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Employer of Record in Portugal

Employer of Record in Portugal

Skuad's Portugal EOR (Employer of Record) solution helps your business expand into Portugal without the need of an entity setup. Our unified and automated global HR platform enables you to expedite the onboarding of your remote team, manage their payroll, benefits etc. compliantly. We help you streamline the global expansion process with the able assistance of our international network.

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Portugal At A Glance

Estimated Population: 10,304,434

Currency: Euro (€)

Capital: Lisbon

Languages spoken: Portuguese and Mirandese and English

GDP: 238.8 Billion USD (2019)

Employment In Portugal

In most cases, employers and businesses in Portugal prefer to hire through referrals, and a lot depends on professional and personal recommendations and relationships here. Emphasis is given to building trust and relationships, which is why it is a big challenge for foreign companies and business entities in hiring the local workforce in Portugal. Employment in Portugal is based on a written employment contract wherein all details of the new employee's salary, benefits, compensation, additional compensation, and termination requirements need to be mentioned.

The thriving industries in Portugal are tourism, hospitality, automotive, electronics, transportation, construction, footwear, and textiles. The unemployment rate is at 5.6% (June 2020), and youth unemployment is 25.6%. In recent years, there has been an increase in the hiring of foreign workers.

Here are few details of the Portugal labour laws:

1. Labour Laws in Portugal

Title Explanation
Labour Code

- It is the main law governing the employment sector in Portugal.

- In the past 30 years, the Labour Code has been changed many times.

Code of Contributory Regime - The law regulates the Social Security System.
Collective Bargaining Agreement (CBA) - An agreement that regulates employer associations and labour unions.

2. Terms of employment contracts in Portugal

An important aspect of Portuguese law is the prohibition of discrimination of gender, age, sex, marital status, family background and situation, religion, origin, genetic heritage, ideological beliefs, economic situation, parentage, trade union affiliation, reduced work capacity, and disabilities.

Title Explanation
Minimum working age
  • Sixteen years is the minimum working age.
  • Once individuals are 18 years of age, they can work on an employment contract without completing their formal education.
Types of employment contracts 1. Fixed-term – this contract has a limited duration, which is usually six months. It could be less than this and go up to a maximum of three years.

2. Contract with unspecified duration – this employment contract has unlimited duration but not more than six years.

3. Very short-duration contract – this type of contract has a period of sixty days. The contract comes into play during seasonal work, for example, agricultural and tourist seasons.

4. Part-time contract – part-time workers do not work for more than 75% of the hours that a full-time worker works.

5. Intermittent contract – there are breaks in this type of work contract wherein employees work intermittently. Employers need to offer the employees full-time contracts with a minimum of six months with mandatory consecutive employment of four months.

As per Portuguese law, the employment contracts need to be in writing, except for very short-duration contracts.

What details are included in the Employment Contract? As per laws of Employment in Portugal, the employment contract should include:
  • Employer's identification
  • Employee identification
  • Job responsibilities and duties
  • Payment terms
  • The object of the contract
  • Start date and last date of the contract.
  • Duration of employment and justification for the same
  • Day-to-day work timing
  • Job location
Working hours
  • The statutory working hours in Portugal are 40 hours weekly or 8 hours daily.
  • A typical working day in Portugal begins at 0900 hours till 1300 hours and then from 1500 to 1900 hours. There is a two-hour lunch break.
  • Overtime
  • Overtime cannot be more than 150 hours annually in companies with 50 employees; and,
  • Overtime cannot be more than 175 hours in companies with less than 50 employees.
  • 3. Leaves

