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Starting a Business In Portugal

Benefits and Compensation in Portugal

Any additional incentives or perks offered to the employees are referred to as employee benefits. Some commonly offered employee benefits are leaves, allowances, health insurance, etc. 

The primary objective of employee benefits is to cover the additional expenses incurred while delivering their responsibilities at work. Employee benefits are designed comprehensively to ensure the employees’ welfare. The quality of employee benefits ensures a lower turnover rate and attracts the best talent. 

While deciding the benefits and compensation policy in Portugal, you must work under the purview of all the prevailing labor laws. You must also consider the applicable collective bargaining agreements before you draft your benefits policy. Apart from mandatory benefits, companies in Portugal also offer several supplementary benefits to employees. However, these supplementary benefits depend on the company’s discretion. 

Compensation Laws in Portugal

The benefits and compensation policy in Portugal considers different labor laws and policies that the government decides, which include the following:

  • Portugal requires a written employment contract for both fixed-term and indefinite employment in the company.  
  • As per labor law, all companies must pay a salary equivalent to the minimum wage declared by the company. 
  • The Portuguese Constitution governs the fundamental rights of employees. It governs the vacation allowances and work-life balance-related aspects of the employees. 
  • The Commission of Equality will directly deal with any discrimination based on gender in Labor and Employment.
  • An employer can only change the terms and conditions of the employment contract after discussing it with the employees.
  • A company in Portugal cannot discriminate among employees based on age, gender, genetic heritage, religion, etc. 
  • Expats have the same rights as the nationals in Portugal when they are employed in a company situated in Portuguese.

How to Develop an Employee Benefits Program for Employees in Portugal?

To create a compensation and benefits policy in Portugal, you must follow a few simple steps. 

Step 1: Set a goal and finalize a budget

  • Before choosing from employee compensation and benefits in Portugal, you must decide on the budget.
  • Once you have a budget, you must define the objectives you want your benefits plan to meet. 
  • Your benefits and compensation policy in Portugal must adhere to all the local labor laws and policies laid down by the government. 

Step 2: Try to understand the industry standards and employee expectations

  • After deciding on the benefits plan’s objectives, conduct thorough research to understand the employee benefits in Portugal offered by other companies. 
  • Once you get an overview of the prevailing industry standards, you should understand the expectations of your employees from a benefits plan.
  • You can conduct an internal survey to collect data and understand employee expectations. 

Step 3: Make the plan flexible

  • All employees working in a company in Portugal have diverse needs. Hence, a compensation package in Portugal should be more adaptable to meet employee needs. You must determine the flexibility requirements and the employee’s gross and net salaries.
  • Also, as an employer, you must explain how to use these benefits to every employee.

Step 4: Share the first draft with all the stakeholders

  • Once you have the plan’s first draft ready, you must contact all the related stakeholders and ask them to give their feedback.
  • You must also explain how they can use these benefits during their employment. 
  • Once they go through the benefits plan, you should collect their feedback.
  • Try to analyze every feedback that you receive on the benefits plan. If the feedback adds value to the plan, you must try to incorporate them. 

Step 5: Analyze the plan

  • Before you launch the benefits plan, thoroughly review the entire draft and check the elements of workers’ compensation in Portugal.
  • A benefits plan must remain relevant since businesses operate in a dynamic environment.
  • To determine the benefits plan’s effectiveness, you must test it in various company settings.

Also, try to spot possible errors in the plan and make necessary corrections. You must also develop an algorithm to check how effectively the plan has been implemented. 

Types of Guaranteed Benefits in Portugal

All Portuguese employees enjoy a few mandatory benefits. Some of these mandatory benefits include the following:

Minimum wage

  • The minimum wage in Portugal stands at €760.00 per month. 

Working hours and overtime

  • All regular full-time employees must work 40 hours per week which translates to 8 hours a day per the Portugal Labor Laws. 
  • Employees who work more than 40 hours weekly will be entitled to overtime pay for their additional work. 
  • The weekly maximum hours for overtime is 2 hours per day with a 48-hour cap per week, and the annual maximums are 150 hours. 
  • The overtime pay for the first additional hour equals 125% of the regular salary. Post that, the overtime payment increases to 137.50%.
  • Employees working on a holiday are entitled to an overtime payment equivalent to 150% of their regular salary. 

Paid leaves

  • Once an employee completes a year with the company, they are entitled to 22 days of paid leave.
  • The unused leaves can be carried forward to the next year but must be used before 30th April of the next year. 
  • An employee is entitled to 20 days of paid leave during the first year of employment. Every month the employee gets credited with two leaves. 
  • After 60 days of employment, the employee is entitled to eight days of vacation. 

