G-P provides employer of record services for customers that want to hire employees and run payroll without first establishing a branch office or subsidiary in Portugal. Your candidate is hired via G-P’ Portugal Professional Employer Organization in accordance with local labor laws and can be onboarded in days instead of the months it typically takes. The individual is assigned to work on your team, working on your company’s behalf exactly as if he or she were your employee to fulfill your in-country requirements.
Our comprehensive solution and Global PEO service enable customers to run payroll in Portugal while HR services, tax, and compliance management matters are lifted from their shoulders onto ours. As a Global PEO expert, we manage employment contract best practices, statutory and market norm benefits, and employee expenses, as well as severance and termination if required. We also keep you apprised of changes to local employment laws in Portugal.
Your new employee is productive sooner, has a better hiring experience and is 100% dedicated to your team. You’ll have peace of mind knowing you have a team of dedicated employment experts assisting with every hire. G-P allows you to harness the talent of the brightest people in more than 185 countries around the world, quickly and painlessly.
Hiring in Portugal
When negotiating terms of an employment contract and offer letter with an employee in Portugal, it may be useful to keep the following standard benefits in mind:
Employment Contracts in Portugal
In Portugal, the labor code protects the employees against discrimination and unjustified terminations trying to establish a fair trade with strict rules on the termination’s actions.
Best practice is to put a strong, written employment contract in place in Portugal which spells out the terms of the employee’s compensation, benefits, and termination requirements. An offer letter and employment contract in Portugal must always state the annual salary and any compensation amounts in Euros rather than foreign currency.
All the dependent employees receive the annual salary divided into 14 installments, normally paid additionally in June and November equal to a base salary. This is known as the 13th and 14th installment/salary or Holidays and Christmas allowance.
Working Hours in Portugal
The full-time contract is 40 work hours per week, up to 8 hours per day, in a maximum of 6 working days per week. Anything beyond 8 hours a day or above the hours agreed per day in the contract is considered overtime. Typically the workday starts at 9 am, the lunch break is from 1 pm to 2 pm (maximum of 2 hours by agreement in the contract), and ends at 6 pm, normally from Monday to Friday.
Holidays in Portugal
There are 15 public holidays in Portugal including the following:
- New Year’s Day
- Holy Friday
- Freedom Day
- Labor Day
- Body of God
- Portugal Day
- Lisbon Municipal Holiday (local public holiday, that can be replaced by agreement, with another local public holiday)
- Assumption of Our Lady
- Republic Implantation
- All Saints’ Day
- Restoration of Independence
- Immaculate Conception
Employers must give their workers that day as paid leave, but if not possible and the employee is required to work on this day it can be replaced by days in lieu, by agreement (email is ok) between the parts (the day to take the day in lieu must be agreed on at the moment of the requested to work), or it can be paid as it was a worked day in a rest day (normal working hour + 50%).
Vacation Days in Portugal
The statutory minimum is 22 workdays (a maximum of 20 days in the first year of employment with the company acquiring 2 days per complete month).
Holidays booking is agreed upon between the company and the employee until the 15th of April of each year. At least 10 days of annual leave must be taken in a row and all the holidays should be taken during the year accrued. A maximum of 12 days of holidays can be carried over to the next year and can only be taken until.
Portugal has provisions specifically forbidding employers from offering employees additional pay for forfeiting paid-leave days.
Portugal Sick Leave
Portuguese social security pays after the 3rd absent day, employees a sick leave benefit for employees who are absent from work as a result of illness or injury. Employees can receive sick pay for up to 1,095 days. Pay is generally 55% to 75% of the employee’s salary.
To be entitled to the support a warranty period of a 6-month deduction in Portugal for social security, must have been paid by the employee, and this has to be registered by the National Health System.
Maternity/Paternity Leave in Portugal
The initial parental leave is a right of the working mother and father, lasting 120 or 150 consecutive days, by choice, and can be shared after childbirth. Leave between 120 and 150 days can also be taken simultaneously by both parents.
