Fines between €2,040 and €9,690 plus retroactive social security contribution and risk of director's personal liability for each employee misclassification.

FUN FACT

Portugal has a set list of approved names that parents can give their children.

Taxes

Employer tax:

26.5%

Social insurance: 23.75% (22.3% for nonprofit companies)

Labour Accident Insurance: 1.75%

Wage Guarantee Fund: 1%

Employee tax:

25.5% - 64%

Social insurance: 11%

Solidarity tax - 2.5% for those earning more than €80,882, going up to 5% for salaries > €250,000

Income tax:


GROSS INCOME	PROGRESSIVE TAX RATE
Up to €8,059	13%
€8,060 - €12,160	16.5%
€12,161 - €17,233	22%
€17,234 - €22,306	25%
€22,307 - €28,400	32%
€28,401 - €41,629	35.5%
€41,630 - €44,987	43.5%
€44,988 - €83,696	45%
More than €83,696	48%

Portugal Employment Cost Calculator

Use our handy calculator to understand what are all the employment costs you have to consider in Portugal.

Provide us with some extra details and we will send you a full breakdown of the salary costs.

Employer of Record in Portugal

An Employer of Record is the legal employer of a worker in Portugal. As such, the Employer of Record takes care of all Portugal compliance aspects of employment, including payroll, taxes, statutory benefits, employment contracts and more.

the employer of Record is responsible for:

Ensuring their employment is compliant with local employment laws

Processing local payroll

Filing employment related taxes and returns

Issuing payslips to the employee

Distributing salary payments

How Employer of Record works

COMPANY

Maintains a direct relationship with the employee, allocates them work tasks, and manages their performance.

BOUNDLESS

Takes care of payroll, taxes, benefits, ensuring the employee and the company are compliant with all legal regulations.

EMPLOYEE

The third party to the agreement, the employee, fulfils all of their obligations as a worker for the company.

Statutory Employee Benefits

Christmas and holiday subsidies

Basic insurance by the national system

Wage guarantee fund

Workers compensation insurance

Common Non-mandatory Employee Benefits

Meal vouchers

Public transportation allowance

Supplementary pension

Supplementary health & life insurance

Commission

Flexible working hours

Covering phone bills

Gym membership

Employee Rights and Protections

Employment agreement signed by both the employer and the employee

Payslip

Special rights and protections during pregnancy

Safe place of work

Whistleblower protection

Redundancy payment

Professional training

Right to set up Works Council

Leave

Paid time off: 22 days + bank holidays

Paternity leave: 28 days

Sick leave: 1,095 days

Parental leave: 120-150 days

Maternity leave: 30 days before birth and 42 after birth

Probation

Typically 90 days but can be extended to a maximum of 240 days.

Payment Frequency

According to employment regulations in Portugal, the payment frequency is monthly.

End of Employment

Employment terminations agreed upon between a Portugal employer and Portugal employees are relatively simple. Terminations initiated by employers are a bit more complicated and require a valid reason, disciplinary procedure and compensation corresponding to 12 days of basic pay and seniority allowances for each year of service. But most employees negotiate higher severance, especially in the case of a mass lay-off. There are different notice periods which depend on the number of years of service. Dismissed employees may file a claim before a labour court.

Frequently Asked Questions

What are my options if I want to hire a worker in Portugal?

While there are generally four ways of employing people across borders, not all are legal or sensible. Here is an overview of each way to employ a worker in Portugal, outlining the potential cons.

HQ country employment & payroll

While the person is in Portugal, they are employed and payrolled directly by the company’s HQ entity.

Cons: This may appear attractive, but it generally isn't legal in the long term. HQ payroll won't be possible if the person is not a tax resident in the HQ country.

Independent contractor agreements

People are locally registered as sole traders or limited liability company owners in Portugal and invoice for their work. There is no direct employment relationship.

Cons: In Portugal, this is not a compliant or legal way to engage full-time workers who work solely for your company. There will be challenges in attracting and retaining talent.

Direct local employer setup

The company sets up as a fully-compliant local employer. This often involves setting up a local entity and local tax registration.

Cons: Expensive, time-consuming, high-level of complexity. Unknowns around how obligations and costs will evolve over time. There will be a need to stay on top of changes in regulations.

Partnering with an Employer of Record Portugal /full-service Professional Employer Organisation

Employment is handled by a platform that specialises in employing people on behalf of customer companies. The Employer of Record helps to hire and pay employees.

Cons: For some countries, the ongoing costs may be higher than direct employment. Some education is needed to inform employees about how the employment relationship will work.

