Employing in Portugal
Portugal is Europe’s most westerly country — famed for port wine, beautiful beaches, arguably the world’s best-known footballer and… cork (yes, Portugal produces over half of the world’s cork!). But there are better reasons to employ there than its geographical position and notable features.
Considered an emerging market, Portugal offers excellent potential for long-term growth and the near-term benefit of lower wage costs than are typical in surrounding countries. Both minimum wage and average wage are among the lowest in the EU. And those with a green agenda will be impressed with the levels of renewable energy the country produces, ranking behind only the Nordic countries among the EU states.
Although there is a lesser prevalence of English speakers than in most other European countries, having native Portuguese speakers may benefit truly international companies. Nine other countries also have Portuguese as their official language, making it the sixth most spoken language in the world. And if you’re hiring expat workers in Portugal, you can be confident they’ll be a happy workforce! The cost of living is low, publicly funded healthcare is considered excellent, and a recent survey found the warm climate ranks highly among reasons given for locating to Portugal from abroad.
In Portugal, there’s a legal requirement to pay two additional months’ salary.
• Month 13 is paid out in June
• Month 14 is paid out in November
Please be mindful of this when negotiating terms with new candidates. Clients can determine that the salary on offer includes these statutory payments, which will be reflected in the contract of employment. However, this should be made known to candidates in the pre-hiring stage.
We invoice for these additional salaries monthly and funds are accrued to be paid out at the appropriate time.
Employees are entitled to a vacation allowance, which is dependent on salary, at the time of vacation.
The meal allowance (or food allowance) is a benefit awarded daily to employees in Portugal. TopSource Worldwide provides a meal voucher scheme through Sodexo. Each month, we top up the individual’s meal voucher scheme based on their number of working days that month. The statutory daily minimum is Euros 4,50 but can be paid up to Euros 7,63 tax-free. Employees can ‘spend’ their allowances in cafés, restaurants or supermarkets.
Social insurance in Portugal is composed of:
- Statutory maternity/paternity pay
- Temporary sickness/incapacity
- Long-term sickness
- Disability benefit
- Unemployment benefit
- Pension benefit
As a guide, the following employer costs are payable in Portugal: Social security: 23.75% plus 1% for FCT (Workers’ Compensation Fund) and FCGT (Guarantee Fund for Work).
Accident insurance is mandatory in Portugal, and TopSource Worldwide provides coverage through Tranquilade.
The regular working hours are eight hours per day (40 hours per week).
The minimum is 0 months with a maximum of 240 days (depending on the job description). If the performance is not satisfactory, it's not possible to extend beyond the maximum limit.
This is a complex subject in Portugal with employees entitled to overtime if they work in excess of 40 hours per week.
Businesses can, however, adopt what is known in Portugal as a ‘schedule exempt regime’ whereby they deem that part of the salary is to cover any overtime. It should be noted that this doesn’t include work rendered on rest days and has a maximum threshold of 48 working hours per week on average over a period of four months.
Based on the employee’s job role and proposed salary, our Portuguese legal team can determine the extent of any additional gross overpay required to be stipulated in the employment contract.
The employer must observe the following minimum notice periods, which vary in accordance with each employee's seniority.
- 15 days for employees with less than one year of service
- 30 days for employees with one to five years of service
- 60 days for employees with five years or more and up to 10 years of service
- 75 days for employees with more than 10 years of service
During a probationary period, either the employer or the employee can terminate the contract without providing notice. However, if the probationary period has lasted longer than 60 days, the employer shall abide by a seven-day notice period. If the probationary period has lasted longer than 120 days, the employer shall abide by a 15-day notice period.
According to Portuguese law, the termination of an employment contract depends on stringent rules that demand the gathering of grounds and several formal procedures.
The employment contract may terminate in the following situations:
- Mutually agreed termination
- Dismissal for disciplinary grounds subject to prior internal dismissal disciplinary procedure
- Collective dismissal (for economical, structural or technological reasons) subject to an internal procedure and prior to notice periods which depend on the seniority of the employee
- Dismissal for employee's failure to adapt to a working position (also subject to internal formalities and prior notice periods)
Individual employees are not entitled to pay in lieu of notice according to the Portuguese Labour Code. However, in case of collective dismissal, should the employer fail to comply with the required notice period, the employment contract will not end until the statutory notice period has expired and the employer is then required to pay the employee a sum equal to the salary equivalent to the missing period of notice.
Holidays in Portugal are determined by articles 237 to 247 of the Portuguese Labour Code which provide for 22 days per year. The regular holiday year runs from January to December, and holiday can be carried forward to 30 April of the following year.
With regards to calculating pro-rated holiday entitlement for employees who start partway through the year, it should be noted that pro-rata leave is calculated on fully completed months. So, an employee will not accrue any leave if they start after the first week in a month
Looking for an EOR in Portugal?
At TopSource Worldwide, we work with local experts to help you stay on the right side of Portugal law.
Get in touch today to see how we can help your business with our employment solutions.