Portugal's prime location, talented workforce, and competitive costs make it an excellent option for global companies expanding into Europe. But before you start hiring, you must familiarize yourself with the country's detailed and employee-friendly labor laws.
Portugal takes worker protections seriously, and if you're not careful, even minor missteps can lead to costly penalties — so understanding the rules is key.
Key takeaways:
- Employees in Portugal benefit from comprehensive statutory rights, including paid leave, severance pay, Social Security contributions, and mandatory 13th and 14th month salary payments.
- Work-life balance and professional development are embedded in the legal framework, from the right to disconnect to generous parental leave and mandatory training hours.
- Employers must follow strict rules around contracts, termination, and worker classification, or risk fines and other penalties.
Labor Laws in Portugal: What You Need to Know
Portuguese labor laws are primarily governed by the Portuguese Constitution (Constituição da República Portuguesa) and the comprehensive Labor Code (Código do Trabalho).
Through these frameworks, employees are entitled to a variety of statutory benefits — including paid leave, maternity and paternity leave, severance pay, and additional compensation in the form of 13th and 14th-month payments.
Portuguese law prioritizes job security and work-life balance, as reflected in recent legislation protecting workers' right to disconnect and prohibiting employers from contacting employees outside of working hours except in emergencies.
Portuguese employees also have a statutory right to at least 40 hours of professional training per year, which employers must either provide directly or allow time for employees to pursue. This training requirement reflects Portugal's commitment to continuous professional development.
Who Is Covered by Employment Laws in Portugal?
Portuguese employment laws cover all employees working within Portuguese territory, regardless of their nationality or the nationality of their employer. This includes Portuguese citizens and foreign workers with valid work permits or EU citizenship.
The laws apply to employees:
- Working for Portuguese companies
- Foreign companies with Portuguese subsidiaries
- International companies employing workers in Portugal through an Employer of Record
Independent contractors (trabalhadores independentes) are covered by separate regulations under Portugal's Social Security system but have different rights and obligations compared to traditional employees.
Employment Contracts & Probation Periods
Portuguese law recognizes two primary types of employment contracts: open-ended contracts (contratos sem termo) and fixed-term contracts (contratos a termo). Open-ended contracts are considered the standard form of employment and provide the highest level of job security.
Employment contracts must include essential information such as:
- Job description and responsibilities
- Salary and payment terms
- Working hours and location
- Annual leave details
Contracts must be written in Portuguese, although bilingual versions are often acceptable for international employees.
Portuguese law allows for probation periods, also known as trial periods (período experimental). For most positions, the probation period lasts 90 days but can extend up to 240 days for management and senior technical roles.
During this time, either party can terminate the employment relationship with reduced notice requirements, though dismissals must still follow fair procedures.
Fixed-term contracts are permitted only in specific circumstances, such as temporary business needs, seasonal work, or replacing employees temporarily on leave. These contracts cannot exceed three years and are subject to strict renewal limitations to prevent abuse.
Collective Bargaining
Collective bargaining plays a central role in Portuguese labor relations, with unions and employer associations negotiating comprehensive agreements that often set standards above statutory minimums.
These collective bargaining agreements (convenções coletivas de trabalho) can cover entire industries at national, regional, or local levels, multiple companies within a sector, or individual workplaces.
Collective agreements typically address employment conditions, including:
- Wages
- Working hours
- Overtime rates
- Vacation entitlements
Non-unionized workers often benefit from these agreements, as they frequently establish industry-wide standards that become the de facto minimum for all employers in that sector.
Working Hours & Wages
The standard workweek in Portugal is 40 hours, usually over five days. Employees can't work more than eight hours in a day unless they're getting paid overtime.
Overtime in Portugal is limited to a maximum of two hours per day and 150 hours per year. The first hour of overtime is paid at 125% of the regular rate, with any additional hours paid at 137.5%. If the overtime falls on a weekend or public holiday, it's paid at 150% of the regular rate.
