How to Hire Employees in Portugal

Struggling to navigate Portugal's complex hiring landscape? Uncertain about legal requirements and cultural nuances? Our comprehensive guide provides expert insights and strategies to streamline your hiring process, ensuring you attract top talent effortlessly.
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Portuguese, spoken by over 220 million native speakers globally, positions Portugal as a prime destination for businesses seeking a diverse talent pool. Lisbon, with 10.3 million native speakers, serves as the country's cultural and economic hub. Despite challenges like declining fertility rates and an aging population exacerbated by the 2008 financial crisis, Portugal has shown resilience. With a successful bailout program in 2011, the country has made strides in reducing budget deficits, leading to economic recovery. Rising GDP and GDP per capita, alongside stabilized inflation rates and increased exports, reflect Portugal's upward trajectory, making it an enticing prospect for global business expansion.

What you need to know before hiring employees in Portugal

Job market in Portugal

  • Portugal's job market showcases a vibrant trajectory supported by a strong service sector, which engages over 72% of the workforce, emphasizing the country's shift towards service-oriented industries like vehicle trade, healthcare, and education. This service dominance aligns with Portugal's progressive adaptation to modern economic demands, making it an attractive landscape for business initiatives.
  • Further bolstering this dynamic market are the robust activities in the manufacturing sector, which accounts for 25.1% of employment. This sector is experiencing a renaissance through significant innovation and a commitment to sustainability, particularly evident in the automotive and agri-food industries renowned for high-quality outputs. Portugal’s traditional industries, including textiles and construction, are also evolving, integrating cutting-edge technologies and sustainable practices to stay competitive globally.
  • The integration of remote working models, especially during the pandemic, has proven Portugal's capability to adapt swiftly to global shifts, enhancing its appeal in high-skilled sectors concentrated around major urban hubs like Lisbon. With a stable employment rate and a strategic focus on upskilling the workforce, Portugal is effectively positioning itself as a key player in the European job market, offering ample opportunities for business growth and development in an increasingly digital and interconnected economy. This setup provides a fertile ground for businesses aiming to tap into a skilled and adaptable workforce within a supportive regulatory framework.

Portugal Hiring Trends

  • Portugal's hiring trends are adapting to a shifting economic scenario, where growth has moderated from a peak of 6.7% in 2022 to a projected 1.8% by 2024
  • Despite economic headwinds and structural constraints, the employment sector continues to show strength with an unemployment rate reduced to 6% and an adult employment rate at a high of 77.5%, signaling robust engagement across various industries.
  • Youth unemployment remains a concern at 19%, highlighting an urgent need for targeted initiatives to integrate younger workers more effectively into the workforce. 
  • Employment sectors such as construction, industry, and services are experiencing notable shortages, indicating a tightening employment scene that demands innovative recruitment strategies to attract and retain skilled workers.
  • Regional disparities in economic performance underscore the need for region-specific employment strategies to drive growth and economic alignment with broader EU standards. With substantial EU cohesion funds at its disposal, Portugal is positioned to enhance regional competitiveness and innovation, making it a strategic location for sustained business development and a vibrant, skilled workforce, ready to meet the demands of a modern economy.

How to hire employees from Portugal

1. Set up an entity in the country

Setting up a legal entity in Portugal is strategic for businesses planning significant growth or aiming to establish a long-term presence. This structure facilitates direct management of personnel and long-term financial advantages.

The initial step involves choosing an appropriate business structure, such as a Sociedade Anónima (S.A.) or Sociedade por Quotas (LDA), and drafting bylaws that outline the entity's operational framework. Key tasks include applying for a corporate name, registering with the Commercial Registrar, and securing a Portuguese Taxpayer Number for non-resident shareholders.

However, navigating this pathway can be intricate and costly, necessitating a comprehensive understanding of Portuguese corporate and labor regulations. It emphasizes the need for detailed planning and the advisability of consulting with legal and financial experts to ensure compliance and optimize the setup process.

2. Hire independent contractors

Engaging talent as contractors in Portugal involves forming agreements with individuals or businesses tailored to specific tasks or projects. This approach offers notable flexibility, particularly suited for short-term assignments or unique project demands. However, accurately classifying these workers is critical to prevent legal complications and potential penalties. Moreover, it's important to recognize that contractors may not demonstrate the same level of commitment or loyalty as full-time, in-house employees, a factor that can impact the dynamics of project execution and team integration.

3. Partner with an EOR in the country

Utilizing an Employer of Record (EOR) service provides a streamlined entry into Portugal's market, avoiding the complexities of establishing a legal entity. This method significantly reduces liabilities and is cost-effective. By partnering with an EOR, companies ensure compliance with Portuguese labor laws, tax obligations, and regulations, thereby minimizing legal risks and ensuring smooth operational processes. This approach is particularly advantageous for businesses looking to quickly mobilize in Portugal without the administrative burdens typically associated with setting up a new entity.