    Title Explanation
    Public holidays in Portugal All employees in Portugal get a day off on public holidays. These are:
    • New Year – January 1
    • Good Friday – March 30
    • Liberty Day – April 25
    • Labour Day – May 1
    • Corpus Christi – May 31
    • Portugal Day – June 10
    • Assumption of Mary – 15th Augusts
    • Establishment of the Portuguese Republic – October 5
    • All Saints' Day – November 1
    • Restoration of Independence – December 1
    • Immaculate Conception – December 8
    • Christmas – December 25
    Annual Leave
    • Twenty-two days of paid annual leave is statutory.
    • The leaves are accrued if not used.
    • It is up to the employer to give more than the statutory paid leaves
    Bereavement leave
  • As per the Portugal employment laws, employees who have lost a family member get up to two days of paid bereavement leave.
  • The employee has to submit these two documents – (a) the death certificate of the family member and (b) Probative document send to the employer by the authorities.
  • Sick Leave
  • Employees can avail sick leave, but the minimum requirement is four consecutive days of leave.
  • Social Security pays sick leave
  • Maternity Leave
  • Social Security pays maternity leave.
  • New mothers can avail themselves of the leave for 120 days.
  • Paternity Leave
  • Mandatory 20 days of leave is granted to the father. Additional five days are optional.
  • Social Security does the payment of the leave.
  • Other types of leaves
  • Marriage Leave – employees can take up to 15 consecutive days on the occasion of their marriage.
  • Study Leave – employees can take leave a day before and on the day of the test.
  • Family Care Leave – employees can take up to 30 days of leave to take care of a family member who is less than 12 years of age. For elders, employees can take up to 15 days' leave.
  • Book a demo today to know more about Skuad's effective EOR solutions.

    Contractors vs Full-time Employees

    As per the Portuguese Labour Code, an employee is committed to offering intellectual or manual activities for an employer, company, individual, or organization. The independent contractor undertakes a project or renders a certain kind of manual or intellectual work but is not under any legal subordination of the beneficiary.

    In the case of employees, the employer has legal subordination in the following gamuts that is determined by the employment contract law in Portugal:

    • Fixing the working time
    • Fixing work or job description
    • Fixing the location
    • Providing the required working tools
    • Paying the employee regularly as per the employment contract in Portugal
    • Determining the performance of the employee
    • Integrating the employee in the work environment.

    In the case of a contractor, the beneficiary is responsible for making timely payments to the contractual worker and integrating them within the work environment.

    The difference between contractors and employees also lies in the tax treatment. Social Security contributions in the case of an employee as per the employment agreement in Portugal are done by both the employee (23.75%) and the employer (11%). In the case of a contractor, social security contributions are the sole responsibilities of the contractor. The social security contribution of the contractor is 29.6%.

    The VAT (Value Added Taxes) applies to independent contractors, with most services offered to fall under the purview of VAT. There are certain cases, however, where independent contractors are exempted from VAT.

    Working with an Employer of Record in Portugal for hiring local workforce and handling onboarding, payroll, taxation, compliance and legalities, and more. By choosing a strategic EOR Portugal as your partner, the route to enter Portugal becomes smooth and cost-effective. To know more, talk to Skuad’s experts today.

    Hiring in Portugal

    After your decision to enter Portugal has been taken and well-analyzed, you need to work fast to build your team. The entire process could be a big challenge because of the intricate nuances, including employment laws, compliance, and the entire hiring process. Looking at outsourcing HR functionalities of Skaud, the team-building process can become easy and smooth sailing.

    To hire employees in Portugal, you can start either by building your international team using your relationships and being present at networking events. Alternatively, you can take the help of popular online platforms like Indeed, Adecco, Net-Empregos, BonsEmpregos, Expressoemprego, Alertaemprego, and many other hiring companies in Portugal.

    The model of hiring in Portugal starts by preparing the employment contract in writing. The contract contains every last detail about the employment starting from the compensation, employee health benefits in Portugal to probation, termination, every detail mentioned in Euros rather than any other foreign currency. The Collective Bargaining Agreement or CBA also needs to be covered in the contract. Even though there is no explicit mandate about the onboarding process, the usual method is to prepare an employee code of conduct and ensure training for your employee.

    Skuad's Employer of Record Portugal solution takes care of all aspects of hiring and onboarding local Portuguese employees seamlessly, completely compliant with the local Labour Code, rules and regulations. To know more about our work, speak to us today!

    Probation & Termination

    The termination of employment in Portugal can happen on four grounds

    • Disciplinary dismissals
    • Position abolition
    • Collective dismissal
    • Job unsuitability

    Employers must inform employees in writing about the reason for dismissal. When it is on disciplinary grounds, a hearing needs to occur where the employee is asked to respond to charges.

    The Ministry of Labour and the workers' representative need to be informed about the dismissal. During the final settlement, the accrued leaves and vacations not taken need to be paid to the employee.

    Standard probation period Portugal

    The probationary period in Portugal is known as the trial period.

    Title Explanation
    Trial Period The same has been defined as:
    • The indefinite contract has a trial period of 90 days for standard employees and 180 days for employees who work on senior posts that involve technical qualifications and are employed in the post of trust.
    • The trial period is 240 days in the case of top management and director-level posts.
    • For Fixed-Term employees, the trial period is 30 days for contracts with six months duration and 15 days for contracts less than six months.
    • Either party can conclude the contract during the trial period without any notice.

