Portugal Country Facts

We provide comprehensive information regarding, Culture, Work life, Taxation, Visa’s & immigration, Labour Law, recruiting in your country of choice and employment contracts.

Global Expansion Made Easy for You

Expanding into Portugal generally comes with challenges, however, partnering with us and using Employer of Record (EOR) eliminates the frustrations you could encounter.

Portugal Visas, Work Permits and Migration

Portugal is easy going and one of the most peaceful countries in the world, providing a high standard of living for its residents. Like most countries, Portugal’s economy contracted through 2019 to 2021, however, an upwardly mobile economy is expected from 2022 and beyond with European Union (EU) investment of around €14 billion through to 2026. Apart from a desirable environment for living and working, Ease of Doing Business in Portugal for 2020 was ranked at 39th out of 190 countries.

To enter, live and work in Portugal requires documentation and penalties exist for non-compliance with the legalities. As part of the EU which it joined in 1986, Portugal operates a ‘free movement of persons’ policy, so citizens of the EU and European Free Trade Association (EFTA) do not require visas or permits to reside or look for employment. However, stays exceeding 90 days require a residence certificate (Certificado de Registo) and their national ID.

Third Country Nationals (TCNs) need a Temporary Stay Work Visa for some short-term employment and for longer periods a Long-term Visa, Work Permit and Residence Permit are needed.

There are numerous routes into the Portugal workforce and understanding the documentation, qualification and making the right choice for you or your employees takes expert advice.

What Types of Work Visas, and Permits for Portugal are there?

European Union (EU) and European Free Trade Association (EFTA) countries’ citizens do not require a Work Visa or Work Permit to enter, live and find employment in Portugal and can travel on their national ID. However, if they stay for longer than three months a Residence Certificate must be applied for through the local council where they are living. Family members who are not EU citizens require a Residence Card and this is applied for through the Immigration and Border Service (SEF) (Servico de Estrangeiros e Fronteiras). Non-compliance will result in fines. EU citizens must have either a job after three months or sufficient funds to support themselves and their families.

Around 191 countries are also visa-exempt for 90 days in a 180-day period, but all travelers require a passport, no older than 10 years with validity for six months, a return ticket and enough money for the proposed trip. For stays exceeding three months, a national visa should be applied for, allowing for stays of up to one year.

Visas available to Third Country Nationals (TCNs) not visa-exempt

  • Short Stay Visas: Schengen Visas up to three months for e.g., seasonal work, business purposes, visiting family and tourism or airport transit.
  • Temporary Stay Visas:  These are National Visas which allow multiple stays for trips between three and 12 months and are valid during the entire trip. The main work category is the Temporary Work Visa for skilled employees, self-employed and freelance workers, those carrying out academic or scientific research and seasonal workers. Also available are visas for study, training, volunteering, internships, a medical visa, and a self-support visa for retired persons
  • Residence Visas: Called Long Stay Visas or National Visas for those people wanting to stay for longer than 12 months. Categories are the same as the Temporary Stay Visa, as is the form and who qualifies. For example – Work Visa, Study, Training, Volunteer and Internship, Family Reunion, and Retirement Visa. This visa is only valid for four months, when holders need to then apply for a ‘Portuguese Residency Permit’ from SEF.

Tech Visa Program: This is for companies and start-ups – wanting to hire highly educated, qualified or specialized staff i.e., citizens classified as TCNs – to become certified to do so. They are only allowed to hire foreigners equal to 50% of their staff.

Golden Visa Scheme:  A fast track system for investors or those wishing to purchase property. If applicants qualify, they are given a Residence Permit and can later apply for citizenship.

ICT (Intra-Company Transfer): For employees who transfer to a branch in Portugal from a company within the same group. The employee applies for the work permit directly to the SEF. They do not require a work visa to enter Portugal if their nationality is visa-exempt, otherwise applications are made at a local consulate/embassy or online. Validity and therefore residency is for the length of the contract or for one year to a maximum of three years and does not therefore require a Residence Permit.

Portugal Tax Laws

Dealing with tax, payroll, and employment regulations for your staff from overseas is always a difficult process and poses complications that demand expert guidance. Portugal is no exception, with layers of taxation at corporate levels and for individuals, whose liability is assessed on different types of income, plus property.

With over 20 years’ experience in the front rank of international payroll providers, Bradford Jacobs ensures our clients comply with every level of taxation and employment law across the globe. Our ‘knowledge’ is vital for foreign companies expanding into Portugal. Employers must stay up to speed with changing regulations of the Portugal Tax and Customs Authority (Autoridade Tributária e Aduaneira,AT) as well as social insurance requirements of the Social Security Institute (Instituto de Segurança Social).

Overview of Taxes in Portugal

Residents’ Income Tax: Portugal’s state budget announced nine tax bands for 2022, stretching from 14.5% for income up to €7,116 (US$8,060), through a fourth band of 28.5% for the excess over €15,216 (US$17,250) up to 48% for income over €75,009 (US$85,028). Additionally, those earning above that rate are liable for a solidarity rate between 2.5% and 5%.

Non-Residents’ Income Tax: A flat rate of 25% applies.

