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Payroll and Benefits Guide - Portugal
Fun Facts
The Carnation Revolution in 1974 marked a peaceful transition from an authoritarian regime to democracy.
Portugal is famous for its delicious cuisine, including pastéis de nata (custard tarts).
Portugal has a strong tradition of craftsmanship, particularly in ceramic tiles (azulejos) and hand-painted ceramics.
Portuguese is the official language.
The Vasco da Gama Bridge in Lisbon is the longest bridge in Europe.
Contributions
Employee Payroll Tax
| Contribution Type | Rate |
| Social Security | 11.00% |
Employer Payroll Tax
| Contribution Type | Rate |
| Social Security | 23.75% |
| Labor Accident Insurance | 1.75% |
| WGF (wage guarantee fund) | 1.00% |
Payroll
Payroll Cycle
The typical payroll cycle follows a monthly pattern, with wages being paid prior to the final day of each month.
13th Salary
In Portugal, there is a requirement for mandatory 13th and 14th salary payments. These additional payments are typically made in June (for holidays) and December (for Christmas), or they can be incorporated into the 12 regular salary payments.
Work Hours and Week
The standard working hours consist of 40 hours per week, equivalent to 8 hours per day. However, the maximum weekly and daily working hours may vary based on the provisions outlined in the employment contract or collective bargaining agreements.
Overtime
The first 100 overtime hours are paid at a rate of:
- 125% salary for the first hour on weekdays.
- 137.5% salary for additional hours on weekdays.
- 150% salary on weekends public holidays.
Above 100 overtime hours are paid at a rate of:
- 150% salary for the first hour on weekdays.
- 175% salary for additional hours on weekdays.
- 200% salary on weekends and public holidays.
Overtime on Sunday requires weekend overtime pay + a compensatory rest day within the following 3 working days.
Leave
Paid Time Off
Paid leave in Portugal is set in the employment contract as a minimum of 22 working days paid holiday per year, following completion of 1-year service, in addition to public holidays.
Public Holidays
In addition to the 13 national holidays listed below, each one of the 308 municipalities (counties) has its own regional or local municipal public holiday. Workers are entitled to take off the local holiday that corresponds to their place of work; the holiday date should be verified through the local authority.
Public holidays that fall on the weekend are usually lost.
Sick Days
To be entitled to receive a sickness benefit, the employee must be duly certified by a competent health service doctor as temporarily unable to work and completed employment service of a minimum of six calendar months, consecutive or otherwise. The first 3 days are paid by the employer at regular salary. From day 4 onward payment falls to Social Security. The daily benefit is calculated by applying a percentage to the employee’s reference remuneration.
Maternity Leave
Eligible expectant mothers are entitled to 100.00% of their usual salary rate, paid for by Social Security for 120 days. For an employee to be eligible, they must have been employed for at least 80 days of the preceding 12 months before the expected due date.
Parental leave is granted for the birth of a child under Portuguese law. This may be shared between both parents (in which case the total parental leave period may be 180 days and paid at 83.00% of the usual salary rate of pay. The mother is entitled to 30 days of parental leave before delivery and a minimum of six weeks following the birth.
Paternity Leave
Compulsory leave for fathers is 28 days, and voluntary paternity leave is 7 days. Fathers must take paternity leave within six weeks of the child’s birth and use at least five days’ leave immediately after the birth. The leave can be taken as a single period or in a series of days.
This leave is paid by social security at 100.00% of the employee’s average salary in the last six months.
Parental Leave
After the required six weeks of maternity leave and 28 days of paternity leave, the couple can decide who takes the next 78 or 108 days. If the couple takes a total of 150 days, the leave is 80.00% paid, and if they choose 120 days, they will receive 100.00%.
Termination
Termination Process
The termination process is standard in Portugal, with notice periods required unless an employer can provide sufficient cause for dismissal without notice, usually due to misconduct or disobedience. The lack of notice of termination must be in writing and sent to the relevant service under the Ministry of Labour, except in discipline dismissal.
Notice Period
In general, notice periods in Portugal are stipulated within the employment contract/collective agreement and are linked to the employee’s length of service, as below:
- 7 days’ notice if employed less than 6 months service or during the probation period
- One month’s notice if employed between 6 and 48 months
- 2 months’ notice if employed for more than 2 years
For fixed (or unfixed) term (temporary) employment agreements:
- 15 days for contracts, which agreed (or expected) duration is less than 6 months
- 30 days for contracts, which agreed (or expected) duration is equal to (or longer than) 6 months
Severance Pay
Fair dismissal based on objective grounds (i.e., redundancy) or dismissal due to unsuitability for the job: 12-18 days’ salary per year of service, up to 12 months’ base salary. The severance is partially (50 percent) paid by a fund (FCT) administered by social security, to which the employer must make contributions. Higher severance payments may be agreed upon and are a typical way to avoid litigation.
Severance might also be required for dismissals that occur during the 91st to 180th day of the probation period.
Compensation for termination of fixed term contracts is 24 days of base salary per year of service
Probation Period
Probation Period
Portugal’s probation period for permanent employees is 90 days, 180 days for high technical/complexity roles, and 240 days for management, directorate, and equivalent responsibility roles.
For fixed-term contracts the probation period is set to 15 days when the contract is agreed for an expected or fixed duration shorter than 6 months and 30 days probation for contracts with a duration equal to or longer than 6 months.
Immigration
Any foreigners coming to work in Portugal for longer than six months need a residence certificate (Certificado de Registo). Most non-EU nationals will also need a Portuguese work permit before they can undertake employment in Portugal. In most cases, a Portuguese work permit is only granted when a job offer is confirmed, and once approved, they can continue the process of obtaining a Portuguese work visa or residence permit. After five years of residence in Portugal, you can claim Portuguese permanent residence, and after six years, Portuguese citizenship.
Portugal has quotas to limit the number of jobs that go to third-country nationals to improve employment opportunities for EU nationals. Most jobs need to be advertised to Portuguese and EU/EFTA citizens for 30 days before the Institute for Employment and Vocational Training in Portugal (IEFP) will classify them as jobs that non-EU employees can freely fill.
VAT
The standard rates of VAT in Portugal are 23.00% in Continental Portugal, in Azores, it is 18.00% and in Madeira, it is 22.00%.