Payroll in Portugal

Mercans is your go-to partner for top-notch payroll outsourcing services in Portugal. Our commitment to delivering exceptional payroll services in Portugal is unwavering. With years of experience in the payroll industry, Mercans ensures accurate and compliant payroll services in Portugal, making us the preferred choice for businesses of all sizes. Trust Mercans for timely and accurate payroll transactions, along with the convenience of multi-currency payments in the Portuguese market. As your dedicated local payroll provider in Portugal, we boast a team of in-country payroll specialists with deep knowledge of local laws, offering comprehensive support for a seamless payroll experience tailored to your business needs.

Everything you need to know before running payroll in Portugal

Working Hours and Overtime

Mercans, your trusted payroll provider in Portugal, ensures compliance with labor laws governing payroll in Portugal. The standard working period typically spans up to 8 hours per day or 40 hours per week. However, labor regulations allow flexibility in daily or weekly working hours, subject to collective bargaining or mutual agreement between employer and employee. It’s important to note that the maximum limit of 12 hours per day or 60 hours per week must never be exceeded, with employees entitled to corresponding additional rest periods. Additionally, labor laws prescribe specific regulations for time banks, adaptability schemes, and intensive work schedules to ensure fair and equitable employment practices.

Minimum Wages

As of January 1, 2024, the minimum wage in Portugal stands at €820.00 per month.

13th Month Salary

In Portugal, there are obligatory 13th and 14th salary payments. These are typically disbursed in June (for holiday expenses) and December (for Christmas expenses), or can be included in the 12 regular monthly salaries.

Payroll Cycle

In Portugal, the payroll cycle typically follows a monthly schedule, with salaries disbursed before the end of each month.

Company Formation in Portugal

In Portugal, the name of a newly formed company must be checked at the National Registry of Collective Entities (RNPC). If available, it can be reserved for 48 hours for a fee, or a pre-approved name can be selected from the RNPC database. To obtain a certificate of registration, founders must submit an application along with articles of association and the approved name certificate within 15 days of incorporation. Upon approval, the Portuguese authority will issue the corporate tax number, social security number, and declaration of business commencement. Employee registration must occur at the Business Registry Office 24 hours before or up to 10 days after starting business activities. The Labor Inspectorate must also be notified, along with registration for employees’ accident compensation insurance through a private insurer. If you require information on incorporation procedures in other countries, such as the Philippines, our partners can assist you.

Payroll Compliance in Portugal

Statutory Filings and Contributions

In Portugal, employers are obligated to submit the following statutory filings. Mercans assists you in completing the necessary filings as per the Portuguese local laws.

Statutory BodyReport/DeclarationFiling FrequencyDue DatesPurpose
Portuguese Tax AuthorityDMR – Declaração Mensal de RemuneraçõesMonthlySubmission: until the 10th of the subsequent month Payment: until the 20th of the subsequent monthReporting monthly labour incomes, taxes and contributions
Social Security OfficeDeclaração Mensal de RemuneraçõesMonthlySubmission: until the 10th of the subsequent month Payment: until the 20th of the subsequent monthReporting monthly labour incomes and contributions
Compensation FundsMonthly StatementMonthlyExtracting and Payment: between the 11th and 20th of the subsequent monthGenerating monthly company contributions related to showing each employee
Work Accidents InsurerDeclaração de Remunerações (Monthly Earnings Statement)MonthlySubmission: until the 15th of the subsequent monthReporting monthly labour incomes
EmployeesAnnual Income StatementAnnuallyUntil 15 January of the subsequent yearGenerating employee tax certificates showing the total employment earnings for the year of assessment and the total amount of employees’ tax deducted or withheld.
Ministry of Labour, Solidarity and Social SecurityUnique ReportAnnuallyUsually until 15 April of the subsequent yearReporting of the work-force structure, worked hours, earnings, in and out flows, training and skills

Payroll Taxes in Portugal

Social Security in Portugal

Any manager of a company in Portugal, whether residing within the country or abroad, must register with the local Social Security and contribute to the Portuguese scheme, amounting to 34.75% of their salary (23.75% + 11%). This contribution is subject to a minimum equal to the Portuguese minimum wage. Managers not receiving remuneration and contributing to another mandatory social security system are exempt. They can obtain exemption by providing a certificate from their country of residence’s social security office (form E 101) confirming their contributions to the respective scheme.

SchemesContribution Rate
General Scheme23.75%
Members of Statutory Bodies (1)23.75%
Disabled workers12.5%
Self-employed persons (2)10% (2)
Young persons employed for the first timeWaived in the first three years

(1) Tax Base:

Lower threshold: determined by the government, known as “IAS” (Indexante dos Apoios Sociais);

Upper threshold: 12 times the IAS rate.

(2) The 10% employer contribution applies when the employer benefits from at least 80% of a freelancer’s services in a given civil year, excluding those covered by a foreign social security system.

IAS rate (2024) = €509.26

Personal Income Taxes in Portugal

Residents in Portugal for tax purposes are subject to progressive tax rates ranging from 13.25% to 48% on their worldwide income in 2024.

Non-residents, on the other hand, are only taxed on income derived from Portuguese sources. This includes remuneration allocated to activities conducted in Portugal or paid/borne by a Portuguese company or permanent establishment. Non-residents are subject to a flat tax rate of 25% on their taxable remuneration in 2024.

