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Hire Employees in Portugal

Key Takeaways

  • Understand labor laws: Familiarize yourself with Portuguese labor laws.
  • Advertise the job: Post the job on Portuguese job websites, newspapers, or through local recruitment agencies.
  • Interview and select: Conduct interviews and select the best candidate.
  • Prepare an employment contract: Prepare a contract that complies with Portuguese labor laws, and onboard the employee.

Key Things to Know Before Hiring Employees in Portugal

Before hiring employees in Portugal, it’s important to understand the country’s labor laws, taxation system, and cultural norms. Here are some key things to know:

  1. Labor Laws: Portugal’s labor laws are quite comprehensive and employee-friendly. The statutory minimum wage and working hours are regulated by the government. Overtime, night work, and work on rest days and public holidays are also regulated and usually entail additional pay.
  2. Contracts: Employment contracts must be in writing and can be either for a fixed term or indefinite duration. They must contain certain minimum information such as the identity of the employer and employee, the employee’s category or a brief description of the work, the date of commencement, the workplace, the duration and timing of daily and weekly rest periods, the basic remuneration and any supplements, and the period of notice to be observed by the employer and the worker in the event of termination of the contract.
  3. Probation Periods: Probation periods in Portugal are 90 days for most employees, but they can be longer for management positions.
  4. Working Hours: The normal working period may not exceed eight hours per day and 40 hours per week.
  5. Vacation: Portuguese employees are entitled to 22 business days of vacation per year, and there are 13 public holidays.
  6. Termination: Portugal has strict rules governing termination of employment. Employees can be terminated for just cause, which includes reasons such as theft, disobedience, or repeated failure to carry out duties. Redundancies are also permitted but require specific procedures to be followed. Employers must provide adequate notice and may be required to pay severance depending on the length of service.
  7. Social Security and Taxation: Employers in Portugal must register their employees with the social security system and make contributions on their behalf. Income tax is withheld at source by the employer.
  8. Non-Discrimination: Portuguese law prohibits discrimination based on factors such as gender, sexual orientation, age, marital status, political or ideological convictions, union membership, race, country of origin, and religion.
  9. Data Protection: Portugal, being a member of the European Union, adheres to the General Data Protection Regulation (GDPR), so it’s important to ensure compliance when handling employee data.
  10. Cultural Considerations: The Portuguese business culture values relationship-building and respect for hierarchy. Understanding these aspects can help create a positive and productive work environment.

Before hiring in Portugal, it may be advisable to consult with legal and HR professionals familiar with Portuguese employment law to ensure you are fully compliant with all legal requirements.

How much does it cost to hire employees in Portugal?

The cost of hiring employees in Portugal will depend on several factors including the position, experience, industry, and location within the country. However, there are some general guidelines and components of employee compensation that you can consider:

  1. Salary: The minimum wage is €760 per month. For more specialized or senior roles, the salary could be significantly higher. Read more in our guide to the average salary in Portugal.
  2. Social Security Contributions: Employers are generally required to pay a social security contribution of 23.75% of an employee’s gross salary, while the employee contributes 11%. This covers pension, sickness, unemployment, and other benefits.
  3. Taxes: Employers are also responsible for withholding income tax at source from an employee’s salary. The rate of this will depend on the employee’s earnings and personal circumstances but can range from 14.5% to 48%.
  4. Annual Leave Pay and Christmas Allowance: Portuguese employees are entitled to receive their normal pay during their annual leave. In addition, employees receive a Christmas bonus equal to one month’s salary, paid in November or December.
  5. Severance Pay: In case of termination, depending on the circumstances and length of service, employers may be required to pay severance to employees.
  6. Other Benefits: Depending on the industry and role, you may also need to consider other benefits such as health insurance, transportation allowances, meal allowances, or performance bonuses.
  7. Recruitment Costs: Finally, don’t forget to factor in the costs of recruiting, which can include advertising costs, agency fees, and the time spent in the hiring process.

Remember that labor laws and wage standards can change, so it’s important to consult with a local HR professional or legal expert to get the most accurate and up-to-date information.

What are the legal requirements for hiring employees in Portugal?

When hiring employees in Portugal, there are several legal requirements that employers must fulfill. Here are some key points to consider:

  1. Employment Contracts: These must be written in Portuguese and must include details such as the identity of the employer and employee, the job description or category, the date of commencement, the workplace, the duration and timing of daily and weekly rest periods, the remuneration, and the period of notice to be observed by the employer and the worker in case of termination of the contract.
  2. Work Permits: If you’re hiring non-EU nationals, they will need a work permit to legally work in Portugal. The process for obtaining a work permit is generally initiated by the employer.
  3. Registration of Employees: Employers must register their employees with the Portuguese Social Security (Segurança Social).
  4. Minimum Wage and Working Hours: As of 2023, the minimum wage in Portugal was €760.00 per month per month, and the maximum regular working hours are 8 hours per day and 40 hours per week.
  5. Leave and Holidays: Employees are entitled to 22 business days of vacation per year. There are also 13 public holidays in Portugal.
  6. Social Security and Tax Contributions: Employers must deduct social security contributions (11% as of 2021) and income tax from the employee’s salary and make their own social security contributions (23.75% as of 2021).
  7. Health and Safety: Employers are responsible for ensuring a safe and healthy working environment. This includes providing necessary training and protective equipment.
  8. Non-Discrimination: Portuguese law prohibits discrimination based on gender, sexual orientation, age, marital status, political or ideological convictions, union membership, race, country of origin, and religion.
  9. Data Protection: Portugal, as a member of the European Union, adheres to the General Data Protection Regulation (GDPR). Employers must ensure compliance when handling employee data.
  10. Termination: Portugal has strict laws regarding termination of employment. Employers must provide adequate notice and may be required to pay severance depending on the length of service.