Employment Laws You Must Know Before Hiring in Portugal

Compliance risk while hiring in Portugal

In Portugal, compliance risks in hiring include misclassification of employees as independent contractors, leading to potential legal penalties. Ensuring adherence to strict labor laws, tax regulations, and mandatory social security contributions is crucial. Missteps can result in hefty fines, emphasizing the need for thorough understanding and compliance.

Key Aspects of Portugal Labor Law:

Employment Contract

In Portugal, the employment contract should comprehensively outline the parties involved, addresses, the commencement date of employment, job locations, detailed job duties, the base salary along with any additional benefits, working hours, entitlement to annual leave, terms for contract termination, any probationary period, and the company's IT policies. While verbal agreements are legally binding, written contracts are advisable for clarity and to ensure compliance with statutory requirements. Most contracts are indefinite, though fixed-term contracts are permissible under specific conditions. All contracts must be drafted in Portuguese, and salary details should be clearly stated in Euros.

Working Hours

In Portugal, typical work hours amount to 40 per week or 8 per day. However, these limits can vary based on terms outlined in individual employment contracts or collective bargaining arrangements, allowing for adjustments to both daily and weekly schedules.

Overtime

Overtime Hours Weekdays Weekends & Public Holidays
Up to 100 Hours 125% for the 1st hour 150%
137.5% for additional hours
Beyond 100 Hours 150% for the 1st hour 200%
175% for additional hours

Additionally, Sunday overtime entails weekend overtime pay plus a compensatory rest day within the following 3 working days.

Minimum Wage

In Portugal, the National Minimum Wage stands at 820 EUR per month, calculated over 14 months. In the Azores autonomous region, the minimum wage for 2024 is 861 EUR.

Payroll laws in Portugal

In Portugal, the standard practice for payroll is typically on a monthly basis, with employees receiving their wages prior to the end of each month. This consistent schedule ensures that workers can expect their compensation in a timely manner before the close of the month.

Employment benefits in Portugal

Leave Policies in Portugal

1. Paid Time Off:

In Portugal, employees are entitled to a minimum of 22 working days of paid annual leave after completing one year of service. During the initial year of employment, they receive 20 days of leave, accruing at a rate of two days per month. Unused leave can be carried over to the following year but must be utilized by April 30th. However, within a single calendar year, the total leave taken cannot exceed 30 days.

2. Public Holidays:

Apart from the 13 national holidays, every one of Portugal's 308 municipalities has its unique regional or local public holiday. Employees have the right to observe the local holiday associated with their workplace, with the date confirmed by the local governing body. It's essential for workers to verify the holiday date through the appropriate local authority to ensure compliance with regional or municipal regulations.

Additionally, employees must provide a Certificate of Temporary Incapacity for Work (CIT) from a doctor with retroactivity of up to 30 days, or they can self-declare incapacity through a digital service from the National or Regional Health Service with retroactivity of up to 5 days.

3. Sick Days

Illness Duration Daily Benefit Percentage Maximum Benefit Period Qualification Requirement
Up to 30 days 55% Up to 1,095 days Six calendar months of service
31 - 90 days 60% Up to 1,095 days Six calendar months of service
91 - 365 days 70% Up to 1,095 days Six calendar months of service

4. Maternity Leave

Expectant mothers in Portugal receive 100% of their regular salary rate, exempt from Social Security and tax deductions, paid by Social Security for 120 days. To qualify, employees must have worked for at least 80 days in the 12 months before the expected due date. Parental leave, applicable for child births, can be shared between parents for up to 180 days, paid at 83.00% of the usual salary rate. Maternal leave includes 30 days before delivery and a minimum of six weeks post-birth.

5. Paternity Leave

Fathers in Portugal can take paternity leave for up to 28 working days, with a requirement of at least 5 consecutive days within 42 days of the child's birth. Social Security provides payment at 100% of the employee's average salary over the last six months, excluding Social Security and tax contributions.

6. Public Health Insurance 

Portugal's public insurance system, managed by the Social Security Institute, offers healthcare, unemployment, retirement, and family benefits. It provides universal access to healthcare services and financial assistance during unemployment. Retirement pensions are based on contributions, ensuring financial security for retirees. Family benefits include maternity and paternity leave, as well as allowances for children. Contributions from employees, employers, and the government sustain the system, ensuring social and economic stability for citizens across different life stages.

