Adoption
- Medical appointments
Employers should ensure internal policies align with local leave requirements.
Termination and Severance
Terminating employees in Portugal generally requires more planning than in countries with at-will employment systems.
Employers must follow specific legal procedures and ensure termination decisions comply with local labor regulations.
Employment relationships may end due to:
- Employee resignation
- Mutual agreement
- Retirement
- Expiration of a fixed-term contract
- Organizational restructuring
- Economic redundancy
- Disciplinary dismissal for serious misconduct
Notice Periods
Notice requirements often depend on factors such as:
- Employee tenure
- Contract type
- Reason for termination
Employers should carefully review applicable requirements before proceeding with a dismissal.
Severance Pay
Employees terminated for reasons other than serious misconduct may be entitled to severance compensation.
The amount can vary depending on factors such as tenure, contract type, and applicable labor regulations.
Because termination procedures can be complex, employers should seek local guidance before ending an employment relationship.
Hiring in Portugal Without a Local Entity
Many companies assume they need to establish a Portuguese subsidiary before hiring local employees. In reality, there are several ways to hire talent in Portugal, each with its own advantages and tradeoffs.
Establish a Local Entity
Opening a local entity gives companies full control over employment operations but requires significant time, expense, and ongoing administrative management.
Hire Independent Contractors
Contractors can provide flexibility, but employers should be careful to avoid worker misclassification. If a contractor functions like an employee, authorities may determine that an employment relationship exists, potentially resulting in penalties and additional liabilities.
Use an Employer of Record
An Employer of Record (EOR) serves as the legal employer on behalf of your company while your employee works exclusively for your business.
The EOR handles:
- Employment contracts
- Payroll administration
- Tax withholding
- Social Security contributions
- Benefits administration
- Employment compliance
Meanwhile, your company maintains day-to-day responsibility for managing the employee's work, performance, and responsibilities.
For companies hiring one or two employees in Portugal, an EOR is often faster and more cost-effective than establishing a local subsidiary. It allows businesses to hire talent quickly while reducing the administrative burden and compliance risks associated with international expansion.
Frequently Asked Questions About Hiring in Portugal
Do I need a legal entity to hire employees in Portugal?
No. Companies can hire employees through an Employer of Record without establishing a local subsidiary.
Are the 13th- and 14th-month salaries mandatory?
Employees are generally entitled to both a holiday allowance and a Christmas allowance, each typically equal to one month's salary.
What is the standard workweek in Portugal?
The standard workweek is generally 40 hours, with employees working up to 8 hours per day.
How much paid vacation do employees receive?
Employees are generally entitled to 22 working days of paid annual leave each year, in addition to public holidays.
Is severance pay required in Portugal?
In many termination scenarios, employees may be entitled to severance compensation, depending on the circumstances and applicable regulations.
How RemoFirst Can Help
Hiring internationally creates exciting opportunities but also introduces payroll, compliance, and employment law challenges that can slow expansion.
RemoFirst helps companies hire, pay, and manage employees in Portugal and 185+ countries without establishing local entities.
As your Employer of Record, we handle employment contracts, payroll administration, tax withholding, statutory benefits, and ongoing compliance so you can focus on growing your business.
Whether you're hiring your first employee in Portugal or building a larger team across Europe, RemoFirst helps you onboard talent quickly, stay compliant with local employment laws, and expand into new markets with confidence. Book your demo today to get started!
