On the southwest edge of Europe, Portugal is a cultural and economic wonder. Its well-developed education system makes it a great place for companies to source talent.

Additionally, the government is actively promoting remote workers to base themselves in Portugal, so there's an influx of young workers.

Hiring in Portugal

Labor law in Portugal is not governed by a single law. Portuguese legislation, the Portuguese Employment Code, and the Regulation of the Employment Code are the main sources, which set forth fundamental rights and principles.

Additionally, individual agreements and collective bargaining agreements are important.

Almost all rules spelled out in Portuguese employment law are mandatory and can't be modified by collective bargaining or agreements between the parties. Portuguese employment law protects all workers.

Before you hire employees in Portugal, you should know that Portugal has a 13th and 14th salary requirement. A 13th and 14th salary are two extra months of salary paid during summer and Christmas breaks.

1. Employment Contracts

Portugal's employment contracts are generally permanent and don't need to be in writing - except for fixed-term or part-time contracts.

Regardless, if there's no written contract, employers have to provide their newly hired employees with a document outlining basic terms like:

• Start date
• Place of work
• Role, duties, and responsibilities
• Salary, benefits, and other perks
• Hours
• Holidays
• Termination notices
• Collective agreements that apply

Written employment contracts have similar minimum requirements. Employment contracts don't have to be in Portuguese, the contract can be written in a foreign language as long as the employee understands it.

2. Probation Period / Trial Period

The trial period for permanent employees is 90 days, and 180 days for high-complexity, trust, or responsibility jobs. For management, directorate and similar roles, the trial period is 240 days. 90 days is the average probation period.

There are shorter probation periods for temporary contracts, both fixed and unfixed:

• 15 days if the contract is shorter than 6 months
• 30 days if the contract is 6 months or longer

Labor agreements can be terminated by either party during the probation period without justification or indemnification.

If the employer terminates the contract within 60 days, no prior notice is needed. The employer must give a 7-day or 15-day notice if the probation period lasts more than 60 or 120 days.

Even if agreed on, longer probation periods aren't allowed. However, you can agree on a shorter probation period or exclude probation completely.

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3. Working Hours

Working hours max out at 8 hours a day and 40 hours a week. Employees with managerial positions, jobs of trust, or who perform their work outside of the company's premises may be exempt. In these cases, the limits don't apply. Employees who qualify for exemptions usually get bonuses.

Overtime

Working over 40 hours in a week is overtime, which is only allowed under certain conditions, like business emergencies. In cases where overtime is allowed, it should not exceed two hours a day and be compensated like this:

• For every overtime hour worked on standard workdays, employees get 125% of the normal rate and 137.5% for every additional hour.
• For rest days and public holidays, employees get 150% of the normal pay rate plus an extra day off.

Minimum Wage

The minimum wage in Portugal is €822.50 per month, based on a standard workweek of 40 hours at 8 hours per day.

4. Payroll and Taxes

Every year, Portuguese employees get 14 months of salary payments:

• 12 months of work
• 1 Holiday allowance
• 1 Christmas allowance

Allowances are paid like a full month's salary. Holiday allowances and Christmas allowances are both taxed the same way as other payments to the IRS and Social Security. One allowance is paid around the summer, and the other around the winter holidays.

On the other hand, workers can choose to get paid 12 times ("twelfths"), with those two extra payments prorated throughout the year. You have to pay every month by the last working day of the period.

Employees' tax contributions depend on whether they are residents of Portugal. An individual must spend more than 183 days a year in Portugal or have a permanent abode there to be considered a resident. Non-residents pay only for their earnings in Portugal, while residents pay based on their year-long income.

Employer tax contributions in Portugal

The three main types of taxes employers pay are:

• Social Security - 23.75% (of gross salary of each worker)
• Labor Accident Insurance - 1.75%
• Wage Guarantee Fund - 1%

5. Employment Termination

There are a few ways to end an employment relationship:

• Employee resigns (voluntary termination);
• As per contract, retirement;
• Expiration or non-renewal of employment contract;
• A termination without indemnity for just cause, like theft;
• Dismissal due to economic issues (bankruptcy, restructuring, etc.); or
• Mutually agreed termination.

In Portugal, regular terminations require a notice period from the employer, depending on the worker's tenure.

• 6 months or less of service: 7 day notice
• 48 months or less of service: 1 month notice
• 2 years or more of service: 2 months notice

Severance pay depends on the terms of the contract, the position/role of the employee, and the cause for termination. If the employee is not being terminated due to serious misconduct, negligence, theft, or something of that nature, a severance payment is due. The payment minimum is 18 days of wages per year for the first 3 years of service, and then 12 more days of wages for each year of service after that.

6. Types of Leave

• Paid time-off: Upon completing the first year at the company, paid time off is set at 22 days per year. Workers can take up to 20 days of leave their first year, accumulating two days a month.
• Sick leave: Employees must work for at least six months to qualify for sick leave.
• Maternity leave: Social Security will pay full payment to expectant mothers for 120 days. To qualify, they have to work for the company for a year plus 80 days prior to their due date.
• Paternity leave: There's a mandatory paternity leave of 20 days and an optional one of five days. A new father must use his benefit within 6 weeks after the birth, plus 5 days afterward. It's paid based on the employee's average salary the last six months.
• Parental leave: Couples can take an additional period of 78 or 108 days of leave after using the six weeks of maternity leave and twenty days of paternity leave. If the parents are off for 150 days, they'll get 80% of their paychecks, and if they're off for 120 days, they'll get their full salary.
• Bereavement, marriage, and care leave: Workers in Portugal can get up to 5 consecutive days of paid leave for family bereavement. They can also take a 30-day paid leave for caring for a family member younger than 12 or 15 days for an older family member. Employees get 15 days of paid leave if they get married.

Hiring in Portugal: How Remofirst Can Help

With the rise of global remote work, there are so many opportunities to scale your company globally without multiple legal entities. You can hire and manage talent in Portugal and 180+ other countries the affordable way, via an Employer of Record (EOR) like Remofirst. Contact us today for more info.