Social Insurance Taxes: Contributions are made based on employees’ gross remuneration. Employers remit the equivalent of 23.75% of their employees’ salaries to the revenue, while employees contribute 11%, which is withheld and remitted by their employer.

Value Added Tax (VAT): The standard rate is 23% on goods and services with a reduced rate of 13%, for example, on foodstuffs, publications, pharmaceutical products, transportation, hotel accommodation and agricultural products.

Capital Gains Tax (CGT): Non-residents are taxed at 28% and companies at 25% on their gains. Residents’ capital gains are taxed at the relevant personal tax rate between 14.5% and 48%, with 50% of the capital gains included in the calculation. EU citizens can opt to be taxed as Portuguese residents but must declare their worldwide income.

Property and Rental Taxes: Rental income is generally taxed at 28% but payers can opt for being taxed at progressive rates as part of general income. Property transfer tax can be levied between 5% and 10%.

Dividends and Interest: Taxed at 28% unless payers opt to be taxed on progressive personal income rates.

Portugal Individual Tax – Single, Married

Tax liability depends largely on residency. Residents pay tax at progressive rates on their worldwide income in six categories – employment income, self-employed income, investment income, rental income, capital gains and pensions. Non-residents pay at a flat rate of 25% on income earned in Portugal. Individuals become tax residents by spending 183 days – not necessarily consecutive – in any 12-month period, or by owning or maintaining a property in Portugal, regardless of how many days are spent in-country. Married couples or registered couples can make either joint or individual returns, but in the latter case both must name dependents on their returns.

Residents’ Income Tax:

There is a tax-free allowance of €4,104 (US$4,657) and earnings below this do not attract tax.

0 – €7,116 (US$8,060): 14.5%
€7,116 – €10,736 (US$12,170): 23.0%
€10,736 – €15,216 (US$17,248): 26.5%
€15,216 – €19,626 (US$22,326): 28.5%
€19,626 – €25,076 (US$28,425): 35.0%
€25,076 – €36,567 (US$41,450): 37.0%
€36,567 – €48,033 (US$54,450): 43.5%
€48,033 – €75,009 (US$85,028): 45.0%
More than €75,009: 48.0%

Those earning above €75,009 are liable for a solidarity surcharge of between 2.5% and 5.0%.

Non-residents’ Income Tax:

Non-residents are generally taxed at a flat rate of 25%.

Employees’ Social Insurance Contributions: Employees contribute 11% of their gross remuneration to the social security system. Foreign residents may be exempt if they pay into the social security system of a fellow European Union member nation.

Portuguese Entity Set Up

Launching a subsidiary overseas takes time and eats up funds – and the venture has no guarantee of success.

Even so, expanding overseas is a major step, especially for companies opening a legal entity in their new territory. If the move fails, companies face the extra expenditure and stress of closing the business, selling property, and paying off employees. It is easy to stumble while chasing two objectives – advancing your company at home while crossing the world into a new territory, maybe thousands of miles overseas.

The sensible alternative is to use a Professional Employer Organisation (PEO) and Employer of Record (EOR) such as Bradford Jacobs to locate the finest local talent and administer your payroll in Portugal – speedily and risk free. Your company will be up-and-running in days rather than weeks or even months.

How to set up a Portuguese Subsidiary

The typical choice to open a subsidiary as a private limited liability company is a Sociedade por Quotas or LDA with at least two shareholders. There is also a simplified form of LDA with a single shareholder called a Sociedade Unipessoal LDA, but the individual can be a shareholder in only one company of this type. Requirements include:

  • A unique company name registered with the Institute of Registries and Notaries (Instituto dos Registos e do Notariado, IRN)
  • A Certificate of Admissibility from the IRN
  • ID cards or passports of members or partners of the company, depending on the nationality
  • Documentation from the Commercial Registry of the parent company’s home country
  • Official minutes of the parent company’s meeting authorizing setting up the subsidiary in Portugal
  • Verification of the individual empowered to sign on behalf of the new company
  • Memorandum and Articles of Association of the parent company
  • Bylaws of the subsidiary detailing business activity, registered office, individual’s share capital (known as ‘quotas’), number of shareholders, minimum of two for an LDA, management structure
  • Minimum share (quota) capital for an LDA is two euros and one euro for a Sociedade Unipessoal LDA
  • Submit all documents in person to the Portugal Registrar of Companies (Serviços do registo comercial) for publication on their website
  • A business bank account to deposit share capital

The subsidiary must obtain their Company Card and Collective Persons Card from the IRN, which provide multiple identification documents. These are:

  • The company identification card (Número de Identificaçäo de Pessoa Coletiva, NIPC)
  • The individual tax identification numbers (Número de Identificaçăo Fiscal, NIF) and tax card from the Portugal Tax and Customs Authority (Autoridade Tributária e Aduaneira, AT)
  • The employees’ Social Security Identification Number (NISS) from the Social Security Institute (Instituto de Segurança Social)

Benefits of setting up a Subsidiary in Portugal

Portugal’s Companies Law is based on limited liability, restricting the liability of shareholders to their own share contribution. There are exemptions. The parent company can be financially liable for the subsidiary if it is 100% owned by them or they have legal powers over the subsidiary through a subordination contract. A sole shareholder who appoints a director can be liable for the director’s actions, or for debts and liabilities in the case of bankruptcy.