As of 2025, Portugal's monthly minimum wage is EUR 870, though this amount can vary slightly by region and sector based on collective bargaining agreements.
Salaries in Portugal are typically paid monthly, and employers must provide detailed pay slips showing all deductions and contributions.
Portuguese employers must pay annual bonuses, known as 13th and 14th-month pay, which are typically paid in December as a Christmas bonus and in July as a vacation allowance.
These payments are mandatory and calculated based on the employee's regular monthly salary.
Health & Safety Standards
Portuguese employers must maintain comprehensive workplace health and safety standards as outlined in the country's occupational health and safety legislation. These requirements include:
- Conducting regular workplace risk assessments
- Providing necessary safety equipment and training
- Ensuring proper workplace ergonomics and environmental conditions
- Establishing emergency procedures and first aid capabilities
Employer Taxes
Portuguese employers must contribute to various mandatory social programs on behalf of their employees. The primary contribution is to Social Security (Segurança Social), where employers typically contribute approximately 23.75% of each employee's gross salary.
These contributions fund multiple social programs, including:
- Unemployment benefits
- Disability insurance
- Family allowances
- Workplace accident insurance
- Retirement pensions
Employees contribute 11% (withheld from pay) to Social Security. Contractors pay their own contributions, typically 21.4%.
Termination Guidelines & Severance Pay
Portugal does not recognize at-will employment, meaning employers cannot terminate employees without just cause or proper procedures.
Valid reasons for termination include serious misconduct, poor performance after proper warnings and improvement opportunities, economic redundancy, or workplace reorganization.
Notice periods depend on employee tenure:
- <1 year: 15 days
- 1-5 years: 30 days
- 5-10 years: 60 days
- 10+ years: 75 days
The termination process requires specific documentation and, in many cases, consultation with employee representatives or unions. Employers must follow due process, including providing warnings for performance issues and opportunities for improvement before termination.
Severance pay is required in most termination scenarios, with the amount calculated based on the employee's length of service and salary.
For contracts starting on or after October 1, 2013, severance pay includes:
- 18 days' salary per year for the first three years of service
- 12 days' salary per year for each year thereafter
- A length of service payment for each full year worked
The total severance amount is capped at the lesser of:
- 12 months of the employee's base salary, or
- 240 times the national minimum wage.
Health Insurance
Portugal provides universal healthcare through its National Health Service (Serviço Nacional de Saúde), funded through tax contributions and Social Security payments. All legal residents, including employees, have access to this system.
While public healthcare is comprehensive, many employers offer private health insurance as an additional benefit to attract and retain talent. Private insurance typically provides faster access to specialists, private hospital rooms, and coverage for services not included in the public system.
Employers are not legally required to provide private health insurance, but it has become a common benefit in competitive industries such as tech and finance. When provided, the value of private health insurance may be considered a taxable benefit for employees.
Paid Leave Laws
Portuguese labor law mandates several types of paid leave that employers must provide to their workers.
Vacation and Holiday Leave
Portuguese employees are entitled to a minimum of 22 paid vacation days per year, typically increasing with the length of service. This vacation time cannot be waived or paid out in lieu, except upon termination of employment.
Portugal recognizes 13 national public holidays, though additional regional and local holidays may apply depending on the employee's work location. National holidays include:
- New Year's Day (January 1)
- Good Friday
- Easter Sunday
- Freedom Day (April 25)
- Labor Day (May 1)
- Christmas Day (December 25)
When public holidays fall on weekends, they are typically observed on the following Monday, ensuring employees receive the full benefit of the holiday.
Sick Leave
Portuguese employees are entitled to paid sick leave when certified by a medical professional. For the first three days of illness, sick leave is unpaid, though employers may opt to cover it.
After this initial period, Social Security pays employees between 55% and 75% of their average salary, depending on their contribution history and length of illness.
