10 things employers need to know about Portuguese labor and employment laws

Hiring in Portugal? In this nation renowned for its rich history and vibrant culture, the legal framework governing the workforce holds several surprises. Portugal and the European Union both offer significant worker protections as well as nuanced regulations. Plus, the country’s collective bargaining agreements create an additional level of complication. To navigate the Portuguese employment landscape successfully, employers must be aware of its unique features and employee rights.

So how do you navigate the most important Portuguese labor laws? From robust worker protections to the unusual 13th and 14th-month “salaries,” this guide explores the most essential aspects of Portuguese employment laws that every employer should know—so you can establish legal working conditions and tap into Portugal’s talent pool with confidence.

1. Portuguese employee payment cadence

In Portugal, salaries are split into 14 payments throughout the year rather than 12 monthly salaries. Pay is doubled as Christmas and summer holiday statutory bonuses. This can be handled in several ways. An employer can pay 50% of each allowance before the summer holidays (typically in June) and before Christmas, with the remainder paid out throughout the other pay periods of the year. Alternatively, the employer can pay the subsidies in full before the holidays.

2. At-will employment doesn’t exist

Portugal is highly protective of workers around job termination. Employees can only be dismissed if their behavior has made it impossible to continue their employment, if they are unproductive, generate low-quality work, or are no longer suitable for the job, or if there’s been organization restructuring. (More on the details of termination law below.)

3. Employers must pay into social security

Social security is a crucial entitlement in Portugal, and both employees and employers contribute. Employers make a payroll contribution equal to 26.5% of an employee’s wages. Meanwhile, employees have 11% of social security tax deducted from each paycheck. Self-employed independent contractors pay their own social security contributions unless they earn up to 80% of their revenue from you, in which case you pay a 5% social security tax on payments made to them.

4. Workers get more than a month of paid time off each year

However, these are not consecutive days off—that time is split up throughout the year. Full-time employees get 22 working days of leave each year. Additionally, workers get 13 national holidays, plus several regional and optional holidays. Sick leave is not included as part of vacation, though Portuguese social security pays for sick leave lasting more than a few days.

5. Employee training isn’t optional

All full-time employees in Portugal are entitled to at least 40 hours of training annually to aid professional growth. Employers can provide this training or they may allow their employees to take on this training at their convenience during work hours.

6. Misclassifying an employee could cost you thousands

Employers should avoid misclassifying Portuguese employees as freelancers. If you’re found guilty of misclassification, penalties may include:

• Retroactive contributions to social security and the Wage Compensation Fund.
• Compliance with work accident insurance requirements.
• Retroactive credits for paid holidays, Christmas and holiday allowances (statutory bonuses), and other benefits afforded to full-time employees.
• Retroactive severance pay for unlawful terminations.
• Up to 9,000 euros in fines.

7. Non-disclosure agreements (NDAs) are legally binding

NDAs in the workplace typically protect trade secrets and private information from competition. NDAs may also protect intellectual property, business strategies, client information, internal processes, and more. In addition to any NDAs, the Criminal Code and the Labour Code of Portugal impose prison sentences or fines on employees who disclose secrets to or negotiate on behalf of competition.

8. Certain industries and companies have special rules

Collective bargaining plays a large role in Portuguese labor law. Unions will negotiate with employers or employer associations to establish collective bargaining agreements to negotiate employment conditions, wages, working hours, benefits, and more. Collective bargaining agreements may cover an entire industry (at the national, regional, or local level), several companies, or a single company/workplace.

9. Offering certain benefits is required

Portuguese employees have a right to workers’ compensation, vacation, and public holidays. Fail to offer these, and you could be fined. In the case of workers’ compensation, you may also be responsible for any claims that may arise from your employee or their dependents. Learn more about statutory benefits in Portugal.

10. Bosses are not allowed to contact Portuguese employees after hours

In 2021, the Portuguese parliament passed a law that employees can’t be contacted after hours—that includes contact by text, call, or email. This new rule was put in place as a response to the COVID-19 pandemic and a rise in remote working, teleworking, and digital work. This law is seen as a way of protecting employees’ work-life balance, and violating it may result in fines.

Frequently asked questions about Portuguese labor laws

How many hours can Portuguese employees work?