Notwithstanding, there are general benefits for opening a subsidiary in Portugal. The subsidiary can operate under a different company name and pursue separate business interests. It operates under Portuguese corporate law in the same way as local companies and is taxed on its worldwide income and liable for Corporate Tax at the headline rate of 21%. A lesser rate of 17% on the first €25,000 (US$28,100) of taxable income applies to SMEs with annual revenue under €50 million (US$56.2 million).

Through its subsidiary, the parent company has the advantage of exploring the Portuguese market and further afield among the European Union’s member nations.

Other benefits for a subsidiary:

  • Easier to obtain regulatory approvals, loans and finance and enter into contracts with other Portuguese and European Union companies
  • More impact with clients and suppliers, as subsidiaries imply more permanency than branches
  • Employees feel there is more stability and job security than from being with a branch

In the wider commercial sense, opening a subsidiary makes a statement of a company’s commitment to expanding into foreign markets, in this case the opportunities offered by the European economies.

However, there is a more straightforward option to the risks and costs of setting up a subsidiary in Portugal.

The Portuguese Market

In the modern economic world, Portugal’s Gross Domestic Product (GDP) reached 251 billion US dollars to rank the nation 49th in the world in 2021, with the Organization for Economic Cooperation and Development (OECD) predicting growth of 5.8% for 2022.

Portugal is on the western outskirts of the European continent but has been a central player in the European Union (EU) since joining in 1986. This was followed by joining the Schengen Area in 1995 and adopting the Euro as its currency in 1999. It has a mixed economy with the service sector, including tourism, accounting for over 65% of GDP.

Industry takes close to 20%, while smaller scale factories with lower labor costs specialize in textiles and designer clothes and shoes. Portugal’s Atlantic coastline sees a large and diverse fishing and fisheries industry – in which sardines are a traditional favorite.

But incoming companies tempted to set up a subsidiary will find adjustments need to be made – and quickly. The demanding employment market is framed by strictly applied laws and regulations … and they cannot be ignored or side-stepped.

Starting a business in Portugal

International companies intending to run their own payroll for staff in Portugal have to establish a legal entity subsidiary. The most popular choice is to open a private limited liability company, a Sociedade por Quotas or LDA with at least two shareholders. There is also a simplified form of LDA with a single shareholder called a Sociedade Unipessoal LDA, but the individual can be a shareholder in only one of this company type.

Steps to set up the limited liability subsidiary of a foreign parent company include:

  • Register the company’s unique name with the Institute of Registries and Notaries (Instituto dos Registos e do Notariado, IRN) to obtain a Certificate of Admissibility
  • If members / partners of company are individuals, they must provide ID cards or passports depending on nationalities
  • Provide documentation from the Commercial Registry of the parent company’s home country and supply minutes of the meeting authorizing setting up the subsidiary
  • Verify identity of the individual with power to sign on behalf of the new subsidiary
  • Provide Memorandum and Articles of Association of the parent company
  • Provide subsidiary’s bylaws detailing business activity, registered office, share capital (known as ‘quotas’) and number of shareholders (minimum of two), management structure
  • Submitting all documents translated into Portuguese in person to the Portugal Registrar of Companies (Serviços do registo comercial) for publication on their website
  • Opening a bank account to deposit share capital
  • Minimum share (quota) capital for an LDA is two euros and one euro for a Sociedade Unipessoal LDA

The subsidiary must obtain their Company Card and Collective Persons Card from the IRN, which provide multiple identification documents. These are:

  • The company identification card (Número de Identificaçäo de Pessoa Coletivas, NIPC)
  • The individual tax identification numbers (Número de Identificaçăo Fiscal, NIF) and tax card from the Portugal Tax and Customs Authority (Autoridade Tributária e Aduaneira, AT)
  • The employees’ Social Security Identification Number (NISS) from the Social Security Institute (Instituto de Segurança Social)

Expanding Business into Portugal

Opening a business in any overseas territory brings issues. Moving staff across the world means lengthy processes to obtain visas and work permits. When employees are in place, who will handle payroll? How will your company deal with regulations on taxation, entitlements and benefits, termination, and severance?

Drawing up an international expansion blueprint is not enough. Your business plan will have to answer all these questions.

Portugal welcomes foreign investment, but incoming companies must be aware of changes to the Commercial Companies Code that came into effect at the beginning of 2022. Additionally, the employment market is complicated by its mix of laws and collective agreements affecting employee benefits and entitlements. There are other questions too: where will you find distributors, manufacturers, and offices?