Filing tax in Portugal

Income Tax:

In Portugal, income tax is structured progressively based on annual earnings. Rates range from 13.25% for incomes up to €7,703 to 48.00% for earnings exceeding €81,199 annually. An additional solidarity surcharge applies to incomes surpassing certain thresholds, with rates of 2.50% for earnings above €80,000 and 5.00% for incomes exceeding €250,000 annually. These taxes contribute to funding essential public services, social welfare, and government initiatives, ensuring a fair distribution of resources and supporting societal well-being. For a detailed understanding of individual tax obligations, consulting a specialized guide on Portuguese taxation is recommended.

Other Tax and Social Security Contributions:

In Portugal, employers and employees contribute to payroll taxes, financing crucial social security and benefit schemes. Employer payments include Social Security at 23.75%, Labor Accident Insurance at 1.75%, and the Wage Guarantee Fund at 1.00%. Employees contribute 11.00% to Social Security. These contributions support various programs such as retirement pensions, disability, accident insurance, and wage guarantees. Together, they uphold a comprehensive safety net covering pensions, healthcare, and unemployment benefits, ensuring societal well-being. For a detailed analysis of these contributions, referring to a specific guide on Portuguese employment expenses is advisable.

Business culture in Portugal

  •  Business in Portugal emphasizes personal connections and trust-building, often conducting business based on established relationships rather than solely on transactions.
  •  Initial business interactions may involve formalities such as titles and greetings, reflecting respect for hierarchy and professionalism.
  • While punctuality is valued, meetings may start a bit later than scheduled, and flexibility is appreciated.
  •  Portuguese communication tends to be indirect and nuanced, with importance placed on diplomacy and avoiding confrontation.
  • Work-life balance is valued, with a focus on enjoying leisure time and maintaining personal relationships.
  •  Businesses often have hierarchical structures, with decisions made by senior management, though input from all levels may be encouraged.
  • Building rapport often extends beyond the workplace, with social events like lunches or dinners playing a role in relationship-building and networking.

Top sectors to hire from in Portugal 

1. Engineering  

This sector shows significant activity, with 7,448 job openings, accounting for 9.9% of the total jobs. It has 2,430 companies involved, representing 14.0% of all firms, indicating a strong demand for engineering skills in the market.

2. Hospitality and Events

The sector is nearly as vibrant as engineering, with 7,333 job openings, which make up 9.7% of the total. It includes 2,618 companies, making up 15.1% of the total, showcasing its critical role in Portugal's economy, likely driven by its thriving tourism industry.

3. IT and Telecommunications

This sector remains a crucial part of the technological growth in Portugal, offering 6,581 jobs and comprising 8.7% of the total job market. It has 1,563 companies (9.0%), reflecting ongoing investments in tech infrastructure and digital services.

Top cities to hire from Portugal

1. Lisbon

Portugal's capital city, Lisbon, offers a diverse talent pool across various industries, including technology, finance, tourism, and creative sectors.

2. Porto

Known for its vibrant culture and historic charm, Porto boasts a growing tech scene and is home to many skilled professionals in engineering, design, and software development.

3. Braga

Braga, with its renowned university and research centers, is a hub for innovation and technology, making it an excellent location to find talent in IT, engineering, and academia.

4. Aveiro

Located near Portugal's "Silicon Valley," Aveiro has a strong presence in the tech industry, particularly in software development, robotics, and renewable energy.

5. Coimbra

Home to one of Europe's oldest universities, Coimbra attracts talent in research, academia, and technology, offering a rich pool of skilled professionals.

Hire in Portugal compliantly with Gloroots

As an Employer of Record (EOR) in Portugal, Gloroots provides an efficient solution to common hiring challenges. Our EOR platform expedites the onboarding process for candidates, ensuring quick operational setup while complying with local and international regulations. Tailored for businesses of every scale, it streamlines payroll processing, benefits management, and tax compliance, eliminating the necessity for a local establishment. This empowers companies to concentrate on building their workforce in Portugal seamlessly. For further insights on how Gloroots can support your hiring endeavors in Portugal, reach out to us today.

Frequently Asked Questions 

What are the main benefits of using an Employer of Record (EOR) in Portugal?

Employers benefit from streamlined onboarding, compliance with local regulations, simplified payroll management, and access to a broader talent pool without the need for establishing a local entity.

How does the EOR process work in Portugal?

The EOR acts as the legal employer, handling payroll, benefits, and tax obligations on behalf of the company. This allows businesses to hire and manage employees in Portugal without establishing a legal presence.

Is using an EOR suitable for businesses of all sizes?

Yes, the EOR solution is designed to accommodate companies of all sizes, from startups to multinational corporations, seeking to expand their workforce in Portugal while minimizing administrative burden and compliance risks.

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