Employer of Record (EOR) Portugal

As the leading Employer of Record (EOR) Portugal, Mercans serves as the official employer for workers in the country, acting as a Global Professional Employer Organization (Global PEO). Our comprehensive role involves overseeing various employment aspects, ensuring strict adherence to local labor laws and regulations. The EOR responsibilities include managing key functions such as payroll, taxes, legally mandated benefits, and the creation of employment contracts.

Simplify your global expansion through our Global PEO services, offering a hassle-free solution without the need for entity setup. Choose Mercans as your trusted Employer of Record Portugal, where we guarantee legal presence, compliance, and Intellectual Property protection, allowing your business to concentrate on its core functions. Enable a smooth global mobility experience, including work visas, while building a diverse and effective global workforce. Partner with Mercans for a compliant and efficient employment journey, experiencing the benefits of our Employer of Record Portugal services. 

Things you need to know before hiring in Portugal

Employment Contracts in Portugal

Employees vs Independent Contractor Compliance

In Portugal, distinguishing between employees and contractors is crucial for effective workforce management. The classification is based on factors such as control, equipment ownership, payment structure, and integration into the organization. Employees, covered by the Portuguese Labour Code, receive statutory benefits, while contractors, operating independently, are responsible for their taxes and lack entitlement to benefits. The classification process involves tests related to control, integration, tools, payment, economic dependence, exclusivity of service, and length of engagement. Misclassification risks penalties, including retroactive contributions, fines, and legal disputes. Utilizing Rippling’s free quiz can aid in accurate worker classification and compliance with Portuguese labor laws. Various contractor entities, like Sole Proprietor and Single Shareholder Limited Liability Company, exist, each with distinct characteristics. Penalties for misclassification highlight the importance of accurate worker categorization for long-term business success.

Factors Determining Worker Classification in Portugal

In Portugal, accurately classifying workers as either employees or contractors is pivotal for effective workforce management. The classification hinges on factors such as control, equipment ownership, payment structure, and integration into the organization.

Payroll in Portugal

Minimum Wages

The existing minimum wage in Portugal is €760.00 per month as of January 1, 2023, and remains valid through December 2023. All figures are stated in Euros and are presented before tax deductions.

Payroll Cycle

Monthly payroll processing is the norm in Portugal, and employee payments must be completed by the final day of the month.

Mercans’ Payroll Capabilities 

Handling payroll in Portugal demands precision and comprehensive solutions, and Mercans excels in simplifying the process through its employer of record services, ensuring accuracy, compliance, and operational efficiency.

In Portugal, the payroll cycle operates on a monthly basis, encompassing critical stages such as setup, salary calculations, and reporting. Mercans’ Employer of Record services adeptly handle these tasks with precision and reliability.

Opting for local currency payments enhances convenience and reduces currency exchange complexities. Mercans facilitates seamless multi-country payment solutions, ensuring a hassle-free payroll experience.

From initial payroll setup to processing salaries and administering leave balances, Mercans’ EOR services cover every aspect of payroll management with efficiency in Portugal.

Ensuring compliance with local regulations is paramount, and Mercans provides seamless support for statutory filings, guaranteeing adherence to Portuguese laws.

As your trusted payroll partner in Portugal, Mercans brings extensive expertise in Employer of Record services, extending its proficiency to multi-country payroll management for accurate and streamlined operations across diverse locations.

Social Security in Portugal

Social Security Contributions

Social security contributions in Portugal are a shared responsibility between employees and employers. The rates, set at 11% for employees and 23.75% for employers, are applied to the employee’s gross remuneration and cover family, pension, and unemployment benefits.

Additionally, employers must purchase an insurance premium to cover occupational accidents, the cost of which varies based on work and risk classification.

For members of the board, social security rates differ, with individual contributions at 9.3% and employer contributions at 20.3%. However, those considered managers or administrators face rates of 23.75% for employers and 11% for members of statutory boards, based on their effective remuneration, subject to a monthly minimum income of EUR 480.43.

Managers or administrators, along with certain types of self-employed individuals, gain entitlement to unemployment protection.

Self-employed individuals face a contribution rate of 21.4%. Those under the simplified tax regime calculate their monthly basis as 1/3 of the relevant remuneration from the previous three months, with contributions impacting the reporting month and the subsequent two months. Relevant remuneration, constituting 70% of service-related income and 20% of income from production and sales, is determined based on the income received in the preceding three months.

Employers are subject to a 10% contribution rate if 80% or more of a self-employed individual’s fees come from services for the same company, person, or group. For economic dependence between 50% and 80%, a 7% contribution rate applies. Payment occurs upon the issuance of a tax assessment by social security authorities.

In 2023, the monthly minimum wage in Portugal is set at EUR 760.

Portugal Employee Hiring Cost

In a hypothetical scenario, let’s consider an employee in Portugal with a Gross Annual Salary of EUR 9,999.96. Beyond the direct salary, the employer incurs additional costs, bringing the Total Annual Employer Costs to EUR 4,892.40. This comprehensive figure, known as the Total Annual Cost, amounts to EUR 14,892.36, encompassing both the employee’s gross salary and the employer’s contributions and associated expenses. This hypothetical breakdown sheds light on the holistic financial commitment involved in hiring an employee, covering various elements such as social security contributions, benefits, and other employer-related costs in the Portuguese employment context.

