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Global Payroll Team
Written by Global Payroll Team
Last updated May 7, 2026
Expert Reviewed
Payroll in Portugal
Tax in Portugal
Immigration in Portugal

Portugal map

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Employer of Record/PEO and Payroll Services in Portugal

A safe and well-connected country, Portugal benefits from strong logistics infrastructure, advanced communications systems, and a business-friendly environment. Key sectors include technology, manufacturing, renewable energy, tourism, and shared services, making Portugal an attractive location for international expansion.

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Doing Business in Portugal

Portugal offers access to the EU market, a skilled workforce, and a generally open investment environment. As a general rule, there are no broad restrictions on foreign investment, and Portuguese law follows a principle 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

Banking hours vary by institution and branch.

Working Week

The standard full-time working week is 40 hours, generally 8 hours per day from Monday to Friday.

Labor Law

The primary legislation is the Portuguese Labour Code. Recent reforms include rules on more transparent employment terms, platform work, and strengthened teleworking and work-life balance protections.

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

2.10%

Dates & Numbers

dd/mm/yyyy

Official State Name

Portuguese Republic

Population

10.43 million

Capital

Lisbon

Major Languages

Portuguese

Currency

Euro €

Internet Domain

.pt

International Dialing Code

+351

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Portugal
Lisbon, PT
6:34 am, June 3, 2026
16°C
clear sky
85 %
Wind Gust: 22 mph
Clouds: 3%
Sunrise: 6:13 am
Sunset: 8:56 pm

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Payroll

Remuneration includes base salary and any regular or periodic payments made in cash or in kind, whether directly or indirectly. In Portugal, employees are generally entitled to holiday allowance and Christmas allowance, commonly referred to as the 13th and 14th month payments. The Christmas allowance is generally payable by 15 December each year.

It is acceptable to provide employees with electronic payslips, provided legal requirements are met

Payslip

Payroll records should be retained in line with applicable labor, tax and social security requirements

Reports

22 business days per year

Annual Leave

Sickness benefit is generally paid by Social Security and may be granted for up to 1,095 days, subject to eligibility and medical certification

Sick Leave

Initial parental leave is generally 120 or 150 consecutive days, with 42 days reserved for the mother after birth and 28 mandatory days for the father, plus 7 optional days

Maternity & Paternity Leave

7 days’ notice may apply during probation where the probation period has lasted more than 60 days

Employee Termination

There are compulsory 13th and 14th month salary-related payments, generally paid as holiday and Christmas allowances

13th month salary

920 EUR per month

Minimum Wage

Overtime is generally paid at 125% for the first hour and 137.5% for subsequent hours on a working day, up to 100 annual overtime hours; higher rates apply thereafter and on rest days and public holidays

Overtime

Severance for collective dismissal or job extinction is generally 14 days of base pay and seniority payments for each complete year of service, subject to transitional rules

Severance Pay

PEO Portugal

Mercans PEO (Professional Employer Organization) services in Portugal provide a comprehensive HR outsourcing solution for foreign companies to establish a local presence, compliantly hire and manage employees, handle HR, payroll, benefits, tax compliance, and other administrative tasks, while reducing costs and administrative burden.

Through our PEO in Portugal, we provide services that are flexible and cost-effective for companies seeking to outsource their HR and payroll processes. As a Professional Employer Organization, Mercans offers a range of services including employee benefits, payroll administration, and compliance with Portugal employment laws. By entrusting their HR and payroll needs to Mercans, companies can focus on their core business activities and ensure a smooth and efficient HR operation.

Partnering with our PEO in Portugal presents the fastest and most efficient way to enter the Portugal market.

Contact us to explore how PEO Portugal solutions from Mercans can support your seamless expansion!

Benefits of Hiring an Employee through a PEO in Portugal

Planning to expand your business into Southern Europe? Partnering with a PEO in Portugal can help you navigate the country’s regulatory landscape, reduce costs, and hire local talent without needing to set up a legal entity. Here’s how a Portugal PEO can drive your success:

Speedy Market Entry

With a PEO Portugal solution, your company can hire employees and begin operations within days. There’s no need to go through the lengthy process of company registration, allowing you to enter the Portuguese market faster and more efficiently.

Full Legal Compliance

Portugal has specific labor laws, tax obligations, and social security requirements. A PEO in Portugal ensures your hiring practices meet all local legal standards, protecting your business from non-compliance risks and regulatory issues.

Simplified HR and Payroll

Managing payroll and HR in a new country can be overwhelming. A Portugal PEO takes care of employment contracts, salary payments, benefits, and leave entitlements, so you can stay focused on core operations.

Lower Operational Costs

Establishing a legal presence in Portugal involves setup fees, accounting services, and ongoing admin costs. A PEO Portugal offers a lean alternative, allowing you to hire locally without the financial burden of incorporation.