Long-term sick leave can extend up to three years for the same illness, with varying payment percentages throughout this period.
Self-employed contractors can also access sick leave benefits through Social Security. However, they must have made the required contributions and may receive payment rates different from those of traditional employees.
Parental Leave
Portugal offers generous parental leave policies supporting both biological and adoptive parents, with benefits funded through the national Social Security system.
Parental leave is structured in stages and includes paid and unpaid options, allowing families to choose what best suits their needs.
Initial Parental Leave
Parents can choose between two standard leave options following the birth or adoption of a child:
- 120 consecutive days of leave at 100% pay, or
- 150 consecutive days at 80% pay
If both parents share the leave, they may be eligible for an extended period of 180 days, paid at 83% of their reference salary.
Some leave entitlements are specific to each parent and must be taken within a set period:
- Maternity leave: Mothers must take six weeks of mandatory leave immediately after giving birth.
- Paternity leave: Fathers are entitled to 20 working days of mandatory leave, which must be used within six weeks of the baby's birth. In addition, they can take up to five optional days, either all at once or spread out, within the same six-week period.
During parental leave, parents receive payments from Social Security rather than directly from their employer, though the amounts are typically equivalent to their regular salary.
Self-employed workers can also access parental leave benefits if they have made the required Social Security contributions.
Extended Parental Leave
After the initial paid period, each parent is entitled to three months of unpaid parental leave, which can be taken consecutively or in separate blocks before the child turns six.
This extended leave helps parents remain flexible with childcare responsibilities beyond the baby's first few months.
Adoption Leave
Adoptive parents are entitled to the same leave and pay rights as biological parents, beginning on the date the child is officially placed with them.
Portuguese Independent Contractors
Companies can hire independent contractors in Portugal but must carefully distinguish between genuine contractor relationships and disguised employment.
Portuguese law applies strict tests to determine worker classification, looking at factors such as the:
- Degree of control exercised by the company
- Exclusivity of the working relationship
- Integration into the company's organization
- Financial independence of the worker
Misclassifying employees as independent contractors can result in significant penalties and retroactive obligations to pay employee benefits and Social Security contributions.
Contractor relationships must involve genuine independence, with contractors typically working for multiple clients, using their own equipment, and having control over how and when they complete their work.
Penalties for Not Following Portuguese Labor Laws
Violations of Portuguese labor laws can result in substantial penalties, including monetary fines ranging from hundreds to thousands of euros per violation, orders to reinstate wrongfully terminated employees, payment of back wages and benefits, and, in severe cases, criminal prosecution of company executives.
The Portuguese Authority for Working Conditions (Autoridade para as Condições do Trabalho) actively investigates labor violations and can impose immediate sanctions. Repeated violations or particularly severe breaches can result in company closures and director disqualifications.
How to Stay Compliant When Hiring in Portugal
Companies looking to hire in Portugal have two primary options for ensuring compliance with local labor laws. The first approach involves establishing a local legal entity, which requires significant time, legal expertise, and ongoing administrative overhead.
This process typically takes several months and involves substantial setup costs, ongoing obligations for local tax filings, Social Security registrations, and regulatory compliance.
Alternatively, companies can hire Portuguese employees through an Employer of Record (EOR) service, which provides immediate market access while ensuring full compliance with local regulations.
An EOR becomes the legal employer for your Portuguese staff while you maintain day-to-day management control, significantly reducing compliance risks and administrative burdens.
Hire in Portugal with RemoFirst
If you're ready to expand your team into Portugal, RemoFirst can streamline the entire process while ensuring complete compliance with Portuguese labor laws.
We specialize in helping companies employ staff in 185+ countries, including comprehensive support for Portugal's complex employment regulations. Our platform handles everything from employment contracts to payroll processing to Social Security contributions.
Book a demo to discover how RemoFirst can help you build your Portuguese team quickly and compliantly.
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