Personal Income Tax

Residents in Portugal for tax purposes are subject to progressive tax rates ranging from 14.5% to 48% on their global income in 2023. Non-residents, on the other hand, are obligated to pay income tax solely on income derived from Portuguese sources. This encompasses the portion of remuneration linked to activities conducted in Portugal, as well as remuneration supported by a Portuguese company or permanent establishment (PE). In 2023, non-residents face a flat tax rate of 25% on their taxable remuneration. The resident income tax rates for 2023, structured based on different income brackets, dictate both the applicable tax rate and any deductible amounts. Special rates are also in place for capital gains and investment income. In cases of married taxpayers or those in de facto marriages opting for joint taxation, the taxable income is divided by two for determining the tax rate.

Resident Income Tax Rates for the Year 2023 in Portugal

*Amounts are in Euros (EUR).

Employee Benefits in Portugal

Statutory benefits, also referred to as mandatory benefits, are privileges that employers are legally mandated to offer their employees. These encompass essential entitlements such as paid annual leave, parental leave, worker’s compensation insurance, and paid sick leave. Portugal boasts robust working conditions, securing the second position on the International Trade Union Convention Global Rights Index, which rates workers’ welfare on a scale from 1 to 5 (with 1 being the best and 5 the worst) globally. The Portuguese Labor Code ensures comprehensive protection for workers, guarding against arbitrary dismissal and establishing a substantial safety net for the nation’s workforce of 5.1 million. For businesses aiming to enter the Portuguese labor market, understanding the legally required benefits is crucial to ensure compliance and attract top talent in Portugal.

Termination and Notice Period

Terminating an employment contract in Portugal can occur through various means, including expiration, termination, dismissal attributable to the worker, collective dismissal, dismissal for redundancy, dismissal for unsuitability, and termination by the worker.

If the employer terminates the contract, the worker is entitled to compensation from the company’s assets. Expiration can result from termination, absolute impossibility for the employee to perform duties, or the employee’s retirement due to old age or disability.

In cases of termination, the worker can contest the agreement if their signature is not authenticated within seven days, providing a written communication within that period. For dismissals attributable to the worker, just cause may arise from various serious offenses.

Collective dismissal occurs when at least two or five employees (depending on the company’s size) are terminated within a three-month period, or when it involves closures, reductions, or other structural changes. Dismissal for redundancy is based on market, structural, or technological reasons. Dismissal for unsuitability arises from the worker’s inability to fulfill the role due to productivity issues, resource breakdowns, or safety risks.

Termination by the worker requires written notice within 30 days of becoming aware of justifying facts, or immediately in cases of just cause, such as non-payment of remuneration, breach of legal or agreed guarantees, abusive penalties, negligent breach of occupational safety, and other offenses. Lack of timely payment of remuneration for 60 days is considered negligent, allowing the worker to terminate the contract.

Work Permit

The specific work visa you need for Portugal is determined by your job nature and experience. Here are the main work visas available:

Portugal Work Visa Requirements:

In addition to meeting specific visa criteria, essential documents for any work visa application in Portugal include a completed application form, valid passport, 2 passport-sized photos, employment contract, proof of funds, criminal record certificate, health insurance for Portugal, and proof of accommodation.

How to Apply for a Portuguese Work Visa:

Processing Time and Fees:

The processing time for a work visa application is 2–3 months, and for a Portugal work permit, it is 60 days. The application fee for a work visa is €90, and the residence permit application fee is €83, with an additional cost of €72 to receive the permit.

Final Step: Getting a Residence Permit for Work:

Upon entering Portugal with a work visa, apply for a residence permit at SEF within 4 months. The residence permit is usually valid for 1 year, renewable as long as the contract remains valid. Changing jobs requires a new residence permit.

Portugal’s Job Seeker Visa:

This visa allows you to visit Portugal and search for employment without a prior job offer. It grants an initial stay of 120 days, extendable by 60 days. If a job and work permit are secured during this period, you can stay; otherwise, you must leave Portugal and apply for jobs from abroad.

Requirements for the Job Seeker Visa Include:

Understanding these requirements empowers you to navigate the visa process confidently and embark on a rewarding professional journey in Portugal.

EOR Solutions in Portugal

• EOR for Prospective Employees: Mercans offers seamless Employer of Record (EOR) solutions for businesses that have already identified their ideal candidates in Portugal. Our services encompass every aspect of the employee lifecycle, ensuring compliance with Portugal labor laws and regulations.
• EOR + Recruitment: For those seeking assistance in talent acquisition, our EOR and recruitment services provide a holistic solution. We tap into our extensive network and expertise to help you find, onboard, and retain top talent, streamlining your expansion into the Portugal market.
• Visa Sponsorship and Global Mobility: Navigating the intricacies of expatriate employment is simplified through our visa sponsorship and global mobility services. We facilitate the relocation of your international workforce, ensuring compliance with Portugal immigration and employment laws.
• AOR for Contractor Payments: Businesses grappling with contractor payments can leverage our Assistance on Record (AOR) services. We handle the complexities of contractor payments, guaranteeing accuracy and compliance.
• Converting Freelancers to Employees: Mercans supports the transition from independent contractors to permanent employees in Portugal. Our expertise ensures smooth conversions while adhering to legal requirements.
• HCM Integration: Integrate Mercans’ EOR services seamlessly with your HCM system in Portugal for real-time data exchange, enhanced compliance, and cost-efficiency. Trust our expertise for a unified, compliant, and efficient approach, elevating your workforce management and payroll operations.