In Portugal, full-time work is limited to 40 hours per week (eight hours per day). Employees are entitled to breaks every five hours, which typically take place during lunch. Employers must give their workers weekly rest of at least one day and, per Portuguese law, workers must be able to rest for 11 consecutive hours between two working days. Both the employer and the employee need to agree to any overtime hours, and employers must provide both additional compensation and adequate rest.

What are the minimum wages in Portugal?

Minimum wage is €886.7 per month (or €10,640 per year if there were 12 payments/year at that rate). Note that the minimum wage may be higher depending on collective bargaining agreements, and there may also be more specific minimum wages for the regions of Azores and Madeira. While this is up-to-date as of May 2023, always check minimum wage laws before writing up employment contracts. Portugal’s national minimum wage is regularly updated to reflect changes in the cost of living and inflation.

What are the overtime laws in Portugal?

Companies can only ask their employees to work overtime when there’s a temporary increase in work or an indispensable need to prevent damage to the company. However, employers must ask for overtime in advance and employees are allowed to decline overtime for extenuating circumstances.

Here’s how overtime compensation typically breaks down in Portugal:

• First hour: Hourly rate plus 25%
• Additional hours after the first hour: Hourly rate plus 37.5%
• Overtime hour on rest days: Hourly rate plus 50%

Overtime shouldn’t exceed two hours per day. Companies with more than 50 employees may ask for up to 150 hours of overtime per year per employee, while smaller companies may ask for up to 175 hours per year. Limits may increase per collective bargaining agreements.

What are the required benefits in Portugal?

All full-time employees in Portugal are entitled to:

• Pension
• Workers’ compensation
• Vacation
• Public holidays
• Professional training (40 hours per year)

Because workers and employers pay into social security, all Portuguese workers are covered by the Portuguese government for health insurance, unemployment, sick leave, and paid parental leave, among other benefits.

For more information on mandatory benefits in Portugal, read our complete guide.

Does Portugal allow temporary and part-time employment contracts?

As a general rule, while employment contracts in Portugal are typically open-ended (for an indefinite period), other types of contracts are allowed. Temporary contracts (also known as fixed-term contracts) may cover an employer’s needs for a specific project or to sub for an absent employee (for example, if an employee is out on parental leave). However, there are several rules to keep in mind:

• The minimum duration of fixed-term contracts is six months. These contracts can’t exceed two years, though they may be renewed up to two times.
• When temporary contracts come to an end, employees may be offered full-time, open-ended employment.
• Short contracts may be used for seasonal work (such as tourism or agriculture) and other special circumstances. These contracts can’t exceed 35 days per term or 70 working days in a calendar year.

Part-time contracts are allowed for those who work fewer than 40 hours per week, either through reduced hours per day or alternative work schedules where they only work select days of the week.

How do I terminate employees in Portugal?

Ending an employment relationship is always difficult and, in Portugal, termination of employment contracts can be tricky due to strong labor laws. Employers can only fire employees in the case of:

• Just cause, such as breach of rights, repeated provocation of co-workers, unjustified absence from work, physical violence, intentional non-compliance, or inability to adapt
• Redundancy, which may occur if a job becomes obsolete or if the company restructures
• Expiration of contract
• Mutually agreed termination

For collective dismissal, there are different rules about employee termination in Portugal per the size of your organization:

• Small companies can fire employees during collective dismissal in situations where they are dismissing several employment contracts or departments at once. For example, during restructuring.
• Large companies can only fire employees if they’re eliminating entire departments.

Employees may also be let go if, during their trial period, they are discovered to be unsuitable for the position.

The required amount of notice for termination varies depending on how long the worker has been employed. Pregnant employees, workers who have given birth within the past four months, workers who are breastfeeding, or workers on initial parental leave are protected from termination. Notice periods are as follows:

• Less than one year of employment: 15 days of notice
• One to five years: 30 days of notice
• Five to 10 years: 60 days of notice
• 10 years or more: 75 days of notice

Portuguese employees are entitled to severance if they’re fired outside of a probation period and are dismissed without extraordinary circumstances. Severance pay should total 12 days to a month of salary for every year of employment for up to 12 months of the employee’s usual remuneration.

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Rippling and its affiliates do not provide tax, accounting or legal advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any related activities or transactions.