Complete Guide to Hiring Employees in Portugal

Located strategically in Europe, Portugal is a premiere country for investors worldwide to start a business. As per the World Bank’s Ease of Doing Business Report 2020, the country ranks 39th out of 190 economies in starting a business. The country had an annual GDP of 253.66 billion USD in 2021, projected to grow in the next few years. 

Companies can benefit by starting a business in Portugal and taking advantage of its growing economy. In 2021, the employment rate in Portugal was recorded to be 99.76%, giving companies opportunities to hire highly skilled employees from this country. However, while hiring from Portugal, companies must comply with the local rules and regulations. 

This guide will let you know all about how to hire employees in Portugal, so keep reading!

Things To Know Before Hiring in Portugal

The hiring process in Portugal comes with its own set of rules and laws, as imposed by the authorities in the country. Employers must know these norms to execute recruitment and selection in Portugal smoothly. 

Contract

In Portugal, it is not mandatory to have a written work contract. However, there could be some exceptions for part-time or fixed-term contracts. Nevertheless, companies should provide the following details to employees in writing:

• Employee and employer’s name
• Workplace address
• Joining date
• Working hours
• Salary and included benefits
• Job title and responsibilities
• Number of holidays
• Notice period
• Any other relevant agreement

Minimum wage

The minimum wage in Portugal is EUR 760 per month (as of January 2023). However, in some sectors, the minimum wage may be higher based on collective agreements.

Probation period

The probation period’s duration depends on the job position. For employees in associate positions, probation is usually 90 days; for those in higher positions, the probation period could be between 180 to 240 days. Additionally, fixed-term contracts have two types of probation periods, which are:

• 15 days for a contract of fewer than six months
• 30 days for a contract of more than six months

Working hours

• The working duration in Portugal consists of 40 hours per week, with 8 hours of work every day for five days. 
• Each eight-hour workday should have an hour of a break after five hours of uninterrupted work. The break’s duration can be a maximum of two hours. 
• An employee should get at least one rest day every week. 
• Overtime: Work done over the standard working hours, i.e., 40 hours a week, is considered overtime and paid per the collective agreement. Overtime is only allowed under particular conditions (such as business emergencies) and should not exceed two hours daily. The overtime compensation is as follows: 

Sick pay

The Portuguese social security scheme compensates employees who miss work due to illness. The rates of compensation are given below:

It is also essential to note that no employee is entitled to sick pay after 1,095 days of sick leave. 

Bonus

Employees in Portugal are entitled to two bonus payments every year; one in June (holiday bonus) and another by December 15 (Christmas bonus).

Taxes

Both employees and employers must pay certain taxes in Portugal. Learning about these taxes is an essential part of hiring employees in Portugal. Hence, the tax structure is given below:

Social security

Both employers and employees are required to pay towards the Portuguese social security scheme at the following rates:

Leave entitlements

Employees in Portugal are entitled to 22 paid vacation days every day. Additionally, a certain amount of leaves are also offered to the employees, which are:

Maternity and paternity leave

Both parents can take 120 or 150 days of leave following the birth of their child. This leave can be extended for 30 days in case of multiple births or if both parents share the leave. Furthermore, pregnant women are allowed 30 days of leave before giving birth and mandatory 42 leave days after birth. 

Parental leave

Once the initial leave days are over, parents are entitled to parental leaves until the child is 6. This leave can be taken in one of the following ways:

1. Three months of parental leave at one stretch
2. Reduction in daily working hours for 12 months

A combination of both, which, when combined, should not exceed three months

Marriage leave

15 days of paid leave

Caring for a sick or injured child or family member

15 to 30 days of paid leave, depending upon the severity of the issue.

Death of a close one

1 to 5 days of paid leave

Public holidays

In addition to the leave entitlements mentioned above, employees are also granted leaves on public holidays. These public holidays are listed below:

Notice period

The notice period in Portugal depends on the length of service and is classified as follows: 

Severance pay

Employees dismissed for an objective reason are entitled to severance pay. The severance pay can be 12, 18, 20, or a whole month’s salary. Additionally, a seniority bonus can also be paid if applicable. 