Portuguese Business Facts

  • Capital – Lisbon
  • Population – 10.16 million
  • Regions – Northern Portugal; Central Portugal; Lisbon and the Tagus Valley; Alentejo; Algarve; Azores Islands; Madeira Islands
  • Official Language – Portuguese
  • Economy and world ranking – US$251 billion end of 2021.
  • Leading sectors – Service 65.6%; industry 19.3%; agriculture 2.1%; which include: vehicles, railway, and trams; electrical machinery and parts; nuclear reactors, boilers, and machinery; plastics, minerals, and fuels
  • Main exports – Cars and vehicle parts; refined petroleum; leather footwear; uncoated paper
  • Main imports – Cars; crude petroleum; aircraft, helicopters, and satellites; vehicle parts and packaged medicines
  • Main trading partners – Spain, Germany, France, UK, Netherlands, and US
  • Government – Constitutional republic, parliamentary system, representative democracy, unitary state
  • Currency – Euro

Advantages and Challenges of the Portuguese Market

Advantages of expanding into the Portugal market include:

  • Advances: Developing renewable energy industry in hydroelectric and wind power
  • Workforce: Low labor costs
  • Growth: Budding food products and electronics industry
  • Economy:  Organization for Economic Cooperation and Development predicting growth of 5.8% for 2022
  • Security: Ranked in the top five for safest and most peaceful countries in the world; low crime rate
  • Global Trade: Portugal’s Atlantic coastline has five ports, providing maritime access to the rest of Europe, plus North and South American markets

Challenges of operating in the Portugal market include:

  • Industry: Underdeveloped manufacturing sector
  • Bureaucracy: ‘Red tape’ surrounding legal processes
  • Logistics: Infrastructure gaps can affect moving produce round the country
  • Trade: Heavily dependent on imports and exports with fellow European Union members

Limited Company / Subsidiary or Branch in Norway?

International companies intending to run their own payroll for staff in Portugal have to establish a legal entity subsidiary. The most popular choice is a private limited liability company, a Sociedade por Quotas or LDA with at least two shareholders. The simplified form of LDA with a single shareholder is called a Sociedade Unipessoal LDA, but the individual can be a shareholder in only one company of this type.

If a foreign company wants to operate commercially in Portugal without running payroll or opening a subsidiary, it is still legally required to at least open a branch (Sucursal) or a permanent local establishment (Representaço permanente).

Portugal’s Companies Law is based on limited liability, generally restricting the liability of shareholders to their own share contribution. There are exemptions. The parent company can be financially liable for the subsidiary if it is 100% owned by them or they have legal powers over the subsidiary through a subordination contract. A sole shareholder who appoints a director can be liable for the director’s actions, or for debts and liabilities in the case of bankruptcy.

Subsidiaries and branches have differences in how they are registered and operate.

Portuguese Contracts

Foreign companies hiring employees in Portugal must operate within a framework of legislation, collective agreements, and European Union (EU) directives that combine to provide safeguards and entitlements for the workforce.

These considerations come into play during the first stages of hiring and onboarding – drawing up a contract with your new employee. Once Bradford Jacobs’ Professional Employer Organisation (PEO) recruitment networks have located the best talent for your company, we step in to steer you through this crucial element of recruitment.

General points apply to all contracts. These include:

  • Formal written contracts are the norm for indefinite, open ended employment but not mandatory
  • In the absence of a formal contract the employer must provide a written statement of the essential working conditions within 60 days of employees starting work. The agreement must include names, addresses and signatures of all parties; the work involved and remuneration. These conditions are usually part of a written contract
  • Written contracts are required for fixed-term, agency, and teleworking employment
  • There is no mandatory requirement regarding the language used in contracts and English is often used. However, contracts are best bi-lingual including a version in Portuguese as this would be used in litigation
  • Contracts and agreements cannot include clauses that reduce employee benefits from those that are either mandatory or subject to Collective Bargaining Agreements (CBAs)
  • Probation periods are allowed but cannot exceed 240 days for senior managers; 180 days for other managers and the highly qualified; 90 days for others. Trial periods of 30 days are allowed for fixed-term contracts of six months or longer and 15 days in other cases
  • Employers must comply with workplace policy requirements under the Labor Code. Companies employing more than seven must institute a code of good conduct prohibiting harassment. Companies employing more than 50 must institute reporting procedures among their workforces. Any internal policies (regulamento interno) must be posted in the workplace after mandatory consultation with employees’ representatives

Other issues must be dealt with during the contract phase, including:

  • Obtaining employees’ Social Security Identification Number (NISS) from the Social Security Institute (Instituto de Segurança Social) within 24 hours of starting work
  • Registering with the Portugal Tax and Customs Authority (Autoridade Tributária e Aduaneira, AT) to obtain their Tax ID Number (Número de Identificaçăo Fiscal, NIF) and tax card
  • Providing photocopy of Citizen’s Card, ID Card, or passport for local employees

If companies employ foreign workers on their payroll, additional requirements apply, including:

  • Providing a valid passport
  • Providing Residency Card (Cartão de Residencia) from the Immigration and Borders Service (Serviço de Estrangeiros e Fronteiras, SEF)
  • Photocopy of residence permit
  • Employment contact verified by employer and identifying the employer’s legal representative
  • Photocopy of individual’s social security document from home country, with registration number for European Union citizens
  • In the case of non-European Union citizens, a photocopy of their work visa
  • Completed foreign workers’ identification form

Employment Contracts in Portugal

Providing written contracts for open-ended employment is not mandatory, but they must be drawn up in the case of fixed-term, agency, and teleworking employment. If not providing a formal written contract for indefinite employment, the employer must give the employee a written statement detailing essential elements of the working conditions within 60 days of starting work. There is no mandatory requirement regarding the contract’s language and English is often used. However, contracts are best bi-lingual including a version in Portuguese, as this would be used in litigation.