Public holidays

  • There are 13 public holidays in Portugal. 
  • Employees working on a public holiday are entitled to overtime pay. 

Sick leaves

  • Employees in Portugal can avail of sickness benefits if they produce a duly certified letter from a competent health service doctor. 
  • To avail of the sickness benefits, you must complete at least six months with the company.
  • When an illness lasts less than 30 days, the employee is entitled to 55% of the reference salary. 
  • If the employee is ill for about 31 to 90 days, the employee is entitled to 60% of the reference salary. 
  • If the illness lasts between 91 and 365 days, the employee is entitled to 70% of the reference salary. 
  • If the illness lasts over 365 days, the employee is entitled to 75% of the reference salary.

Maternity leaves

  • Pregnant employees are entitled to 100% of their regular salary for the first 120 days of their maternity leaves. 
  • To avail of maternity leaves, the employee must have completed at least 80 days with the company. 

Paternity leaves

  • In Portugal, fathers can take a leave of 20 days as paternity leave. 
  • The employees can take paternity leave within the first six weeks of the child’s birth.
  • Social Security will cover this leave at a rate equal to 100% of the employee’s average monthly pay for the previous six months. 

Parental leaves

  • According to Portuguese law, both parents may share parental leave, in which case the total parental leave time can go up to 180 days, with each parent receiving 83.00% of their regular salary as compensation. 
  • The mother is entitled to a minimum of six weeks of parental leave after giving birth and 30 days of leave before giving birth.


  • Portugal divides annual salaries into 14 installments rather than the usual 12. 
  • The two additional incomes are offered as a holiday bonus before the employee’s annual leave (usually June) and a Christmas bonus due by December 15th.

Employee Benefits for Expatriates

Expats employed in Portugal enjoy all the benefits given to Portuguese nationals. Expats can avail of the medical benefits for employees in Portugal, along with several other mandatory and supplementary benefits. They can get their fuel cost and travel expenses reimbursed. 

Expats also have access to accommodation benefits and food allowances. Expats also enjoy other benefits that were agreed upon by the employer when the employment contract was signed. You must include the list of benefits the employees will enjoy during their employment.

How are Employee Benefits Taxed in Portugal?

Portugal has a progressive tax system where the tax rate increases with the level of income. The tax rate ranges from 14.5% to 48%. However, non-residents pay taxes at a flat rate of 28%. The total income on which the tax is calculated includes the calculated value of the benefits provided by the company. 

The employees also contribute to social security accounts. However, the contribution amount is not deducted from the two annual bonuses given to employees. 

Restrictions for Portugal Benefits and Compensation

In Portugal, most benefits and bonuses are taxed. To determine the tax burden for the employee, you must know how much these benefits are worth. The employer is responsible for ensuring that all tax payments are made on time to the organizations in charge of employee social security and taxation and the appropriate government agencies.

Before creating pay and benefits in Portugal, ensure your firm has been properly incorporated and has the required business authorizations. The legal minimum wage is what employers are required to pay their employees. You must consider Portugal’s labor rules carefully while establishing a compensation package in Portugal. Also, the benefits plan must be tested before you pass the benefits to the employees. 

Supplemental Benefits for Employees in Portugal

The employees enjoy several supplemental compensation and benefits in Portugal. Some of the popular supplementary benefits include the following:

Bereavement leaves

Employees in Portugal are entitled to bereavement leaves of up to 5 days in case a death in the employees’ family. 

Other leaves

Employees are entitled to 15 days for family members over 65 and 30 days for those under 12 who require immediate and necessary care each year. Employees are also entitled to 15 days of paid leave if they are getting married.

Meal vouchers

Several companies in Portugal offer meal vouchers to their employees. The best part about these vouchers is that they do not attract any taxes for up to €4.77 daily if paid in cash and €7.63 if paid through lunch tickets.

Phone bills

Multiple companies in Portugal provide reimbursement for telephone bills. They may also offer smartphones to their employees for making business calls. 

How Multiplier Can Help with Benefits Management in Portugal

While starting a business, you must appoint qualified personnel who can grow the company and contribute to the organization. Employers must abide by local laws and ordinances when drafting employment agreements and providing employee benefits. You can carry out this strategy using a multi-national EOR platform like Multiplier.

With Multiplier, you have access to knowledgeable professionals who are conversant with a range of business-related difficulties. We help you adhere to Portugal’s labor regulations. With the assistance of our knowledgeable staff, you won’t need to establish a countrywide subsidiary to manage the workforce effectively. With our assistance, you can expand your customer base and cut labor costs.

Frequently Asked Questions

Several companies provide commissions on several goals and targets as cash bonuses to their employees.

The employees contribute 1% of their gross income towards the wage guarantee fund.

The financial year in Portugal runs from 1st January to 31st December.

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