How to hire employees in Portugal: A guide for foreign employers (2026)

Hiring employees in Portugal as a foreign company means choosing the right employment structure, understanding Portuguese payroll obligations, and getting the contract right from the start.

Portugal’s Código do Trabalho governs employment relationships with detailed rules on contract types, probation periods, working hours, minimum wage, and termination. Employer social security contributions run at 23.75% of gross salary. Employees receive a 13th and 14th month payment as standard. A meal allowance is expected in most employment arrangements. None of this is optional, and getting any of it wrong creates compliance risk.

This guide covers the end-to-end process for hiring in Portugal, from choosing your employment structure through to ongoing payroll and compliance. If you have already decided on an Employer of Record, see our guide to the best EOR providers in Portugal. For a deeper look at how EOR works in the Portuguese context, see our complete guide to Employer of Record in Portugal.

Foreign companies hiring in Portugal have three main options. Each has different cost, speed, and compliance implications.

Set up your own entity. Register a Portuguese Sociedade (typically a Sociedade Unipessoal por Quotas for a single-shareholder subsidiary). This gives you full control over the employment relationship but requires 4 to 8 weeks of setup, costs €5,000 to €15,000+ in legal and registration fees, and creates ongoing obligations for accounting, annual filings, and local administration. This makes sense for companies building a large, permanent team in Portugal.

Use an Employer of Record. An EOR becomes the legal employer under Portuguese law. It handles employment contracts, payroll, social security, and compliance. You manage the employee’s day-to-day work. Setup takes days rather than weeks, and there is no entity to establish or maintain. This works well for companies hiring one to ten people in Portugal, testing the market, or employing a relocating team member at speed. The trade-off is that you share the employment relationship with a third party. See the Boundless guide to Portugal for more on how this works in practice.

Engage an independent contractor. You can engage Portuguese workers as independent contractors (trabalhadores independentes) for defined projects or services. This is faster and cheaper than employment, but carries misclassification risk. Portuguese law will reclassify a contractor relationship as employment if certain conditions are met, including fixed working hours, use of the company’s equipment, or regular monthly payments that resemble a salary. Reclassification triggers back-payment of social security, benefits, and potential penalties. If the working relationship looks like employment, it is employment under Portuguese law, regardless of what the contract says.

Portuguese employment contracts must comply with the Código do Trabalho. The most common contract types relevant to foreign employers are as follows.

Permanent contracts (contrato sem termo). The default and most common type. No fixed end date. The employee becomes a permanent member of the workforce. Most EOR hires in Portugal are on permanent contracts. A written contract is not strictly required for permanent employment, but it is standard practice and strongly advisable.

Fixed-term contracts (contrato a termo certo). Permitted only in specific circumstances defined by law, such as replacing an absent employee or meeting a temporary increase in activity. Maximum duration of two years, renewable up to two or three times depending on the circumstances. The reason for the fixed term must be stated in the contract. Using a fixed-term contract without a valid legal justification will result in the contract being treated as permanent.

Uncertain-term contracts (contrato a termo incerto). Used when the end date is uncertain but the work is linked to a specific event (such as the return of an employee on leave). Maximum duration of four years. If the event does not occur within four years, the contract converts to permanent.

Very short-term contracts (contrato de muito curta duração). Designed for exceptional, short-term needs. Maximum of 35 days per contract and 70 days per year with the same employer. Non-renewable. Simplified formalities.

Part-time contracts (contrato a tempo parcial). Must be in writing. Working time cannot exceed 75% of the comparable full-time schedule. Part-time employees are entitled to the same rights as full-time employees on a proportional basis.

For most foreign companies hiring their first employees in Portugal, the permanent contract is the right choice. Fixed-term contracts require a legally valid justification, and using one without it creates risk rather than flexibility.

Portuguese payroll has several components that foreign employers need to understand before making their first hire.

Gross salary. The agreed monthly salary. The minimum wage for 2026 is €920 per month, paid 14 times per year.

Employer social security (Taxa Social Única). 23.75% of gross salary, paid monthly to Segurança Social. This covers pensions, unemployment insurance, sickness benefits, and other statutory protections.

Employee social security. 11% of gross salary, withheld from the employee’s pay by the employer and remitted to Segurança Social.

Income tax withholding (IRS). Portugal uses a progressive income tax system with rates from 13.25% to 48%. The employer is responsible for calculating and withholding the correct amount each month based on the employee’s salary, filing status, and number of dependants.

13th month payment (holiday subsidy). An additional month’s salary, paid before the employee’s annual holiday. Statutory entitlement.

14th month payment (Christmas subsidy). A second additional month’s salary, typically paid in December. Also a statutory entitlement. Both the 13th and 14th month payments are subject to social security contributions and income tax.

Meal allowance (subsídio de refeição). Standard practice in Portugal, though not strictly mandatory by statute. The public sector benchmark for 2026 is €6.15 per working day. Payments via meal card below the tax-exempt threshold are exempt from income tax and social security, making the card format more cost-effective for both employer and employee.

Workplace accident insurance. Mandatory. The employer must take out an insurance policy covering workplace and commuting accidents. Premiums vary by industry and risk category.

