Tax and Compliance — 5 min
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A high quality of life, low cost of living, and policies that support flexible working, all make Portugal home to an abundance of talented working professionals. Companies who are looking to hire employees in Portugal can also benefit from the country’s strategic location (with easy access to Europe, Africa, and the Americas) and favorable tax regime.
However, there are complexities involved in hiring employees from Portugal, especially when it comes to compliance with local labor laws, tax practices, and administrative tasks. If you’re looking to hire from within the country, but are concerned about local regulations, then your best bet would be to partner with an employer of record in Portugal.
Jump straight to a key chapter
An employer of record (EOR) is a service that allows you to hire and onboard international talent quickly without having to spend time and money on establishing a legal entity within the country. Using an EOR in Portugal will ensure that your new employees are paid on time and in accordance with the country’s labor laws. An EOR can support you through the HR and admin work involved in global hiring.
Read on to learn more about how to use an employer of record in Portugal so that you can begin expanding your team in Europe.
6 steps to hiring employees in Portugal using an employer of record:
So, how do you go about hiring employees in Portugal using an employer of record? Here are six simple steps to follow before choosing a partner:
Make a list that outlines exactly what you are looking for in an EOR. Think about what your business needs from an EOR — for example, payroll processes, HR, or data security protection. This can help you narrow down potential partners. Then, compare the pros and cons of each to whittle your options down further.
When you review potential EOR partners, make sure the EOR owns its own entity in Portugal, rather than depending on third-party providers. EORs that are partner-dependent outsource their client’s work to third-party companies, which could lead to a compromise in security and increased costs.
Read through online reviews, testimonials, and other press coverage on your shortlisted partners to get a more in-depth understanding of their reputation and services.
Double-check to ensure that the employer of record solution you are considering can and will provide a best-in-class employee experience for your hires in Portugal.
Confirm that you can work alongside your future EOR partner to ensure that your employees receive a fair and equitable compensation package. To attract top talent, you have to offer your recruits competitive benefits that are fully compliant with local laws, and also consider each employee’s role, skill set, and experience level.
Check out your potential EOR partner’s security measures to ensure that they can safeguard your intellectual property and maintain high levels of data security for your business.
Hire and pay your global team with speed and security
Start using Remote’s employer of record services and local entities to avoid the time, cost, and risk of building your own.
What are the benefits of using an employer of record in Portugal?
Having an employer of record in Portugal means that you get the entire infrastructure of a legal business entity within the country. The great benefit is the fact that you won’t have to go through the time-consuming and costly process of establishing a legal entity in Portugal. Using an EOR service also means you do not have to hire your own legal team within the country or anyone else to handle administrative tasks.
An EOR can create the entire employment contract for you, outlining all the legal requirements expected from all parties involved. This is especially important when hiring internationally as many countries, including Portugal, have certain legal expectations regarding the workforce.
A reliable EOR will also handle:
Country-specific benefits and compensation packages
Payroll deductions and taxes
Worker classification
Termination processes and procedures
Employment and labor law compliance
How much does it cost to use an EOR in Portugal?
Generally speaking, you can expect an employer of record service to cost anywhere between $599 to $2,000, and upwards per employee. However, it is important to keep in mind that actual prices depend on the services offered, the location of your workers, and the number of workers you want to hire.
EOR services also typically come with two pricing models: flat-fee structures or percentage structures. It is not recommended to partner with an employer of record service that charges a percentage of the employee’s salary, as percentage-based structures cause companies to reduce their workers’ salaries to cover the cost of third-party providers.
Traditional providers can charge enterprise-level rates, which can be expensive, especially if your company is a small business or a start-up. On the other hand, if you find that the company is advertising a suspiciously low rate, double-check to make sure the company is not cutting corners on compliance or security to keep costs low.
A global employment solution like Remote offers an affordable flat-rate model for Portugal — while still offering high standards in compliance and security.