Open-ended, Permanent, Indefinite Employment Contracts: If no other contract type is specified, the employment is considered open-ended and permanent.

Fixed-term Employment Contracts: These must be in written form. The contract is expected to cover a specific role to fill a temporary need for the employer. If the contract for this temporary role is not written, it is considered open-ended. The contract cannot be for less than six months and may be renewed twice, but each extension cannot exceed one year.

Employment Contract of Unspecified Duration: A temporary contract dependent on completion of a particular project or event, of an unknown timescale. The maximum term is four years after which the employer is entitled to compensation.

Probation Periods: These cannot exceed 240 days for senior managers; 180 days for other managers and the highly qualified; 90 days for others. Trial periods of 30 days are allowed for fixed-term contracts of six months or longer and 15 days in other cases.

Collective Bargaining Agreements (CBAs): Known in Portugal as Convençōes colectivo de trabalho. Legislation allows for CBAs in three areas: industry agreements that can be signed at national, regional, or local level (CCs); agreements covering several companies (ACs); single company or workplace agreements (AEs). CBAs can improve mandatory benefits for employees but cannot undercut them. Where different agreements operate simultaneously, single-company agreements override multi-company agreements, and multi-company CBAs replace industry-wide agreements.

Employee Benefits

Happy and satisfied employees make your business thrive and lead to even better profits. However, the specific benefits for employees in Portugal might not all be familiar to you yet. By using our PEO and EOR service we can provide compliant labour contracts for employees in Portugal including local benefits.

When expanding your company’s presence in a new country, you need to ensure compliance both in your employment contracts and benefit guarantees. These involve social security contributions, sick leave, health insurance, and unemployment, to name a few.

Our guide will explain what benefits and employee compensation are guaranteed, and what can be modified, for any employer who wishes to expand their business into Portugal.

What are the Employee Benefits in Portugal?

Benefits and entitlements for employees in Portugal, both locals and foreigners, are covered by the Labor Code, supplemented by various statutes and decrees, as well as Collective Bargaining Agreements (CBAs). Foreign companies hiring employees in Portugal must comply with this framework of legislation that provides guarantees and safeguards for the workforce.

Minimum guaranteed benefits, either from legislation or agreements, include:

  • Minimum wages
  • Paid vacations
  • Working hours
  • Termination, severance, and notice periods
  • Sick leave
  • Maternity allowances and benefits

The responsibilities of foreign companies reach further than simply complying with tax, social security, and payroll regulations. Failure to comply with specific regulations applying to benefits and entitlements runs the risk of fines and sanctions. It is vital that employers have a firm grasp of what is guaranteed for their employees, as this will affect the employer-employee relationship.

What Compensation Laws exist in Portugal?

The Portugal Labor Code (Código do Trabalho) covers most legislation regarding employees’ statutory compensation and draws together a range of statutes, alongside the Social Security Contributory Code. Both have been amended by various decrees relating to retirement and sickness benefit; parental leave; health and safety and accidents at work; disability and unemployment protection for the self-employed.

The labor legislation watchdog protecting workers is the Working Conditions Authority (Autoridade para as Condições de Trabalho, ACT) which enforces the rules of the Labor Inspectorate. The Ministry of Employment and Social Solidarity oversees the Social Security Institute (Instituto de Segurança Social) concerning social welfare issues. Gender equality is the responsibility of the Commission for Equality in Labor and Employment (Comissão para a Igualdade no Trabalho no Emprego, CITE).

Additionally, employer-employee contractual arrangements are also governed by Collective Bargaining Agreements (Convençōes colectivas de trabalho) CBAs.

The requirement for employers to respect employees’ rights stretches further than simply complying with tax and payroll procedures. Legislation and binding collective agreements apply to such as maternity allowances and benefits, holidays, sick pay and severance payments, minimum wages and working hours.

Drawing up contracts and agreements with employees is tricky enough, but in Portugal it is vital employers are up to speed with responsibilities to their staff over benefits, compensation, and minimum requirements. Written contracts are not mandatory – but are advised – and in their absence employers must provide employees with a written agreement detailing core aspects of the relationship within 60 days of starting work.

Compensation, entitlements, and benefits include the following, all of which can be improved by collective agreements, but not diminished.