It’s advisable to consult with a legal expert or HR professional familiar with Portuguese employment law to ensure compliance with all legal requirements when hiring in Portugal.

What are the key ways to hire employees in Portugal?

When expanding business operations to Portugal or any foreign country, there are several methods you can use to hire employees:

  1. Direct Hiring: This is the traditional method of hiring where you establish your own subsidiary in Portugal and hire employees directly. This method gives you full control over your workforce, but it also requires a significant amount of time and resources to set up and manage, as you’ll need to navigate local labor laws, payroll, taxes, benefits, and other administrative tasks.
  2. Professional Employer Organization (PEO): A PEO acts as a co-employer of your employees in Portugal. They take care of HR, payroll, benefits, compliance, and other administrative tasks, while you retain control over the day-to-day management of your employees. This option can be a good choice if you’re looking to expand quickly with less upfront investment and administrative hassle.
  3. Employer of Record (EOR): Similar to a PEO, an EOR hires your employees on your behalf and takes care of all legal and administrative tasks, including HR, payroll, and compliance. The key difference is that the EOR is the legal employer, which can provide an additional layer of liability protection for your company. This can be an excellent choice for companies that want to test the market or only need a small remote team in Portugal.
  4. Recruitment Agencies: These agencies help you find and hire employees, but you will still need to manage payroll, benefits, and compliance yourself or with the help of a PEO or EOR.
  5. Independent Contractors: Hiring independent contractors can be a flexible and cost-effective option, especially for short-term projects. However, it’s crucial to ensure that your contractors are genuinely independent under Portuguese law to avoid potential misclassification issues.
  6. Joint Ventures/Partnerships: If you can find a local company with similar goals, setting up a joint venture or partnership can be a way to enter the Portuguese market. In such a case, hiring would be conducted by the joint entity.

Each of these options has its pros and cons, and the right choice will depend on your specific circumstances, including the size of your planned operation in Portugal, your level of familiarity with Portuguese labor laws and business practices, and your long-term goals. Before proceeding, it’s advisable to consult with a legal or HR expert who is familiar with international hiring.

What are the steps businesses need to take to hire employees in Portugal?

Hiring employees in Portugal involves a series of steps that must be followed to ensure legal compliance. Here are the general steps you would need to take:

  1. Define the Job and Salary: Clearly define the role, responsibilities, qualifications, and salary range for the position. Keep in mind that Portugal has a minimum wage that must be complied with.
  2. Advertise the Position: Post the job on popular job boards, use recruitment agencies, or leverage professional networks to find potential candidates.
  3. Interview and Select the Candidate: Conduct interviews to evaluate candidates’ skills and fit for the role. This could be done through phone, video conferencing, or in-person interviews. Once you have selected a candidate, extend a job offer.
  4. Prepare the Employment Contract: Once the job offer is accepted, prepare an employment contract in Portuguese. The contract must include details such as the job description, start date, workplace, working hours, salary, and notice periods. The contract should be signed by both parties.
  5. Register the Employee: Register the employee with the Portuguese Social Security (Segurança Social). This must be done before the employee starts work.
  6. Set Up Payroll: Set up payroll to ensure the correct deductions are made for income tax and social security contributions. The employer’s social security contributions also need to be calculated and paid.
  7. Onboard the Employee: Provide the new employee with any necessary training and familiarize them with your company’s policies and procedures.
  8. Health and Safety Requirements: Ensure all health and safety requirements are met, including risk assessments and providing necessary personal protective equipment.
  9. Data Protection: Ensure that your handling of employee data complies with the General Data Protection Regulation (GDPR).

Remember, the specifics might vary based on the type of business, the position you’re hiring for, and whether you’re hiring local or foreign workers. It’s always best to consult with a legal or HR expert familiar with Portuguese employment law to ensure compliance with all regulations.

Hiring Employees in Portugal — Our Take

Portugal is a popular destination for international hiring due to its attractive business environment and its skilled workforce. If your needs are short-term or project-based, it may be sufficient to hire independent contractors in Portugal. 

If your interests are long term, a PEO, EOR or entity setup solution may be more appropriate. 

Portugal Business Guides

FAQs

Yes, it is possible to hire employees in Portugal even without a local business entity. This can be done through a Professional Employer Organization (PEO) or an Employer of Record (EOR), which hire the employees on your behalf and handle all legal and administrative tasks such as HR, payroll, and compliance.

The standard working week in Portugal is 40 hours, spread over five days. The maximum daily working time is eight hours, but this can be extended to up to 10 hours under a flexible working schedule, provided the average working time over a reference period does not exceed the limits.

In Portugal, employers must provide certain mandatory benefits to employees. These include social security contributions, vacation leave (22 business days per year), public holidays (13 per year), and a Christmas bonus equal to one month's salary. Employers may also need to provide severance pay in case of termination, depending on the circumstances and length of service. Other benefits like health insurance, meal allowances, or performance bonuses may be provided depending on the industry and role.

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