Hiring in Portugal
Portugal’s labor laws and standard workweek differ from most other countries inside and even beyond the European Union. Portuguese citizens observe different public holidays, work specific hours, and are entitled to certain benefits.
In Portugal, employment law is governed by the Portuguese Constitution and the country’s Labor Code. Together, these government documents work to balance employee rights with the employer’s freedom, especially regarding organized labor. This actually puts Portugal ahead of its neighbors in terms of being considered more employer-friendly.
In recent times, the country has also continued to amend employment laws, specifically in updating its terms for compliance with employment contracts. Therefore, your employer of record in Portugal must be aware of any changes and stay compliant with local labor laws. This would include ensuring the employment contract, compensation, and statutory benefits for each type of worker meets the country’s constitutional requirements.
Employment contracts and agreements in Portugal
Employment contracts are crucial as they create the foundation for how an employee will function within his or her defined role. The employment contract serves as a legal statement of record between you, as the employer, and your international employees.
Unless otherwise specified by the employer and employee, most employment contracts and agreements in Portugal are considered to be open-ended. In other words, employment is essentially permanent until one or both parties decide to terminate the agreement. The duration of employment for fixed-term contractors for temporary roles must be explicitly stated.
Regardless of the type of employment, you must include the following information in the employment contract to remain legally compliant with the country’s labor laws:
Identification of the employer
Identification of the employee
The expectations of the employee regarding their specific role and responsibilities within the said role
The starting date of employment and the end date (for fixed-term agreements)
The location of employment
The expected working hours and agreed-upon schedule
Salary and statutory benefits, including severance
Notice periods, probation, and standard procedures for termination
It should be noted that it is not mandatory for all terms and conditions within Portuguese employment contracts to be expressly agreed upon, as many of the provisions involved arise from other statutory provisions and CBAs. However, the terms listed above are mandatory for employers to include in their contracts.
Labor law compliance in Portugal
Portuguese labor laws are strictly governed by the Labor Code of 2009. This Labor Code governs all the terms and conditions of employment, which includes working hours, holidays, rest periods, wages, overtime, employment relationships, statutory benefits, and more.
Work standards are different in Portugal, and you’ll have to consider significant differences in working conditions, including work hours, vacation team, sick days, and holidays. There are also some unique considerations to keep in mind that you may not be aware of — unless you’re keeping up with the country’s labor laws and current events.
As of November 2021, for example, it’s illegal under Portugal’s new labor laws for employers to call, text, or even email employees during their personal time. This law is meant to protect workers in Portugal from unknowingly working overtime during their off-hours, especially those who work from home.
When you work with an EOR in Portugal, you should be able to depend on them to stay updated with the country’s evolving laws so that you can stay compliant with local regulations while hiring workers in the country.
Payroll and payroll taxes in Portugal
Remaining up-to-date with Portugal’s payroll laws requires a firm understanding of the country’s payroll system and practices, especially when it comes to taxes.
The first two things you need to know is that the official currency of Portugal is the Euro. Employees in Portugal must be paid biweekly via check, money order, or direct deposit. These payments must be made on a workday and during working hours. Employers must provide a payslip that outlines the employees’ compensation, benefits, and deductions for each pay period.
The income tax in Portugal is also assessed on a progressive scale, with the rates ranging from 14.5% to 48% depending on the employee’s annual income. As an employer, you are required to withhold income tax and remit payments to the Portuguese government on behalf of your Portuguese employees. You must also provide your employees with an annual tax summary for their records by January 20 of each year.
You can also expect to divide Social Security contributions with your Portuguese employees. Social Security rates in Portugal are currently set at 23.75% for employers and 11% for employees.
An EOR in Portugal can efficiently handle social security contributions, income taxes, statutory benefits, and payroll processes, ensuring that your employees are paid appropriately and on time.
