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Portugal’s low employment costs and the country’s strategic position in proximity to other EU markets make the small republic situated in the West of the Iberian Peninsula a very attractive destination for international companies looking to recruit remote workers. Especially in engineering and business, the country offers foreign recruiters a large talent pool to choose from.
Employment contracts in Portugal are generally considered to be permanent and do not need to be in writing in order to be legally valid – except for some contract types such as fixed-term or part-time contracts. However, where no written contract is put in place, employers are obligated to provide their newly hired employees with at least a written document outlining the basic terms of employment including:
Date of commencement
Job title, duties and responsibilities
Basic salary as well as other compensation or benefits
Total number of holidays
Notice periods for employment termination
Applicable collective agreements
Similar minimum requirements apply in cases where the parties decide to put a written employment contract in place. Portuguese law does not require employment contracts to be in Portuguese. They may be composed in a foreign language as long as the employee understands what is said in the contract.
The length of an employee’s probation period depends on the position. While employees in normal positions are usually subject to probation periods of up to 90 days, probation periods for employees who exercise a high responsibility role or who occupy a management position can extend to up to 180 or even 240 days.
Different probation periods apply for fixed-term contracts:
15 days for temporary contracts of less than six months
30 days for temporary contracts of more than six months
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A standard working week in Portugal is 40 hours with five eight-hour days which is also the maximum employees are generally allowed to work.
During an eight-hour day, the employee must have a break of at least one hour – but no more than two hours – after five hours of consecutive work. Rest periods between two working days cannot be shorter than eleven hours and an employee should get at least one rest day per week.
Any work performed beyond 40 hours within one week is considered overtime and is only possible under certain conditions such as business-related emergencies. Where permitted, overtime work must not exceed two hours per day and is to be compensated as follows:
on standard working days: 125% of normal pay rate for the first hour worked overtime and 137.5% of normal pay rate for every additional hour
on rest days and public holidays: 150% of normal pay rate as well as an additional paid rest day
Employees in Portugal must be paid at least once per month. However, pay dates are set by the employer.
The national minimum wage in Portugal is currently (February 2023) fixed at EUR 760 per month when counting 14 salary payments per year. In some industries, collective agreements may provide for higher minimum wages.
Employees who are unable to work because of illness or injury are entitled to sick leave during which they receive payments from the Portuguese social security.
Rates of sick leave benefits are set as follows:
0% during the first three days
55% between days 4 and 30
60% between days 31 and 90
70% between days 91 and 365 days
75% for long-term incapacity to work exceeding 365 days
The period during which an employee can receive sick pay is limited to 1,095 days.
Employees in Portugal are not only entitled to a 13th but also to a 14th salary which are paid in form of a Christmas bonus – to be paid no later than the 15h of December – and a holiday bonus – to be paid in June.
Learn about tax reporting, compensation laws, registration requirements and more in our free Payroll Guide for Portugal.
Employees and employers in Portugal are subject to the following tax and social security contribution rates (last review February 2023):
21% corporate tax rate
23% VAT (standard rate) – except for Madeira region (22%) and Azores (16%)
up to 48%
Individual income tax rates range from 14.5% to 48% *
additional solidarity rates of 2.5% and 5% apply to income exceeding EUR 80,000 and EUR 250,000
23.75% to social security including family, pension and unemployment benefits
1% to Portuguese Wage Guarantee Fund – applicable only to employees hired after 2013
plus additional insurance for occupational accidents
11% of employee’s gross salary to social security
* Read more
Individual income tax rates:
Up to EUR 7,479 - 14.50%
Over EUR 7,479 up to EUR 11,284 - 21.0%
Over EUR 11,284 up to EUR 15,992 - 26.5%
Over EUR 15,992 up to EUR 20,700 - 28.5%
Over EUR 20,700 up to EUR 26,355 - 35.0%
Over EUR 26,355 up to EUR 38,632 - 37.0%
Over EUR 38,632 up to EUR 50,483 - 43.5%
Over EUR 50,483 up to EUR 78,834 - 45.0%
Over EUR 78,834 - 48.0%
Please note that the social security contributions indicated above do not necessarily reflect the actual employment costs. These may differ depending on the employment contract and due to other factors (e.g. 13th and 14th salary, health insurance allowances, accrual for severance pay, etc.).
Employees in Portugal must receive at least 22 paid vacation days per year. During their first year at the company, employees receive two days of leave for each month they have worked – after having completed six months of service and limited to 20 days within the first year.
In addition, Portugal observes 13 public holidays, plus one optional holiday as well as some municipal holidays.
There are no specific maternity or paternity leave regulations included in Portuguese labour law. Instead, both parents are entitled to so-called initial parental leave which can be either 120 or 150 days – an extension of another 30 days is possible if both parents share the leave or in case of multiple births. Pregnant employees are allowed to take up to 30 days of leave before birth and must take at least 42 days of leave after birth.
20 to 25 days of this initial parental leave are exclusively reserved for the father. Five days must be taken immediately after birth and the rest within the following six weeks. The remaining parental leave can either be taken solely by either mother or father or be shared between both parents.
During initial parental leave, parents receive benefits from Portuguese social security equal to:
100% of their normal wages for parental leave extending to 120 days
80% of their normal wages for parental leave extending to 150 days
83% of their normal wages for shared parental leave extending to 180 days
The government is currently discussing changes to the parental leave regulations. Under the new rules, 28 days of paternity leave (to be taken within the first 42 days after the birth) would be mandatory.
After the initial parental leave is used up, parents are entitled to further parental leave until the child is six years old under one of the following schemes:
three months of parental leave taken in one block
reduction of daily working hours to part-time standards during twelve months
a combination of both which, in sum, cannot be more than three months of parental leave
While on extended parental leave, mothers and fathers receive statutory benefits from social security amounting to 25% of their usual wages.
In addition to the above mentioned leave entitlements, employees may take time off from work due to one of the following reasons:
necessity to care for sick or injured children and family members: 15 to 30 days of paid leave depending on the child’s age, severity of the injury etc.
marriage: 15 days of paid leave
death of a close family member or spouse: two to five consecutive days of paid leave
In addition to employment termination by default – i.e. in case of a fixed-term contract – resignation and mutual agreement, employment in Portugal may be terminated due to one of the following reasons (non-exhaustive list):
collective dismissal or other business-related reasons such as staff reduction or liquidation
breach of employment contract
employee’s underperformance – must be continuous
employee’s incapability to adapt to new role
summary dismissal due to gross misconduct
Notice periods depend on the employee’s length of service and are set as follows:
Length of Service
For fixed-term contracts, employers have to respect notice periods ranging from 15 to 30 days, depending on the length of the contract.
No notice must be given during an employee’s probation period. Employees who are dismissed for objective reasons are entitled to severance pay which can be either 12, 18 or 20 days’ or even one full month’s salary for each year of completed service plus a seniority bonus where applicable.
This country guide is for informational purposes only and should not be construed as legal advice. The content of this guide contains general information, and although we update this guide regularly, it may not reflect current legal developments. Lano Software GmbH disclaims any liability for any actions you take or refrain from taking based on the content contained in this country guide.
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