Payroll calendar. Salaries are typically paid monthly. Employer and employee social security contributions are due by the 20th of the following month. IRS withholding is remitted on a monthly basis. The 13th and 14th month payments are made at the times specified by law (before the annual holiday and in December, respectively), though they can be paid in monthly instalments by agreement.

Do not attempt to build your own payroll calculations from these components. The interaction between tax brackets, social security thresholds, meal allowance rules, and subsidy timing makes manual calculations error-prone. Use the Boundless cost calculator to model the full employer cost at any salary level.

The probation period (período experimental) allows both employer and employee to assess the fit. During probation, either party can end the contract without cause or compensation, subject to notice requirements.

Standard probation periods for permanent contracts are 90 days for most employees, 180 days for roles involving high technical complexity or considerable responsibility, and 240 days for senior management and executive positions.

For fixed-term contracts, probation is shorter. 30 days for contracts of six months or more, and 15 days for contracts shorter than six months.

After the first 60 days of probation, the employer must give 7 days’ notice to terminate. After 120 days, the notice requirement increases to 15 days. If the employer fails to give the required notice, compensation equal to the missing notice period is owed.

The probation period must be clearly stated in the employment contract. If it is not referenced, it may be considered non-existent. The Trabalho XXI reform, still under negotiation as of April 2026, proposes changes to probation periods for certain categories of workers, including reduced probation for first-job seekers and the long-term unemployed. These changes have not yet been enacted.

The standard working week in Portugal is 40 hours, with a maximum of 8 hours per day. These limits are set by the Código do Trabalho and apply to most employment arrangements.

Overtime is permitted but regulated. The annual overtime limit for most employees is 200 hours. Overtime compensation rates are 25% above the normal rate for the first hour on a working day, 37.5% for each subsequent hour, 50% for the first hour on a rest day or public holiday, and 75% for subsequent hours on rest days or public holidays.

Employees are entitled to a minimum rest period of 11 consecutive hours between working days and at least one rest day per week (typically Sunday).

Annual leave. Employees are entitled to a minimum of 22 working days of paid annual leave per year. Leave accrues from 1 January each year, and new employees are entitled to 2 working days of leave per month of service in their first year, up to a maximum of 20 days.

Public holidays. Portugal has 13 mandatory public holidays per year. Carnival Tuesday is widely observed but not legally mandatory.

Sick leave. Employees are entitled to sick leave, with pay provided by Segurança Social from the fourth day of absence. The employer does not pay sick leave directly (though some collective agreements or company policies provide top-up payments). Sick pay from Segurança Social is calculated as a percentage of the reference salary, increasing with the duration of absence.

Parental leave. Initial parental leave is 120 or 150 days, shared between parents. The mother must take at least 72 consecutive days, of which 42 must be taken after the birth. The father is entitled to 28 mandatory consecutive days of paternity leave (20 of which must be taken immediately after birth). Additional parental leave of up to 3 months is available. Parental leave is paid by Segurança Social.

For a full breakdown of Portuguese leave entitlements, see the Boundless guide to leave in Portugal.

Portuguese employment law is employee-protective. Understanding the rules before you hire is essential, because getting termination wrong in Portugal is expensive.

Dismissal by the employer requires just cause (justa causa), which is limited to serious disciplinary breaches. There is no “at-will” employment in Portugal. Outside of just cause, the employer can only terminate through collective redundancy, job extinction (extinção do posto de trabalho), or unsuitability (inadaptação) procedures, each of which has strict legal requirements.

Notice periods for employer-initiated termination scale with the employee’s tenure. 15 days for employees with up to one year of service, 30 days for one to five years, 60 days for five to ten years, and 75 days for ten or more years.

Severance pay is generally calculated at 14 days of base salary and seniority payments per complete year of service. Transitional rules apply for employment contracts that began before certain legislative changes, which can affect the calculation for longer-tenured employees.

Employee resignation requires advance notice. For permanent contracts, the employee must give 30 days’ notice if they have up to two years of service, or 60 days for longer tenure. Failure to give proper notice entitles the employer to compensation.

For detailed coverage of Portuguese termination rules, see the Boundless guide to end of employment in Portugal.

Salary is only part of the picture. Portuguese employees expect certain elements in a compensation package, and foreign companies that overlook them will struggle to attract strong candidates.

Meal allowance. Almost universal in Portugal. The standard practice is to provide this via a meal card, which offers tax advantages for both employer and employee. Not including a meal allowance in your offer will stand out to candidates.

Health insurance. Not mandatory, but increasingly expected, especially for professional and technical roles. Private health insurance is a common benefit offered by employers looking to compete for talent.

Flexible or hybrid working. The Portuguese workforce has adapted to remote and hybrid working arrangements, particularly in technology, professional services, and creative sectors. Portuguese law provides specific protections for teleworking employees, including provisions on expenses and the right to disconnect.

Training and development. Under Portuguese law, employers must provide a minimum of 40 hours of training per employee per year. Framing this as a benefit rather than a compliance obligation can strengthen your offer.

Annual leave above the minimum. While 22 days is the statutory minimum, some employers offer additional days to stay competitive, particularly for senior hires.

When structuring an offer through an Employer of Record, a good provider will advise you on Portuguese market norms and help you build a package that is both compliant and competitive.