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Mercans offers complete payroll, PEO and HR services in Portugal

A safe country, Portugal is strengthened by great logistic infrastructures, advanced communication systems and a business friendly environment. From renewable energy to communication technologies, Portugal is leading in a range of sectors. It ranks #12 on the European Innovation Scoreboard EU-28 | 2020

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Doing Business in Portugal

Ranked 25 of 161 of Forbes’ Best Countries for Business 2019 and the second most open country on the OECD FDI Restrictiveness Indicator, Portugal boast #7 on the Proficiency Index 2020 (high proficiency in English). As a general rule, there are no restrictions with respect to foreign investment and Portuguese law follows a principal of non-discrimination based on the investor’s nationality.

Entity Registration and Incorporation Requirements

Setting up a new business or expanding an existing one in Portugal is straightforward. Choose how your company operates from a range of entity types which suit your individual circumstance.


Banking Hours: Monday - Friday from 8:30 am - 3:00 pm

Working Week

The standard working week is from Monday to Friday from 9:00 am - 7:00 pm

Labor Law

The primary legislation is the Labour Code but new laws came into effect on 1 January 2022 regarding the teleworking arrangement and the right for the employee to disconnect. The employer is obligated to respect the privacy, work hours and rest time of the employee and their family as well as provide adequate physical and psychological working conditions.

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Main Industries

Textiles, clothing, footwear, wood and cork, paper, chemicals, auto-parts manufacturing, base metals, dairy products, wine and other foods, porcelain and ceramics, glassware, technology, telecommunications; ship construction and refurbishment; tourism, building materials

GDP Growth


Dates & Numbers


Official State Name

Portuguese Republic


10.31 million



Major Languages



Euro €

Internet Domain


International Dialing Code


Lisbon, PT
1:15 am, July 13, 2024
temperature icon 17°C
clear sky
Humidity 82 %
Wind Gust: 0 mph


Remuneration includes base salary, any regular or periodic payments (in cash or kind) whether directly or indirectly. This may be established in a fixed or variable amount or a mix. Companies which operate a multi-country payroll should take note that employees are entitled to a Christmas bonus equal to one month’s salary which must be paid until 15 December each year.

It is acceptable to provide employees with online payslips


Payroll report must be kept for 5 years


25 days per year

Annual Leave

Employees are entitled to 370 days of paid sick leave with at least 6 months service. First 3 days are paid at 89% of the salary rate

Sick Leave

6 weeks of paid maternity leave and 15 days of paid paternity leave

Maternity & Paternity Leave

7 days’ notice if employed for less than 6 months service

Employee Termination

There are compulsory 13th and 14th month salary payments which are paid out in June and December

13th month salary

665 EUR per month

Minimum Wage

Overtime payments are calculated as 125% of the usual salary rate for the first hour of overtime, increasing to 137.50% per hour for subsequent hours worked


18 days of the usual salary rate for the first 3 years of service and 12 days’ salary for each subsequent year of service

Severance Pay


Tax and Social Security

A person is deemed to be resident in Portugal when they spend more than 183 days, consecutive or not, in Portugal, over any 12 month period starting or ending the fiscal year concerned. Social security contributions are shared between the employer and employee.


Corporate tax (CIT)is a tax levied on profits derived by both resident (such as corporate bodies) and non-resident entities (such as those which companies have a local branch or building site or act through dependent agents). Personal income tax (PIT) applies to all earned income of employed individuals, pensions and director fees.


Corporate Income Tax


Personal Income Tax


Sales Tax



Social Security

Contributions are due on the employee’s gross remuneration and cover family, pension and unemployment benefits. Foreign residents may be exempt from social security if they contribute to a compulsory social security system in an EU country or a country that has a bilateral social security agreement with Portugal. Additionally, employers must buy an insurance premium to cover occupational accidents.


Social Security Rate


Social Security Rate for Employers


Social Security Rate for Employees


Employment Law

A foreigner who is authorized to pursue an occupation in Portugal is entitled to the same rights and subject to the same duties as an employee with Portuguese citizenship. All such employment contracts must be in writing.

Employment Agreement

Where an employment contract is for a fixed term, unfixed-term, intermittent, part-time, a telecommuting contract or a temporary-work contract (fixed or unfixed term), the contract must be agreed in writing. This is not required for employment contracts of indefinite duration or where the duration is very short.

Working condition

Labor laws set the maximum limits of working hours but also set several mechanisms to introduce flexibility in how an employee organizes their work time. While the law establishes a maximum of 8 daily working hours, the Collective Bargaining Agreement may fix fewer working hours per week or day.


The right to vacation cannot be waived. Although the annual vacation period is for 22 business days, collective bargaining agreements may extend the duration of this period. For employment contracts that last less than six months, the employee is entitled to two business days of vacation per month of the contract duration.

Employment termination

Termination of employment can be done through expiration, revocation, dismissal for cause, collective dismissal, dismissal due to job elimination, dismissal for inability to adapt, unilateral termination of contract by the employee without just cause and unilateral termination of contract by employer with just cause. An employer and employee can also agree to terminate an employment contract.


7 days

Minimum notice period for terminating an employee



Total number of public holidays



Working hours per week


5 days

Total number of days for Compassionate & Bereavement Leave



As a general rule, there are two types of visas: temporary stays and residence visas. To be granted a residence visa to work as an employee or to be self-employed, a citizen from a third-party state is also required to have a ticket that ensures their return.


Residency permits

There are two types of residence permit: temporary residence and permanent residence. A foreigner authorized to reside in Portugal is issued a residence permit. The permit, which has conditions attached, may be renewed for successive periods of two years.

Work Permit validity

One year

Required Documents

A valid passport

Passport-sized photos that adhere to the Schengen visa picture guidelines

Proof of financial sustainability

Criminal records (where applicable) from the individual’s country of residence. If the individual has lived in another country for over a year, criminal records from that country must be obtained as well

A document giving permission to the The Portuguese Immigration and Borders Service (SEF) to check the individual’s Portuguese criminal records

Document of health insurance

Document of accommodation in Portugal

Proof of the individual’s employment contract

If already in Portugal: Proof of legal entry into the Portuguese territory (such as a visa)

If applying from a country other than that of your origin: Proof of legal stay (such as a residence permit or a visa).

Compliant, reliable, error-free and touchless payroll in Portugal

Build the best team and hire top talent compliantly in Portugal. Get in touch with Portugal payroll outsourcing & PEO specialists for a free consultation!

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This document was prepared for informational purposes only. As local laws & regulations keeps on changing. Please consult your tax & legal advisors as well.
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