The Cost of Hiring an Employee in Portugal

There are different costs associated with recruitment and selection in Portugal, which vary per the company’s policies. An overview of the costs is discussed below:

• Travel costs: International companies that want to set up shop in Portugal must bear the costs of sending a team to the country to conduct interviews. Furthermore, in some cases, you might also have to pay for the applicants’ travel costs. 
• Job advertisement costs: Even though free job boards exist, you might have to opt for paid job boards and newspaper advertisements to get the word across. Some of Portugal’s most reliable and popular job boards are Indeed, Adecco, and Expressoemprego. 
• HR costs: To hire staff in Portugal, it is best to have a separate HR staff who will dedicate their time and resources to conduct interviews, evaluate and shortlist candidates, and carry out the onboarding process. 
• Onboarding costs: Onboarding new employees requires a separate budget for training hours, employment contracts, salaries, and others. 

What Does a Company Need to Hire Employees in Portugal?

Companies must first go through several steps to legalize their presence and operations in the country to hire employees in Portugal. These steps are given below: 

• Get valid documents: Some essential documents required to operate a company in Portugal are a social security number, a tax number issued by the Portuguese tax officer, and a Portuguese residency card. A non-EU or non-EFTA individual requires a Portuguese visa and residency permit. 
• Select a name for your company: Once you have the documents, you should select a name for your company and register it through a Validation Certificate that the National Registry of Companies issues. 
• Choose a business model: Different business models have different legal structures in Portugal. Hence, choosing one sets a legal base for your company. Some business models are partnership, private, and public limited companies. 
• Final set-up: You can set up your organization online, which takes 1 to 2 days. This is when you receive social security and tax numbers. Subsequently, you can open a bank account for your company using an accountant. 

Various Options For Hiring Employees in Portugal

Overall, two ways are used in which employers can conduct recruitment and selection in Portugal. These two methods are given below:

• Through a subsidiary: To hire people in Portugal through a subsidiary, companies must first establish their presence in the country through an office and an account with a local bank, in addition to being compliant with many other laws and norms. Hence, this is considered a time-taking process that also requires a lot of resources. 
• Through an employer of record (EOR): An employer of record or EOR can be hired by companies to take care of all the steps of employing individuals in Portugal and following the local laws. 

The Steps to Hiring in Portugal

The steps followed for recruitment and selection in Portugal are similar to those in any other country. These steps are elaborated on below: 

• Step 1: Advertisements are posted by the concerned companies to invite interested candidates to send their curriculum vitae or CV for specific job positions. 
• Step 2: Subsequently, the CVs are evaluated by HR or any appointed team. The shortlisted candidates are then invited for their interviews. 
• Step 3: Interviews are carried out either in person or online. It is essential to remember that Portugal has strict laws against discrimination. Hence, the interviewer should not ask questions related to sensitive topics such as gender identity, family situation, sexual orientation, economic situation, and so on. 
• Step 4: Once the interviews are over, the selected candidates are informed about their onboarding process. On the contrary, a second round of interviews may be conducted based on written assessment tests. 
• Step 5: Finally, once the onboarding begins, companies should draft an employee code of conduct, arrange training courses, draft an employment contract, and offer letters with the necessary details. 

Let Multiplier be Your EOR Platform in Portugal

Hiring in a foreign country requires a strong grasp of the rules and laws governing the country. Hence, many enterprises opt for an EOR platform to simplify the hiring process in foreign nations.

Therefore, if you want to streamline hiring staff in Portugal, Multiplier will be your perfect partner. We offer a robust infrastructure for companies to seek and employ the best in Portugal without going through the tedious process of establishing a subsidiary. Furthermore, we help facilitate contracts, manage payrolls, get work permits, etc. 

So, if you want to hire employees in Portugal as smoothly as possible, without any hiccups or delays, reach out to Multiplier.