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Portugal – Employer of Record

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Country Introduction – Portugal

Capital – Lisbon
Currency – Euro
GDP – 253.7 billion USD (2021)
People/Nationality- Portuguese
Language – Portuguese
Major Religion – Roman Catholic
Population – 10,074,432 (as of January 1, 2023)

Portugal is firmly positioned as one of the most appealing European destinations for global investors. There are individuals who view the Pyrenees region as either a tranquil getaway location or a chance to make a real estate investment. A multitude of individuals aspire to establish their own enterprise in Portugal.

It asserted ownership over various coastal regions in Africa, the Middle East, South Asia, and Pacific Asia. The newfound prosperity of today’s territories was made possible by the trade routes that underpinned these empires.

Portugal has made significant progress in its recovery from the pandemic by bolstering its economic growth and enhancing its fiscal and financial well-being. Through persistent policy actions and resolute execution of the comprehensive reform program financed by the EU, an exclusive chance arises to shift towards a greener, more competitive economy that can optimize the benefits of digital advancements.

Portugal was the pioneer of maritime power and the homeland of several of the initial explorers in the world. Portugal led the way in European exploration during the 15th and 16th centuries. Ferdinand Magellan achieved the remarkable feat of being the inaugural individual to sail around the entire world during the Age of Exploration.

Contract of Employment

Usually, written employment contracts are not mandatory in Portugal, although it is customary to document certain details after the employee has started working.

Even though Portuguese employment law doesn’t mandate a particular language for employment contracts, it’s highly recommended to have them available in Portuguese since various Portuguese institutions and official bodies exclusively accept documents in that language.

Probation Period

The length of the probation period varies based on the type of agreement. The standard duration for probationary periods usually lasts for 90 days, but for roles that are highly technical or entail significant responsibilities, this length may be extended to 180 days. The time frame for probationary period can be stretched up to 240 days for higher-level executives and managers.


The process of ending employment by mutual agreement between an employer and employee is straightforward and can be accomplished with a written statement. Unless the termination agreement is witnessed by a public notary, employees are entitled to retract their decision within a seven-day period following the effective date.

Working Hours

Usually from  9 a.m. to 6 p.m. on weekdays (Monday-Friday), with a one-hour lunch break, or 9 a.m. to 7 p.m. with a two-hour lunch break.


An employee who works more than the allotted daily or weekly hours must receive additional compensation for overtime. This extra compensation should include an hourly rate plus an additional 25% for the first hour worked beyond the maximum threshold. For every hour beyond the regular stipulated time, there will be an additional charge of 37. 5% on top of the hourly rate. For any additional hours worked on rest days, an additional 50% will be added to the hourly rate.

13th Month Pay

13th and 14th salary payments are mandatory in Portugal, which are given in June (to cover vacation expenses) and December (as a Christmas bonus), respectively. Alternatively, these payments may be included in the 12 standard monthly salaries.

Annual Leave

Workers have the right to receive remuneration for a maximum of 22 days of annual vacation time. For temporary contracts lasting up to 6 months, workers receive 2 days off per month worked. If the contract lasts up to 12 months or ends in the year following their recruitment, employees can take leave time in proportion to the length of their contract.

It is not possible for an employee to have a vacation period exceeding 30 business days within a single calendar year.

Sick leave

Portugal does not have a prescribed minimum requirement for sick pay for its workers. In the event of being sick and absent for four consecutive days, employees who can provide a medical certificate are eligible to receive government-funded sick pay amounting to 55%-75% of their salary, which they can receive for a maximum of 1095 days.

Maternity and Paternity Leave

In Portugal, all employed individuals are entitled to take parental leave. Individuals who are self-employed can also qualify. Upon beginning her leave, a female individual is obligated to utilize 90 days of her post-delivery leave. The residual leave may be taken either before or after childbirth, whereby the cumulative leave would amount to 120 days, compensated at 100%. It is imperative for mothers to take a minimum of six weeks of leave following childbirth.

Fathers are eligible for a paid leave of 20 days following childbirth that is mandatory. It is permissible to use the first five days immediately following delivery while the remaining fifteen days must be utilized within six weeks after the birth. The former can be taken in a non-consecutive manner.


The standard Portuguese VAT rate is currently 23%.

Income Tax

The income tax enforced by the IRS pertains to the earnings of individuals, whether they reside in Portugal or not, who generate income within the country’s borders. Portugal has set its individual rates for 2023, which will range between 14. 5 percent and 48 percent.

Portuguese income tax bands Portuguese tax rate
up to €7,116 14.50%
€7,117–€10,736 23%
€10,737-€15,216 26.50%
€15,217-€19,696 28.50%
€19,676-€25,076 35%
€25,076-€36,757 37%
€36,758-€48,033 43.50%
€48,034-€75,009 45%
€75,010+ 48%

Employer/ Employee Contributions

The responsibility for social security contributions are divided equally between the employer and the employee. The employee and employer are required to pay respective rates of 11% and 23. 75% of the employee’s gross earnings as contributions.

Public Holidays

January 1 – New Year’s Day
April – Good Friday
April – Easter
April 25 – Freedom Day
May 1 – Labour Day
June 3 – Corpus Christi (Second Thursday after Whitsun)
June 10 – Portugal Day (National Day)
August 15 – Assumption Day
October 5 – Republic Day
November 1 – All Saints’ Day
December 1 – Restoration of Independence
December 8 – Immaculate Conception Day
December 25 – Christmas Day

There are also 5 regional holidays observed in certain cities and regions in Portugal:

May 24 – Day of the Azores (celebrated in Azores)
June 13 – Feast of St. Anthony (Lisbon)
June 24 – Feast of St. John the Baptist (Porto)
July 1 – Madeira Day (Madeira)
December 26 – Christmas Holiday

Severance Pay

It is essential to accurately determine the commencement date of employment in Portugal in order to calculate the appropriate amount of severance pay given recent policy modifications. The following chart offers a straightforward and understandable framework to abide by:

(This information only applies to indefinite-term contracts entered into before November 1, 2011.)

Before October 31, 2012 1 month’s wages for every year of service
November 2012 – September 30, 2013 20 days of wages for every year of service
From October 2013 18 days’ wages for the first 3 years of service and then 12 days for the remaining time.

The maximum limit for severance pay in Portugal corresponds to 240 times the monthly wage designated as the country’s minimum wage.

Work and Residence Permits (Expatriates)

Portugal provides four options of residency permits, namely, for employment, education, rejoining family members, and medical attention/pursuing military duties. Foreigners from other countries can legally reside in Portugal for a duration of two years through these visas. They have the option of being extended for a period of three years. After dwelling in Portugal for a period of five years,  visa holders have the option to apply for permanent residency.

These are the most common types of (work) residence permits:

– Residence permit for employed workers
– Residence permit for highly qualified activity
– Residence permit for highly qualified activity
– Residence permit for highly qualified activity in certified companies – Tech Visa
– Residence permit for highly qualified activity – EU Blue Card

The issuance of residence permits is handled by the SEF (Serviço de Estrangeiros e Fronteiras), and the granting of appointments may vary depending on the specific permit received by the applicant alongside their visa. In case otherwise, individuals must directly arrange appointments with the SEF.

Employees can obtain residency permits allowing them to legally reside and work in Portugal for a duration of one to two years. They are eligible to extend the permit provided they possess current employment or a legitimate job offer from an employer.

Once they have completed a five-year period, they can submit an application for permanent residency.

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