Table of Contents

Portugal

Table of Contents

Currency

Euro (EUR)

Payroll Frequency

Monthly

Employer Taxes

26.5%

About Portugal

Located on the Iberian Peninsula of Europe, Portugal is a nation with a rich history of discovery and seafaring, under Prince Henry the Navigator, King John II, and Vasco da Gama encouraging and engaging in global travel to new lands, establishing an empire and monopolizing trade (such as spices).

Portugal has developed into an increased and diversified service-based economy since becoming a part of the European Union. Resulting from a strong rebound in Portugal’s private consumption and export, the country overcame the economic slump attributed to the 2008 global financial crisis. Portugal’s GDP increased to 2.5% in 2017; however, the unemployment rate has remained disappointingly high.

Portugal itself has an estimated population of only 10.8 million, mostly Roman Catholics, but has left an indelible mark on culture and architecture in a world that now has over 300 million Portuguese speakers. Portuguese cuisine is diverse and influence by its former empire, including dry cod, grilled sardines, and caldeirada, a potato-based stew made from different types of fish. Some of the best-known Portuguese wines are Vinho Verde, Port, Madeira, and Moscatel.

Employment Relationship

• Permanent Employment

In Portugal, indefinite-term contracts are the default form of employment contracts. Fixed-term agreements may only be concluded to satisfy the temporary needs of an employer for the period strictly necessary to meet those needs. Such temporary needs may include the replacement of absent employees, the performance of seasonal work or a short-term task, or the performance of additional work due to a sudden increase in business. Contracts that do not have any end term are considered indefinite term. Fixed-term contracts that continue after their end date or 3 renewals become open-ended.

• Fixed-Term or Specific-Purpose Contracts

Per the labor law of Portugal, fixed-term contracts may only be concluded to satisfy the temporary needs of an employer for the period strictly necessary to meet those needs. A fixed-term contract must be made in writing. Fixed-term contracts cannot be renewed more than 3 times. The maximum length (including renewals) of a fixed-term contract varies based on the status of the employee. An initial fixed-term contract between an employer and a person seeking their first job may not exceed 18 months. The maximum length is two years for fixed-term contracts concluded with long-term unemployed workers, or fixed-term contracts concluded when launching a new activity or starting a new company provided the total number of workers in such an enterprise does not exceed 700. In all other cases, the maximum length of a fixed-term contract is three years.

• Temporary Employment Contratcs

Portugal's Labor Code allows for temporary employment, as long as the temporary employment agency is properly licensed, and the employer provides acceptable justification for requiring a temporary employee. Temporary contracts are fixed-term employment contracts that terminate if certain objective criteria are met, such as the completion of an assignment or the return of an employee who was temporarily replaced. Temporary employment contracts must be concluded in writing and may not exceed 2 years. Temporary workers can be assigned to more than one user, even if they do not have an indefinite employment contract for temporary assignment, if the contrary is not established in the respective contract. The user must prepare the worker's work schedule and schedule the period of vacations that are taken at his/her service. Temporary employees are entitled to pay between assignments.

Probationary Period

In Portugal, the Labor Code sets maximum lengths for trial periods. A trial period may be excluded from the employment contract by the written agreement of both parties. The maximum trial period for the majority of employees is set at 90 days. It varies based on the criteria listed below: For employees holding positions of technical complexity or a high degree of responsibility, positions requiring special qualifications, or carrying out functions of trust, the probationary period is 180 days. The maximum trial period for a manager or senior manager is 240 days. For fixed-term employment contracts of six months or more, the maximum probation period is 30 days. For fixed-term contracts of less than six months length, the maximum trial period is 15 days. Employees are entitled to standard employee protections and rights during their trial period. If the trial period lasts more than 60 days, the termination of the contract by the employer requires 7 days' notice.  If the trial period lasts more than 120 days, the notice must be at least 15 days.

Working Hours

The Labor Code of Portugal stipulates that the regular working hours may not go over eight hours per day and 40 per week. The maximum average hours of work per week (including overtime) cannot exceed 48 hours, measured over a reference period of four months. Bill 790/XIV/2 guarantees right to professional disconnection. Bill 745/XIV/2 contains changes the legal and labor regime for teleworking, ensuring greater protection for workers. 