  • National Minimum Wage: The national minimum wage was set at €705 (US$798) per month from January 2022, an increase from the 2021 rate of €665 (US$752). The Portuguese government announced plans to increase the minimum to €750 (US$848) by the end of 2023
  • Sick Leave and Benefit: The Portuguese Social Security Institute (Instituto de Segurança Social) pays employees’ sickness benefit. Beneficiaries must have been employed for a minimum of six months (consecutively or in parts) before claiming benefit, which can be for a maximum of 1,095 days. Benefit is calculated on the employee’s salary and number of sick days: 55% – up to 30 days sick leave; 60% – between 31 and 90 days; 70% – between 91 and 365 days; 75% – over 365 days. Full-time employees’ benefit begins after the third day; for the self-employed or beneficiaries of a voluntary social insurance scheme after 30 days. Sickness must be validated by a doctor or the health services supplying a ‘Temporary Invalidity Certificate (CIT) to the social services, the employer and the employee
  • Working Hours and Breaks: Working hours are restricted to eight per day and 40 a week under the Labor Code, although they can be averaged over an agreed period. Average working weeks, including overtime, cannot exceed 48 hours over the agreed period, which cannot exceed 12 months or in the absence of an agreement not more than four months. Collective agreements may provide for better entitlements. New legislation from January 2022 prohibited employers from texting or contacting remote or tele-workers after work hours on work-related matters at the risk of fines
  • Overtime: Employees receive 25% above the normal hourly rate for the first hour and an extra 37.5% for additional hours. Additionally, under the Labor Code, working overtime on rest days or vacation days is paid at 150% with a rest day on one of the following three days. Annual overtime maximums are 150 hours for companies employing more than 50 workers and 175 hours for companies employing fewer. Collective agreements may provide for better entitlements
  • Paid Vacations: The Labor Code provides a minimum of 22 paid vacations days in a calendar year, after completing one year’s service. They should be taken in that year but can be delayed until April 30 of the following year in special circumstances. During the first year of work, employees are allowed a maximum of 20 days. In addition to receiving their normal salary, employees also receive a ‘vacation subsidiary’ as a 13th month salary payment. Collective agreements may provide for better entitlements.
  • Maternity / Paternity / Parental Benefit and Leave: Maternity leave entitlement is a total of 120 days, and it is mandatory to take at least 42 days after the birth, with the balance used wholly or in part before or after the birth. Benefit is funded by the social security system and paid at 100% of the mother’s salary for the 120 days. Fathers receive 20 workdays leave after the birth, five of which must be taken immediately with the remaining 15 days taken within six weeks after the birth consecutively or in parts. Fathers also have the option of taking a further five workdays as paternity leave. Maternity leave can be extended to 150 days in the case of multiple births: 150 days for twins, 180 days for triplets and 210 days for quads. Additionally, parents can share parental leave for 150 days at 100% of pay or 180 days at 83% of total pay.
  • Termination and Severance: Termination generally applies by reaching the end of a fixed-term contract, due to the inability of the employee to perform their job or to retirement. The Labor Code stipulates severance pay equals a minimum of 20 days basic salary and seniority bonus for each full year of employment, or part of a year. The monthly salary amount used to calculate the severance cannot exceed 20 times the minimum national wage, €705 (US$798) as of January 2022
  • Notice Periods: Minimum notice periods depend on length of service, as follows: Less than one year’s service – 15 days; between one and five years – 30 days; more than five years up to 10 – 60 days; more than 10 years’ service – 75 days. In probationary periods no notice need be given if the trial period is less than 60 days. Seven days’ notice applies if the trial is more than 60 days, and 15 days’ notice if more than 120 days. Employees must respect the notice period at risk of having to refund the employer pay in lieu

Employer Statutory Costs in Portugal

  • Social Insurance:  Employers in Portugal must fulfil their obligation to contribute an equivalent percentage of 23.75% from their employees’ salaries into social insurance funds. Contributions cover family benefits, unemployment assistance and pensions
  • Corporate Income Tax:  Complying with Corporate Tax laws is a statutory requirement on employers in Portugal. Resident companies are taxed on their worldwide income. The standard flat rate is 21% plus other charges, including a municipal surcharge of up to 1.5%. Further surcharges apply: 3% on profits between €1.5 million (US$1.8 million) and €7.5 million (US$8.5 million); 5% on profits on the excess up to €35 million (US$39.6 million); 9% on the excess above €35 million
  • National Minimum Wages: Employers must comply with the national minimum wage for their employees, although collective agreements may set higher limits, which will be binding. From January 2022 the national minimum was increased to €705 (US$798). Employers must also be prepared for an increase to this statutory cost, as the Portuguese government has pledged to increase the minimum to €750 (US$848) by the end of 2023

Portugal Top Talent

Finding and recruiting top talent in any overseas territory poses many potential barriers for companies taking the steps to build their international profile. This is certainly the case in Portugal, which is a long-term member of the European Union (EU), having joined in January 1986, and then joined the Schengen Area in March 1995. Portugal adopted the Euro as its currency in January 1999.

In 2021 Portugal’s Gross Domestic Product (GDP) reached 251 billion US dollars to rank the nation 49th in the world, with the Organization for Economic Cooperation and Development (OECD) predicting growth of 5.8% for 2022. Portugal ranks 43rd in GDP per capita at US$24,457.

This potential – and the challenges it brings – underlines why Bradford Jacobs’ global experience is indispensable for taking the smartest recruitment route into Portugal – ideally placed for international expansion among other EU members and further afield.