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How payroll tax compliance software benefits your business
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Portugal employee benefits and compensation
Your EOR should consider the country’s legal requirements regarding compensation and employee benefits while negotiating the terms of the employment contract with a potential hire in Portugal.
For example, employees in Portugal are entitled to 22 days of paid vacation with a minimum of 10 days' leave. Employees with unused vacation days may carry that leave over to the following year, entitling them to up to 30 days of paid vacation. Additionally, any employees with 20 days of excess leave can trade that time for cash.
It should also be noted that benefits, such as maternity leave or sick leave, will depend on their Social Security contributions. The longer an employee works and pays into their contributions, the more compensation they are entitled to collect.
Remote makes it a priority to compensate all its international employees fairly. This includes the provision of standard statutory benefits, as well as additional benefits (like flexible working hours). This gives your company a competitive advantage in attracting and retaining top talent.
Not only can Remote create a globally compliant and competitive compensation package when you use our services to expand globally, but we also continue to ensure that the benefits package remains competitive. This includes providing benefits for global contractors as well.
Portugal severance pay and employee terminations
Portuguese labor laws do not allow for “at will” employment. Therefore, any employee termination must have a just cause, such as:
Insubordination
The violation of the rights of other employees or constant provocation of conflict with other employees
A constant disregard for the employee’s contracted obligations and responsibilities
Frequent unjustified absences
Serious damages to the financial interests of the employer or company
A blatant and willful disregard of health and safety rules
Severance compensation will depend entirely on the circumstances of employee termination. However, whenever there is just cause for terminating an employee, the employee in question is not entitled to compensation.
Portugal —
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Employee benefits in Portugal: All you need to know
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What are the risks of employee misclassification in Portugal?
Portuguese law has different definitions for employee and contractor. An employee is paid regular wages and works under the supervision of the employer. The employer oversees the employee's performance, work schedule, and location of work. A contractor is a self-employed individual who can work for multiple clients and has the freedom to decide their own hours of work and location. An independent contractor is responsible for paying taxes and paying social security contributions.
There are also differences in payroll and reporting obligations when it comes to contractors.
Employers need to be careful while assigning the worker classification status because if you incorrectly misclassify your employees as contractors, you could run the risk of having to pay penalties, fines, back wages, and benefits. Your company may also be subject to lawsuits. Read our expert guide on employee and contractor misclassification for more guidance.
Working with an EOR in Portugal can help you avoid misclassification risks because the EOR’s legal team will ensure that correctly classify your workers and remain legally compliant in all aspects of your global hiring.
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When should you convert a contractor to an employee?
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Get started with an EOR in Portugal
If you want to tap into Portugal’s talented and highly skilled workforce, you’ll have to get to grips with every aspect of international hiring — taxes, payroll, labor law compliance, and routine HR and administrative tasks.
It’s much easier and cost-effective for you to partner with a trusted EOR to handle everything related to hiring, onboarding, and paying workers abroad. Using an EOR service is the best way to hire internationally without having to physically expand your operations into Portugal, and spend precious time and resources in the process. Remote’s global employment solutions are designed to handle all your international hiring needs by acting as your legal team and HR department, ensuring that your business remains legally compliant.
A global HR platform like Remote can offer you:
An intuitive platform that allows you to view and manage your employees in Portugal, and beyond
A global team experienced in local laws to ensure that you stay compliant with labor regulations
A HR department that can handle the hiring and onboarding process easily
Payroll services that take care of taxes, payroll deductions, and social security contributions
Strong security protection for your data and intellectual property
Grow your global footprint with Remote’s trusted employer of record services. Or get started with Remote to hire and onboard talent in Portugal right away!
Your guide to switching EOR providers
Use this guide to learn how easy it is to switch from a different EOR provider and start employing your global team with Remote. We walk you through the key steps so you understand what’s involved.
Read Remote's expert guide to hiring in Portugal
Use our expert hiring guide for information on local benefits, taxation, and compliance requirements to help you employ in Portugal with ease.
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