Holidays / PTO

• Statutory Holidays

New Year’s Day (January 1), Freedom Day (April 25), Labor Day (May 1), Portugal Day (June 10), Assumption of Mary (August 15), Republic Day (October 5), All Saints’ Day (November 1), Restoration of Independence (December 1), Immaculate Conception Day (December 8), Christmas Day (December 25), Good Friday (date may vary), Easter Sunday (date may vary), Corpus Christi (date may vary).

• Paid Annual Leave

Portugal's labor law provides employees the right to paid annual leave of 22 working days (20 in the first year of employment), up to 15 of which may be taken consecutively (although the employer may allow for more than 15 days be taken consecutively). An employee is eligible to take leave after 6 months of working with the same employer, and accrues 2 vacation days per month of work in the first year, up to 20 days. If the employee's contract is under 6 months, the employee is eligible for 2 vacation days per month worked and may use the days immediately after they accrue. The law prohibits compensation in lieu of vacation for the first 20 days of accumulated leave but allows it for the time over the "mandatory" 20 days. Leave must be taken in the calendar year in which they are due, and 50% of vacation due may carry over to the following year if such a policy is agreed to by the employee and the employer. 

• Sick Leave

Payments toward sick leave in Portugal come from the social security system, paid into by employees and employers. Employees receive a percentage of their regular wages while they are absent due to illness. The employee must have worked at least 20 days during the last 4 months before the month which preceded the month that the illness occurred to qualify for the benefit The exact amount varies based on the amount of time an employee is unable to work: 55% of regular wages for an incapacity lasting 30 days or less 60% of regular wages for incapacity lasting 30 to 90 days 70% of regular wages for an incapacity lasting 90 days to one year 75% of regular wages for an incapacity lasting over one year The daily amount of the sickness allowance in situations of incapacity for work resulting from tuberculosis is calculated by applying the percentages of 80% or 100%, depending on whether the beneficiary's household includes up to two or more dependent relatives.  Sickness allowance is increased by 5% for beneficiaries who earn less than EUR 500 per week.  

• Maternity Leave

The Labor Code of Portugal provides 120 days of paid maternity leave. Parental leave benefits are funded by the social security system.  Expectant mothers are entitled to up to 30 days of the initial leave before giving birth and six weeks of mandatory leave after childbirth. An employee who intends to use part of the leave before giving birth must inform their employer and submit a medical certificate stating the foreseeable date of delivery at least ten days before their leave. If medical urgency makes it impossible, the employee must attempt to provide the employer with a medical certificate at the earliest time possible.

• Paternity Leave

The Labor Code of Portugal grants fathers paid parental leave of 20 working days within six weeks of the birth of the child, five of which must be taken immediately after birth. In the case of multiple births, two days are added to the paternity leave for each child. The father is entitled to 5 additional days of paid leave if it is taken at the same time as the mother's initial parental leave. The employee must notify the employer of their need to take paternity leave at least five days in advance. Violation of the paternity leave provisions of the Labor Code constitutes a serious administrative offense. The father is also entitled to time off work to accompany their pregnant partner to three prenatal consultations.

Termination of Employment

• Notice Period

Portugal's Labor Code requires the employer to give advance notice to employees who are being dismissed. The duration of the advanced notice period varies based on the seniority of the employee: 15 days for the service of under one year 30 days if the worker has been employed between one and five years 60 days if the worker has been employed between five and ten years 75 days for service over ten years Employees on probation are also entitled to notice period for termination of their contract. If the trial period lasts more than 60 days, the termination of the contract by the employer requires 7 days' notice. If the trial period lasts more than 120 days, the notice must be at least 15 days.

• Severance Benefits

Per the Labor Code of Portugal, in November 2011, severance pay for dismissed employees was reduced from 30 to 20 days of compensation per year of service (the amount may not exceed one year’s worth of payment). Severance pay calculation for employees hired after November 2011 depends on the duration of their labor agreement. It is different for contracts with a term up to October 31, 2012, or after that date. Additional changes to employee severance were made in 2013. For employees who executed labor contracts after October 1, 2013, severance compensation is equivalent to 18 days of base salary per year for the first three years of the contract and 12 days of base salary per year for every subsequent year until termination.  In case of collective dismissals, severance pay is calculated as 12 days of base pay and seniority payments for each full year of seniority, limited to 240 times the guaranteed minimum monthly salary.