The Recruitment Process in Portugal

Portugal’s business environment tends towards hierarchy with employees showing considerable respect for age and status, often to the detriment of advancing ideas and progress. Being overly respectful to titles and seniority can put taking individual responsibility on the shelf.

However, under pressure Portuguese employees are creative in solving crises – which can often surface due to lack of planning or staying to a scheduled timetable.

These are all considerations when moving into the employment market, either for individuals or for international companies hiring staff in Portugal.

Speaking Portuguese and having other languages boosts opportunities for jobseekers, particularly in the services and tourism sectors – although this can be by-passed for those working online or in IT. The increasing number of global companies operating in Portugal also increase the options for foreign jobseekers.

The path to employment is also easier for citizens from European Union (EU) nations, as they do not require a visa or work permit.

Portugal’s Institute of Employment and Professional Training (IEFP) provides support, services for jobseekers, and works in partnership with EURES. Citizens from the European Union (EU), European Economic Area (EEA) and Switzerland can search through the EURES jobs’ portal that links jobseekers with potential employees.

In-comers can count on Portugal’s comprehensive framework of regulations and collective agreements safeguarding employment rights.

Recruitment is the first stage of making your company operational and competitive in Portugal. It is vital to know where to locate the finest talent to be a perfect fit for your company’s expansion plans. So … contact Bradford Jacobs.

International companies intending to run their own payroll for staff in Portugal must establish a legal entity subsidiary. The most popular choice is to open a private limited liability company, a Sociedade por Quotas or LDA with at least two shareholders.

The company must then follow strict procedures to register and onboard employees. Steps include:

  • Registering with the local social security office to obtain employees’ Social Security Identification Number (NISS) from the Social Security Institute (Instituto de Segurança Social) within 24 hours of starting work
  • Obtaining company tax code (Numero Fiscal de Contribuinte) from the local office of the Director General of Taxes (Direcçao-Geral dos Impostos) and the company identification card (Número de identificaçäo de pessoa coletiva, NIPC)
  • Obtaining employees’ Tax ID Number (Número de Identificaçăo Fiscal, NIF) and tax card and registering with the Portugal Tax and Customs Authority (Autoridade Tributária e Aduaneira, AT)
  • Providing photocopy of Citizen’s Card, ID Card for local employees

Additional requirements apply to foreign employees, including:

  • Providing a valid passport
  • Providing Residency Card (Cartão de Residencia) from the Immigration and Borders Service (Serviço de Estrangeiros e Fronteiras, SEF)
  • Photocopy of residence permit
  • Employment contract verified by employer and identifying the employer’s legal representative
  • Photocopy of individual’s social security document from home country, with registration number (if a European Union citizen)

In the case of non-European Union citizens, a photocopy of their work visa and completed foreign workers’ identification form

Legal Checks on Employees in Portugal

Scope: Allowable questions must generally be strictly relevant to the role in question and require the candidate’s permission.

Medical Checks: Unless these are legally required for certain positions, employers cannot ask an applicant to submit to a medical examination or pregnancy test.

Drug Tests: Allowed only for the protection of the employee or third parties or if necessary for the specified role. The employer must provide written reasons for asking for the information.

Educational Qualifications and References: Checks are allowed.

Criminal Record Checks: These are allowed only if relevant to certain types of roles – such as security guards or working with children – to obtain a criminal record check certificate. The employer must give the reasons in writing for requesting the information.

Discrimination: Issues covered by Portugal’s Labor Code should be avoided. The Code prohibits discrimination on grounds of gender, gender identity or sexual orientation; parentage or family, social or marital status; nationality, ethnic origin, or race; religious, political, or ideological beliefs or trade union membership.

Required: Ensuring non-European Union, European Economic Area and European Free Trade Association citizens have required immigration documents.

Basic Facts on Hiring in Portugal

Companies hiring staff for expansion into Portugal must comply with a framework of employment regulations generally covered by the Labor Code, with mandatory provisions enhanced by collective agreements. European Union directives may also apply. Basic requirements include:

  • Formal written contracts are common for indefinite, open ended employment but not mandatory
  • The employer must provide a written statement of the essential working conditions within 60 days of employees starting work. These conditions are usually part of the written contract
  • Written contracts are required for fixed-term, agency, and teleworking employment
  • There is no mandatory requirement regarding the language used in contracts and English is often used. However, contracts are best bi-lingual including a version in Portuguese as this would be used in litigation
  • Contracts and agreements cannot include clauses that reduce employee benefits from those that are either mandatory or subject to Collective Bargaining Agreements (CBAs)
  • Probation periods are allowed but cannot exceed 240 days for senior managers; 180 days for other managers and the highly qualified; 90 days for others. Trial periods of 30 days are allowed for fixed-term contracts of six months or longer and 15 days in other cases
  • Employers must comply with workplace policy requirements under the Labor Code. Companies employing more than seven must institute a code of good conduct prohibiting harassment. Companies employing more than 50 must institute reporting procedures among their workforce and any internal policies (regalement interno) must be posted in the workplace after mandatory consultation with employees’ representatives

After hiring and onboarding, employers must consider other considerations. Minimum standards apply to such as sick leave, minimum wages, working hours, maternity allowances, paid vacations, termination, and severance, notice periods and social insurance payments. Other rules regulate workplace discrimination and harassment.

