Employment contracts in Portugal can be either written or verbal. They must be in the local language and contain at least these terms:

• workplace,

• probation period,

• salary,

• working hours,

• termination details,

• notice period,

• employee’s duties, and

• signatures of both parties.

Some of the common types of contracts are:

• fixed-term employment contracts, which cannot be more than three years,

• permanent or indefinite-term contracts,

• contracts of unspecified duration to replace an absent employee,

• short-duration contracts for seasonal or event work lasting no more than 70 days,

• intermittent contracts for full-time, irregular work, and

• part-time contracts where working hours are less than regular working hours.

The National Minimum Wage in Portugal is 820EUR per month, based on a 14-months calculation.

For the autonomous region of Azores, the minimum wage per 2024 is 861 EUR

Common Benefits

Meal vouchers – the meal allowance limit of tax exemption is €9.60 when paid by Meal Card and €6.00 when paid in Cash.

Private health insurance

Transportation allowance

Gym allowance

Private pension

Bonus

The standard working hours in Portugal are 40 hours per week, 8 hours per day.

The maximum weekly and daily working hours can differ as stipulated in employment contract/collective bargaining agreements.

Overtime

The first 100 overtime hours are paid at a rate of:

• 125% salary for the first hour on week days.

• 137.5% salary for additional hours on week days.

• 150% salary on weekends public holidays.

Above 100 overtime hours are paid at a rate of:

• 150% salary for the first hour on week days.

• 175% salary for additional hours on week days.

• 200% salary on weekends and public holidays.

Overtime on Sunday requires weekend overtime pay + a compensatory rest day within the following 3 working days.

Remote Work

Remote working set ups are possible but there must be a written agreement in place to enact this remote work set up. In companies where there are 10 or more workers, employees with children up to 8 years old are entitled to work under a remote work regime (providing there is job and employer agreement). Employers must legally refrain from contacting employees during their rest period, except in cases of force majeure. This might include not contacting workers by phone, text or possibly even email. Work from home allowance is mandatory at a rate of 1 Euro per day worked, up to 22 EUR per month is exempt from tax.

The first 3 days of sickness are unpaid. The worker can issue a self-declaration of sickness and communicate it to the employer. From day 4 onwards, the sick leave is paid for by the Social Security Institute.

The daily benefit is calculated by applying a percentage to the employee’s reference remuneration. This percentage varies according to the duration and nature of the illness:

• if the illness lasts for up to 30 days, the employee is entitled to 55% of the reference remuneration

• if the illness lasts between 31 and 90 days, the employee is entitled to 60% of the reference remuneration

• if the illness lasts between 91 to 365 days, the employee is entitled to 70% of the reference remuneration

• if the illness lasts more than 365 days, the employee is entitled to 75% of the reference remuneration

The period for which the benefit is granted depends on the duration of the illness and is also subject to the following maximum periods:

• up to 1,095 days in the case of employed workers, seafarers, and coastguard

• up to 365 days in the case of the self-employed and scientific research grant holders

To be entitled to receive the sickness benefit from the 4th day, the employee must have completed a service length of at least six calendar months, consecutive or otherwise. Additionally, Workers must provide a Certificate of Temporary Incapacity for Work (CIT) issued by a doctor as proof of incapacity, subject to a retroactivity period of up to 30 days, or, workers can to self-declare incapacity by commitment of honor, through a digital service from the National or Regional Health Service and subject to a retroactivity period of up to 5 days.

Maternity Leave

Expectant mothers are entitled to 100% of their usual salary rate excluded from Social Security and tax contributions, paid directly by Social Security for 120 days.

For an employee to be eligible, they must have been employed for at least 80 days of the preceding 12 months before the expected due date.

Parental leave is granted for the birth of a child under Portuguese law. This may be shared between both parents in which case the total parental leave period may be 180 days and paid at 83.00% of the usual salary rate of pay. The mother is entitled to 30 days of parental leave before delivery and a minimum of six weeks following the birth.

Paternity Leave

Fathers can take paternity leave of up to 28 working days. At least 5 consecutive days must be taken within the 42 days following the child’s birth. The leave can be taken as a single period or in a series of days. After taking 28 days, the father is also eligible to take an additional 7 days leave, which must be partly used at the same time that the mother is on maternity leave.

This leave is paid by Social Security at 100% of the employee’s average salary in the last six months, exempt from Social Security and Tax contributions.

Parental Leave

After the required six weeks of maternity leave and 28 days of paternity leave, the couple can decide who takes the next 78 or 108 days. If the couple takes a total of 150 days, the leave is 80% paid, and if they choose 120 days, they will receive 100%.