Resident Income Tax Rates for 2024

SchemesContribution Rate
General Scheme23.75%
Members of Statutory Bodies (1)23.75%
Disabled workers12.5%
Self-employed persons (2)10% (2)
Young persons employed for the first timeWaived in the first three years

For married taxpayers and those in de facto marriages opting for joint taxation, taxable income is halved for tax rate application.

Special rates are applicable to capital gains and investment income.

Employee Benefits in Portugal

Mandatory Employee Benefits in Portugal

Workers Compensation Insurance

  • All employees are covered for work-related accidents and “in-itinere” incidents.
  • No waiting period; benefits assessed based on disability type.
  • Benefits include temporary disability, permanent disability, spouse’s pension, orphan’s pension, and funeral grant.

Holiday Pay

  • Legal entitlement to 22 paid holidays per year; may vary with collective labor agreements.

Meal Allowance

  • Employers must provide a meal allowance for each workday, either taxable or tax-free through cards or tickets.

Supplementary Employee Benefits in Portugal

  • Company Cars: A few employees may receive company-financed cars, fuel, or allowances.
  • Meal Allowance Cards: Tax-advantaged benefit, tax-free up to €9.60 per day.
  • Childcare Vouchers: Tax-efficient benefit for employees with children.
  • Voluntary Benefits: Employers offer discounted voluntary benefits to employees.
  • Flexible Benefits: Employees choose tax-efficient benefits from a menu.
  • Work from Home: Growing trend, accelerated by the COVID-19 pandemic.
  • Workplace Canteens: Common in larger companies, offering discounted meals.
  • Bike to Work: Government-supported subsidy for commuting by bicycle.
  • Gymnasiums: Large employers provide on-site gyms or subsidies for gym access.

Note: Benefits may vary; check local regulations and company policies.

Benefits of Payroll Outsourcing in Portugal

  • Ensuring Compliance with Complex Regulations: By outsourcing payroll services in Portugal, meticulous adherence to intricate labor laws and regulations is guaranteed. Our expert professionals adeptly navigate these complexities, minimizing the risk of errors or penalties due to non-compliance, providing peace of mind for businesses.
  • Enhanced Scalability and Flexibility: Payroll outsourcing offers unparalleled scalability and flexibility to meet the evolving needs of businesses in Portugal. Whether expanding the workforce or adapting to changes in employment regulations, outsourcing providers seamlessly adjust their services to meet these demands.
  • Access to Advanced Technologies and Expertise: Leveraging cutting-edge software solutions, outsourcing providers streamline processes, enhance data security, and improve efficiency in payroll management in Portugal. Additionally, professionals possess extensive knowledge of tax regulations, deductions, and reporting requirements, ensuring accurate and timely processing.
  • Cost Savings and Competitive Pricing: Outsourcing payroll leads to significant cost savings by eliminating the need to hire and train in-house staff. Furthermore, providers often offer competitive pricing models tailored to the specific needs of businesses, optimizing cost-effectiveness while maintaining quality service.
  • Supporting Business Growth: Overall, outsourcing payroll services in Portugal enables businesses to focus on core objectives while benefiting from accurate, compliant, and cost-effective management. With specialized expertise, advanced technologies, and scalability, providers play a crucial role in supporting the growth and success of businesses.
  • Emphasizing High Safety Standards: Incorporating industry-leading security measures to safeguard sensitive data, along with ISO 27001 and ISAE3402 certifications, ensures stringent adherence to information security protocols.
  • Ensuring Adequate and Sustainable Performance: Our commitment extends to ensuring consistent and sustainable performance that meets the dynamic demands of payroll services in Portugal.
  • Flexibility and Scalability Tailored to You: We offer flexibility and scalability to accommodate evolving client needs and adapt to changing business environments in Portugal.
  • Utilizing Collaborative Cloud Tools: Our collaborative Cloud-based platform promotes efficiency and accessibility across teams, facilitating seamless collaboration and communication. These certifications signify our commitment to the highest standards of information security and operational integrity.

Payroll Solutions in Portugal

Streamline Payroll Processing in Portugal with Mercans’ Global Solutions. Our adaptable models ensure local compliance, facilitate multi-currency transactions, and seamlessly integrate with HCM and ERP systems for accurate payments.

Explore Our Flexible Solutions:

  • SaaS (Software as a Service): Tailored for enterprise businesses managing payroll across multiple countries with diverse complexities. Our SaaS model optimizes operations for maximum efficiency.
  • Managed Services: Customized for mid-sized and large enterprises handling multi-country payroll, delivering on-demand HR expertise for security, reliability, and compliance.
  • HRMS (Human Resource Management System): Ideal for expanding mid to large businesses, offering a comprehensive suite of functionalities, including payroll and benefits, with personalized features for effective solutions.

Streamline Payroll with Mercans’ Technology and Integrations

  • Technology: Explore the forefront of innovation with Mercans’ cutting-edge technology that powers our global payroll solutions. Learn more about our technological prowess here
  • Integrations: Seamlessly integrate your Human Capital Management (HCM) systems with Mercans’ solutions, enhancing efficiency and connectivity. Discover the power of integration here
  • Recognitions: Join a partner recognized for excellence. Mercans has earned accolades for its commitment to delivering exceptional payroll services. Explore our awards and recognitions here

Outsource to Payroll Company in Portugal

In Finland’s bustling business landscape, Mercans stands out as the top choice for mastering local intricacies. Our commitment to full compliance, deep knowledge of labor laws, and wide-ranging services make us the perfect partner for business success. Trust Mercans to ensure seamless operations, statutory compliance, and prosperous growth in Northern Europe.

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