Work Culture

To succeed in business in Portugal, it is vital for both employers and employees to have a strong understanding of the business culture.

As a global PEO (Professional Employment Organization) it is our goal to be familiar and updated with the business culture in the country we work with and in. By sharing our knowledge about Icelandic work culture, we want to support your global expansion plans. Therefore, we will address all the aspects of the work culture in Portugal to start your expansion well-informed.

Portugal has an Atlantic Ocean coastline to the west and is flanked by its Iberian neighbor Spain to the north and east. The 1,200km border between the nations is one of the oldest in the world, virtually unchanged since being set by the Treaty of Alcaňices in 1297.

Portugal’s geographical location has contributed to a rich history which includes being the first major maritime power in the 15th and 17th centuries, opening trade routes and colonial outposts in India and beyond to Japan, Korea, and East Asia in the Portuguese ‘age of discovery’.

Tourists and visitors are attracted by historical cities and architecture from those centuries, by Portugal’s beaches in the Algarve, seafood cuisine and Fado music, wine, mountains, and rugged landscapes. Lisbon is the capital, mixing heritage and culture with a vibrant lifestyle, while the former capital of Porto gave the country its name.

These are among the attractions for foreign jobseekers looking to find their perfect role in Portugal’s employment market. The Organization for Economic Cooperation and Development predicts Portugal’s economy will grow by 5.8% in 2022, building on 2021’s predicted Gross Domestic Product (GDP) of 251 billion US dollars to rank the nation 49th in the world.

Portugal has a mixed economy with the services sector, including tourism, accounting for over 65%. Speaking Portuguese and having other languages boosts opportunities for jobseekers, particularly in the service and tourism sectors – although this can be by-passed for those working online or in IT.

The opportunities are there, but alongside the exciting potential of making such a move comes many challenges. Incomers need to be up to speed to make their mark in this highly competitive environment.

Ready for the challenge? Now it is time to get down to business. So here are a few tips on taking the right steps and avoiding the pitfalls!

  • Language:  Portuguese, of course, is the official language but English is commonly used in the business environment, among other languages. Speak plainly though, avoiding colloquialisms, to avoid misunderstandings. If advised beforehand that your language is not fully understood, employ an interpreter
  • Punctuality:  Book the meeting a couple of weeks in advance, confirm at least once, and be on time or at least within five minutes, as the Portuguese are not so strict on this aspect as other nations
  • Attitudes:  Portuguese, naturally warm and welcoming, nevertheless tend to have a more formal attitude towards initial meetings. Compliments on the climate, cities, wine, and food will be appreciated; references to your own family and enquiries about theirs help to break the ice. Gentle humor and a smile help
  • Business Environment:  Much store is put by building relationships on trust. Employment contracts, for example, are not mandatory in Portugal … and a ‘Gentleman’s Agreement’ still counts. Beware … make your feelings known if agreed points are not being followed up
  • Negotiations:  Portuguese avoid an argumentative approach, being naturally friendly and tolerant, but if talks are meandering it is best to ask a direct question to get a satisfactory response. Your hosts will be slow to volunteer information and will not respond to high-pressure tactics. The business set-up is still largely hierarchical, so identify the main movers and display respect
  • Greetings:  Shake hands at the start of all meetings, including with a woman on the other team, but be prepared if a cheek is offered for a slight kiss. All graduates in Portugal have the prefix ‘Dr.’ so use that before the surname … unless you are corrected that the individual is a ‘Mr’
  • Dress Code:  Play safe – formal suits, jackets, and ties for men; dresses, skirts, blouses, and trouser suits for women

Portugal’s Minimum Wage

The national minimum wage was increased to €705 (US$798) per month from January 2022, up from the 2021 rate of €665 (US$752). Further, the government confirmed plans to increase the minimum to €750 (US$848) by the end of 2023.

Probation Periods in Portugal

Probation periods cannot exceed 240 days for senior managers; 180 days for other managers and the highly qualified; 90 days for others. Trial periods of 30 days are allowed for fixed-term contracts of six months or longer and 15 days in other cases.

Working Hours in Portugal

Under the Labor Code, working hours are restricted to eight per day and 40 a week, although they can be averaged over an agreed period. The average working week, including overtime, cannot exceed 48 hours over the agreed period, which cannot exceed 12 months. In the absence of an agreement the average period must not be more than four months. Collective agreements may provide for better entitlements. From January 2022, new legislation-imposed fines on employers texting or contacting remote or tele-workers after work hours on work-related matters.

Overtime in Portugal

Pay for extra work is 25% above the normal hourly rate for the first hour and an extra 37.5% for extra hours. Additionally, under the Labor Code, working overtime on rest days or vacation days is paid at 150% with a rest day on one of the following three days. Annual overtime maximums are 150 hours for companies employing more than 50 workers and 175 hours for companies employing fewer. Collective agreements may provide for better entitlements.

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