Annual paid leave is a minimum of 22 working days, following completion of 1-year service. During the first year of employment, an employee is entitled to 20 days of leave, accumulated as two days per month.

The leave can be carried forward into the next year but must be used by 30th April; however, within the same calendar year there may not be more than 30 days of holiday taken.

Marriage Leave – employees are entitled to 15 consecutive days of paid leave when getting married.

Bereavement Leave – employees are entitled to up to 5 consecutive days of paid leave in the case of a family bereavement.

Urgent and Essential Care leave – employees are also entitled to 30 days of paid leave per year to provide urgent and essential care for a family member younger than 12 and 15 days for an older family member.

In addition to the 13 national holidays listed below, each one of the 308 municipalities (counties) has its own regional or local municipal public holiday. Workers are entitled to take off the local holiday that corresponds to their place of work; the holiday date should be verified through the local authority.

Public holidays that fall on the weekend are usually lost.

Date Day Holiday

1 Jan 2024 - Monday - New Year’s Day

29 Mar 2024 - Friday - Good Friday

31 Mar 2024 - Sunday - Easter Sunday

25 Apr 2024 - Thursday - Liberation Day

1 May 2024 - Wednesday - Labour Day

30 May 2024 - Thursday - Corpus Christi

10 Jun 2024 - Monday - National Day

15 Aug 2024 - Thursday - Assumption Day

5 Oct 2024 - Saturday - Republic Day

1 Nov 2024 - Friday - All Saints’ Day

1 Dec 2024 - Sunday - Independence Restoration Day

8 Dec 2024 - Sunday - Immaculate Conception

25 Dec 2024 - Wednesday - Christmas Day

Portugal provides universal healthcare and employers must enroll employees in the healthcare system. Employers also offer supplementary private healthcare insurance.

Notice periods in Portugal are generally stipulated within the Employment Contract/Collective Agreement and are linked to the employee’s length of service.

The statutory notice period from the Employer is:-

• 15 days notice where where employment lasted less than a year.

• 30 days notice where employment lasted 1 – 5 years.

• 60 days notice where employment lasted 5 – 10 years.

• 75 days notice where employment lasted more than 10 years.

• During the trial/probation period, the Employer can terminate the employment contract without just cause or the right to compensate by providing a notice period of 7 days where the trial period lasted more than 60 days and a notice period of 30 days where the trial period lasted more than 120 days.

The statutory notice period for the worker is:-

Indefinite Term/Open ended employment contracts

• 30 days’ notice when the contract lasts up to 2 years.

• 60 days’ notice when the contract lasts more than 2 years.

Fixed Term (certain or uncertain) employment contracts

• 15 days’ notice when the contract lasts up to 6 months.

• 30 days’ notice when the contract lasts more than 6 months.

• 8 days’ notice should be given when the employment contract approaches its full expiry date.

During the trial/probation period

• A Worker can terminate the employment contract without prior notice and without justifying cause just by informing the employer of intention to terminate.

Severance Pay

For both indefinite or fixed term contracts, fair dismissal based on objective grounds (i.e. redundancy) or dismissal due to unsuitability for the job results in a required severance payment. Indefinite Term contracts require a payout of 12-18 days’ salary per year of service, capped at 240 times the national minimum monthly wage. Fixed Term contracts require a payout of 24 days of base salary and seniority allowances per year of service.

Higher severance payments may be agreed upon and are a typical way to avoid litigation. Severance might also be required for dismissals that occur during the 91st to 180th day of the probation period.

Probation Period

Portugal’s probation period for permanent employees is 90 days, 180 days for high technical/complexity roles, and 240 days for management, directorate, and equivalent responsibility roles.

For Fixed-term contracts the probation period is set to 15 days when the contract is agreed for an expected or fixed duration shorter than 6 months and 30 days probation for contracts with a duration equal to or longer than 6 months.

Employer Payroll Contributions

23.75% - Social Security

1.75% - Labor Accident Insurance

1.00% - WGF (wage guarantee fund)

26.50% - Total Employment Cost

Employee Payroll Contributions

11.00% - Social Security

11.00% - Total Employee Cost

Employee Income Tax

13.25% - up to 7,703.00 EUR annually

18.00% - 7,703.01 EUR to 11,623.00 EUR annually

23.00% - 11,623.01 EUR to 16,472.00 EUR annually

26.00% - 16,472.01 EUR to 21,321.00 EUR annually

32.75% - 21,321.01 EUR to 27,146.00 EUR annually

37.00% - 27,146.01 EUR to 39,791.00 EUR annually

43.50% - 39,791.01 EUR to 51,997.00 EUR annually

45.00% - 51,997.01 EUR to 81,199.00 EUR annually

48.00% - 81,199.01 EUR and above annually

Solidarity Surcharge

2.50% - Additional solidarity surcharge applied on income exceeding EUR 80,000 annually.