Minimized Legal Risk

Employment laws in Portugal can change, and penalties for non-compliance can be severe. A Portugal PEO stays current on all regulatory updates, helping you manage labor risk with confidence.

Access to Portuguese Talent

Portugal has a growing pool of skilled professionals in technology, engineering, tourism, and customer service. A PEO in Portugal helps you recruit top local talent, familiar with regional business practices and culture.

Scalable Workforce Solutions

Whether you’re hiring a single employee or building a larger team, a PEO Portugal solution offers the flexibility to scale up or down as needed without making long-term infrastructure commitments.

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Tax and Social Security

A person is generally deemed to be resident in Portugal for tax purposes when they spend more than 183 days, consecutive or not, in Portugal in any 12-month period beginning or ending in the relevant tax year, or if they maintain a habitual residence there. Social security contributions are shared between the employer and employee.

Tax

Corporate income tax (CIT) applies to resident companies and to non-resident entities with a permanent establishment in Portugal. Personal income tax (PIT) applies to employment income, pensions, business income and other taxable categories of income.

19%

Corporate Income Tax

48%

Personal Income Tax

23%

Sales Tax

23%

VAT

Social Security

Contributions are generally due on the employee’s gross remuneration and cover family, pension, sickness, parental and unemployment benefits. Foreign residents may be exempt in certain cases if they remain covered by another compulsory social security system under EU coordination rules or an applicable bilateral social security agreement. Employers must also obtain insurance to cover occupational accidents.

34.75%

Social Security Rate

23.75%

Social Security Rate for Employers

11%

Social Security Rate for Employees

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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. Employment contracts do not always need to be in writing, but several contract types, including fixed-term, part-time, telework and temporary work contracts, must be agreed in writing.

Employment Agreement

Where an employment contract is for a fixed term, unfixed-term, intermittent, part-time, teleworking contract or temporary-work contract, the contract must be agreed in writing. Employers must also provide employees with mandatory information on essential terms and conditions of employment.

Working condition

Labor laws set the maximum limits of working hours and provide mechanisms for flexibility in organizing working time. As a general rule, normal working time may not exceed 8 hours per day and 40 hours per week, unless a more favorable collective agreement applies.

Leaves

The right to vacation cannot be waived. The annual vacation period is generally 22 business days, although collective bargaining agreements may provide more favorable terms. For employment contracts lasting less than six months, the employee is generally entitled to two business days of vacation for each full month of contract duration, up to the applicable limit.

Employment termination

Termination of employment can occur through contract expiry, mutual agreement, dismissal for cause, collective dismissal, dismissal due to job elimination, dismissal for inability to adapt, resignation by the employee, or other legal grounds provided under Portuguese law.

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7 days

Minimum notice period that may apply during probation

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13

Total number of public holidays

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40

Working hours per week

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5 days

Total number of days for Compassionate & Bereavement Leave

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Immigration

As a general rule, there are temporary stay visas and residence visas. For long-term employment in Portugal, a third-country national will usually need a residence visa for subordinate work activity, which allows entry into Portugal for the purpose of applying for a residence permit.

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Residency permits

There are temporary and permanent residence permits. Temporary residence permits are generally valid for 2 years and may usually be renewed for a further 3 years, subject to continued eligibility. Immigration administration functions are handled by AIMA.

Work Permit validity

2 years

Required Documents

A valid passport

Passport-sized photos, if requested by the consular post

Proof of sufficient means, where applicable

Criminal record certificate, where required

Proof of health insurance, where applicable

Proof of accommodation in Portugal

Employment contract, promise of employment contract, or other document required for the specific visa route

Proof of legal stay if applying from a country other than the country of nationality

Additional documents may be requested by the relevant Portuguese consular post or AIMA depending on the visa type

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!

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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    FAQs

    What is an Employer of Record (EOR) in Portugal and how does it work for foreign companies?

    An Employer of Record in Portugal, provided by Mercans, acts as the legal employer for your team while you manage daily operations. Mercans handles contracts, payroll, taxes, and compliance, allowing global companies to hire in Portugal without setting up a local entity.

    Why should businesses use an EOR instead of establishing a legal entity in Portugal?

    Using Mercans as your EOR helps you enter the Portuguese market quickly and cost-effectively. It removes the need for company registration and ensures full compliance with employment and tax laws.

    How does payroll outsourcing in Portugal ensure compliance with tax and labor laws?

    Mercans manages all payroll obligations, including tax withholdings and social security contributions, in line with Portuguese regulations. The system is regularly updated to ensure accurate, compliant payroll processing.

    Can an Employer of Record in Portugal hire employees and manage work permits for international companies?

    Yes. Mercans can hire employees on behalf of foreign companies and manage visa and work permit procedures for expatriates, ensuring smooth and lawful employment.

    What are the main benefits of using EOR and payroll services in Portugal for global expansion?

    Key benefits include fast market entry, cost savings, compliance assurance, reduced administrative work, and access to local HR expertise.

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