How long does it take to set up a company in Portugal?

Setting up a local company in Portugal is relatively straightforward. However, the difficult part comes after the initial setup when payroll needs to be calculated and run every month, taxes filed, benefits extended, change of rules and regulations followed. Here is an overview of everything you will find yourself needing to do.

Can I employ people as independent contractors in Portugal?

While many employers practice employing remote workers as independent contractors, it's a bad practice. If an individual is giving their full and undivided attention to your company in Portugal, treating them as an independent contractor is a likely breach of Portuguese employment laws and of those in your country.

Your company could be liable for fines on owed holiday pay, sick pay, social welfare payments, paternity benefit, maternity benefit, or other legal measures. Since the individuals you are working with do not receive the benefit of local employment laws and protections that are often afforded to people working full-time hours.

What does HR compliance mean in Portugal, and why does it matter?

When you hire employees in Portugal, you have certain obligations as an employer. HR compliance is about ensuring your policies and procedures respect all applicable laws and regulations regarding employment and work practices. Complying with local employment law in Portugal is fundamental for the correct running of your business - not only because these laws are in place to protect employees and guarantee their rights are safeguarded, but to minimise your risk of liabilities as an employer. Being compliant means respecting and following all local labour laws, sick leave and illness benefits, annual leave, minimum wage, tax credits, working hours regulations.

How much does it cost to employ someone in Portugal?

As with every other country, there are certain costs associated with employing a worker in Portugal that come on top of the gross salary you are offering. In Portugal those are social insurance, labour accident insurance, and contributions to the Wage guarantee fund. To view the exact percentages and amounts given the salary you are planning to offer, you can use our handy calculator tool.

What does Employer of Record mean in Portugal?

It means that Boundless is the legal employer of the individual, as far as the Portuguese government, tax, and employment authorities are concerned. We are responsible for:

informing you about any pre-employment requirements
ensuring their employment is compliant with Portuguese employment law
informing you about the length of the maternity leave, paternity leave, public holidays, illness benefits, medical benefits
providing a locally compliant employment contract
processing local payroll
filing employment-related tax returns
issuing payslips to the employee
distributing salary payments
payments to the local tax authorities

Customers that work with an Employer of Record in Portugal are responsible for:

sourcing and recruiting their own workers
managing the employee’s day-to-day work load
contributing to the personal / professional development of the employee through their work
following any guidance we give on employment and HR best practices or legal obligations in Portugal, such as the employment contract, public holidays, annual leave, sick leave, maternity and paternity benefits, probationary periods, overtime pay, statutory redundancy payments, liability insurance and many others
ensuring that payroll bills relating to their team are paid to Boundless before the cut-off point in each pay cycle

Who is responsible for filing and paying employees' taxes and social insurance contributions in Portugal if employing through an Employer of Record?

Boundless as the Employer of Record Portugal files all pertinent taxes as they relate to the compliant employment of an individual in their home country.

How does Boundless as an Employer of Record Portugal ensure HR compliance in Portugal?

We carefully choose employment lawyers or advisories to partner with in each country we operate in, including Portugal. They ensure the Portugal employment contracts, and any other relevant documents required for new employees comply with the local jurisdiction. We have thorough discussions on specific norms such as payroll services, social protection, data protection, notice period or work-from-home regulations. Whenever a potentially sensitive issue arises in Portugal, our internal team contacts the relevant firm to ensure all steps are taken to resolve it promptly.

What are the legal responsibilities of a company when they use an Employer of Record service like Boundless in Portugal?

The company remains responsible and informs employees of the day-to-day management of the people and teams that are employed through Boundless, including any disciplinary or performance issues.

Boundless ensures compliance with Portuguese-specific procedures, practices and labour laws while employing people and teams on behalf of the company.

Do employees get all their rights and benefits when employed through an Employer of Record in Portugal?

Any new employee that is locally employed through an Employer of record gets full employment rights and benefits as specified in Portuguese employment law. They get a locally compliant employment contract, statutory maternity leave, annual leave, illness benefits, any relevant tax credit, and many more. All Portugal-based employees receive healthcare through the public healthcare system.

What taxes do I need to pay in Portugal?

In Portugal, both employers and employees have to pay taxes. For employers, these include social insurance contributions, labour accident insurance, and contributions to the Wage guarantee fund, and for employees, they include social insurance, solidarity tax and Income tax. To get a clear overview with both employee and employer taxes, use our salary breakdown calculator, submitting any additional data needed and get a downloadable pdf like this one.

Choose Boundless as your employment partner in Portugal

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