5.00% - Additional solidarity surcharge applied on income exceeding EUR 250,000 annually.

Non-Habitual Resident tax (for expats)

The Non-Habitual Resident (NHR) tax regime is available for workers who have not been deemed resident on Portuguese territory during the 5 years prior to the year they intend to change residence to Portugal and who perform an activity considered as high added value of a scientific, artistic or technical nature (from a predetermined official list of activities). The net income from employment obtained in Portugal by non-habitual residents shall be taxed at 20% (flat rate). The non-habitual resident acquires the right to be taxed as a non-habitual resident for the period of 10 consecutive years. A tax residence certificate and proof of tax paid abroad are required. Having documents proving tax residency in previous years is crucial.

Payroll Cycle

The payroll cycle in Portugal is generally a monthly cycle, with wages paid before the last day of each month.

13th Salary

There are mandatory 13th and 14th salary payments in Portugal, which are paid out in June (for holidays) and December (for Christmas), or can be paid within the 12 regular salaries.

Authority Payments

Authority Payment Paid To Due Date Method

Social Security - Segurança Social - 20th of the month following the obligation (salary July is pay till 20th of august) - Homebanking (only Portuguese account), ATM, check

Tax and Customs authority - Atoridade Tributária e aduaneira - 20th of the month following the obligation (salary July is pay till 20th of august) - Homebanking (only Portuguese account), ATM, check

Compensation fund - Fundo de compensação - 20th of the month following the obligation (salary July is pay till 20th of august) - Homebanking (only Portuguese account), ATM, check

Any foreigners coming to work in Portugal for longer than six months need a residence certificate (Certificado de Registo). Most non-EU nationals will also need a Portuguese work permit before they can undertake employment in Portugal. In most cases, a Portuguese work permit is only granted when a job offer is confirmed, and once approved, they can continue the process of obtaining a Portuguese work visa or residence permit. After five years of residence in Portugal, you can claim Portuguese permanent residence, and after six years, Portuguese citizenship.

Portugal has quotas to limit the number of jobs that go to third-country nationals to improve employment opportunities for EU nationals. Most jobs need to be advertised to Portuguese and EU/EFTA citizens for 30 days before the Institute for Employment and Vocational Training in Portugal (IEFP) will classify them as jobs that non-EU employees can freely fill.

The standard rates of VAT in Portugal are 23% in Continental Portugal. In Azores, it is 18% and in Madeira, it is 22%.

Setting up a legal entity

It is mandatory that the name of the newly formed company in Portugal is checked at the National Registry of Collective Entities (Registro Nacional de Pessoas Colectivas, RNPC). If the name is available, it can be reserved for a period of 48 hours if a fee is paid. Also, a pre-approved name can be elected from the RNPC database.

To obtain a certificate of registration, the founders of an entity must apply followed by the articles of association and the certificate of the name approval, but no later than 15 days from the incorporation. When receiving the above, the Portuguese authority will deliver the corporate tax number, the company’s social security number, and the declaration of commencement of business activities.

The Labour Inspectorate must also be notified regarding its existence by providing the newly formed business name and tax number, a copy of the published announcement regarding the company incorporation, the company’s activities and the headquarter address.

Registration as an employer

A company must register with the National Registry of Collective Entities (Registro Nacional de Pessoas Colectivas, RNPC), the Portuguese Trade Register, the entros de Formalidades das Empresas /the Business Registry Offices and the social insurance offices.

The entity’s employees must be registered at the Centros de Formalidades das Empresas or at the Business Registry Offices 24 hours before they start their activity or 10 days at the latest after the declaration of starting the business. The registration for the employees’ accident compensation insurance is performed online at a private insurer and cannot cover the individual which doesn’t receive a salary.

In Portugal, collective labour regulation instruments can determine the minimum working terms and conditions. At the same time, collective labour agreement instruments can only be set aside by a labour contract when the latter establishes more favourable conditions for the employee and if the contrary does not result from the collective labour agreement rules.

New Employee Registration

Upon the admission of employees, employers are required to notify Ministry of Labour, Solidarity and Social Security within 15 days preceding the commencement of the start of the employment.