The initial parental leave (120 or 150 days) is increased by 30 days if each parent enjoys, exclusively, a period of 30 consecutive days, or two periods of 15 consecutive days.
Mother’s exclusive parental leave:
- The mother’s exclusive initial parental allowance is cash support given to the mother for a period optional up to 30 days before delivery and mandatory six weeks (42 days) after delivery. Note: Both the optional 30 days and the mandatory six weeks are included in the period corresponding to the initial parental subsidy of 120 or 150 days, depending on the option.
Father’s exclusive parental leave:
- Mandatory twenty-day leave (20). The father is entitled to a mandatory twenty working days of leave after the birth of the child. Your first five days are followed and taken immediately after birth and the other fifteen days must be taken in the six weeks (42 days)* after birth, may or may not be followed
- Optional five-day leave (5). The father, if he so wishes, is entitled to an additional five working days, consecutive or not, and he must enjoy them in concurrently with the mother’s initial parental leave.
During this leave, the “salary” is paid by Social Security called parental allowance.
If the mother takes 120 days the leave is paid 100% or alternatively, can choose to take 150 days of leave at 80% of her salary. If shared 120 days by the mother + 30 days by the father (total of 150 days) it’s paid 100%.
Fathers in Portugal are entitled to 10 days of paid paternity leave to be taken within 30 days of the birth of the child. 5 of these days must be taken consecutively.
Health Insurance in Portugal
Basic insurance is provided through the national system.
Portugal Supplementary Benefits
Supplementary health insurance may be provided to employees as a benefit. Most senior level executives request supplementary health and life insurance but smaller companies may prefer to provide an allowance in lieu of arranging insurance.
Many employers in Portugal offer meal and car allowances.
In Portugal by law is not mandatory to establish bonuses independently. However, depending on the area of working activity it is normally established a certain % of performance bonuses linked to specific achievements.
Termination/Severance in Portugal
The probation period in an employment contract in Portugal is typically 90 days and is extended to 180 days for employees who hold positions of a highly technical nature or involving a high level of responsibility. For senior executives and managers, the probationary period may be extended to 240 days. Fixed-term contracts under 6 months may have a probationary period of 15 days with the option of increasing to 30 days if the engagement is extended. Although probationary periods are considered statutory in Portugal, they may be excluded by written agreement by both parties or reduced by collective bargaining agreements.
Termination notice by the employee is dependent upon the number of years of service.
- 15 days is required for employees with less than 1 years’ service
- 30 days for those between 1 and 5 years’ service
- 60 days for those between 5 and 10 years’ service
- 75 days for employees with over 10 years’ service
Termination of an employment contract in Portugal by the employer entitles the employees to severance pay where there has been termination for objective reasons. Generally, employees are entitled to compensation for termination, equivalent to 20 days’ base remuneration for each complete year of service, subject to certain caps.
For fixed-term contracts, communication on the non-renewal is around 20 days before the expected renewal date. It is not possible to terminate the contract before.
Paying Taxes in Portugal
Employees are entitled to social security coverage in Portugal. Contributions are made by both employer and employee. Employees pay 11% percent of their salary and their employer matches it with approximately 23.75%.
Establishing a branch office or subsidiary in Portugal to engage a small team is time-consuming, expensive and complex. Portuguese labor law has strong worker protections, requiring great attention to detail and an understanding of local best practices. G-P makes it painless and easy to expand into Portugal. We can help you hire your candidate of choice, handle HR matters and payroll, and ensure that you’re in compliance with local laws, without the burden of setting up a foreign branch office or subsidiary. Our Portugal PEO and Global Employer of Record solution provides you peace of mind so that you can focus on running your company.
If you would like to discuss how G-P can provide a seamless employee leasing or PEO solution for hiring employees in Portugal, please contact us.