    EOR Solution

    When you have decided to expand your business in Portugal, the ideal way to start is to partner with a high caliber EOR like Skuad. Its versatile solution supports you through and through in hiring and onboarding the right team for business growth. Every foreign land has its sets of challenging laws. When dealing with the workforce, you need to ensure that no local law is ignored or bypassed during recruitment, payroll processing, or deducting taxes. An Employer of a Record offers an end-to-end HR functional solution so that you can focus on your business and expansion and let them handle the labor-related aspects.

    Skuad is one of the most promising and experienced employers of record solutions in Portugal. It is a high-end online platform with a smart and intuitive interface and comprehensive features that can become your go-to platform for expansion not just into Portugal but any other place on the globe. With low costs and customized solutions, you have a helping hand 24x7 with Skuad.

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    Types of Visas In Portugal

    A Portugal work visa means the opportunity to live and work in a peace-loving country with political and social stability. It also means the right to move freely within the EU, have family members join in Portugal and apply for Portuguese residency at the end of five years.

    Types of work visas in Portugal Explanation
    D3 Visa - The visa type is for highly qualified and specialized technical skills.
    D2 Visa - It is a visa type for the self-employed or entrepreneurs.
    Startup visa - This visa type is also aimed at entrepreneurs from foreign countries.
    D7 Visa - It is a residence visa type for people who wish to earn and reside in Portugal.
    Tech Visa - It is a special visa type meant for companies that are headquartered in Portugal or have a permanent establishment in the country.
    Golden Visa - The ideal way is to obtain a residence permit in Portugal by investing in real estate, buying shares of a Portuguese company, or making capital investments.

    Portugal work visa requirements

    Among other things, applicants must submit:

    • The completed visa application
    • Valid passport
    • Letter of invitation from the employer
    • Health insurance and accident insurance papers
    • One passport-size photo
    • Biometric data
    • Flight tickets
    • Hotel reservation or accommodation proof

    Work Permits

    For applying for a work permit, Portugal, the following papers are required:

    • Valid passport
    • Accommodation proof in Portugal
    • Valid Portuguese residence visa
    • Two passport size photos
    • For Portugal work permit for foreigners, it is pertinent to submit tax documents
    • Police verification certificate for background checks
    • Employment contract
    • Social Security registration documents

    It is impossible to have a Portugal work permit without a job offer because the employer needs to apply for the work permit, which they do after offering the job.

    Payroll & Taxes in Portugal

    1.Payroll in Portugal

    Wages
    • The Minimum wage in Portugal has been fixed at 740.8 EU each month with 12 installments or 635 EU per month with 14 installments.
    • There is no obligatory date for salaries to be paid to employees in Portugal. However, the salary or wage must be paid once every month.
    Overtime pay
  • Overtime work is paid at the normal hourly rate plus 25% for the first hour, 37.5% for every subsequent hour.
  • 2. Portugal Employer payroll taxes

    The tax percentages under different sub-heads in Portugal is as follows:

    • Portugal payroll tax rates - Employer
    Title Percentage
    Social Security 23.75%
    Labor Accident Insurance 1.75%
    Wage Guarantee Refund (WGF) 1.00%
    Total Employment Cost 26.50%
    • Portugal payroll tax rates - Employee
    Title Percentage
    Social Security 11%
    Total Employment Cost 11%

    Income Tax slabs for Employees

    Earnings (EU) Tax %
    0 – 7,112 14.5%
    7,112 – 10,732 23.0%
    10,732 – 20,322 28.5%
    20,322 – 25,075 35.0%
    25,075 – 36,967 37.0%
    36,967 – 80,822 45.0%
    80,822 and over 48.0%

    Payroll outsourcing Portugal is one of the best ways to address the complicated HR ecosystem in Portugal. Consider Skuad as your EOR and speak to us to know more about how we can become your effective partner.

    Incorporation

    When starting a business in Portugal, it is vital to understand the business climate in the company. The Portuguese Companies Code define the following business types:

    • Business owned by a single individual:can be subdivided into – solo trader, Individual Limited Liability Establishment and Single-Member Limited Company.
    • Businesses owned by two or more people: Private Limited Company or Sociedade por Quotas can have at least two partners with a minimum investment of €5,000.
    • Public Limited Company or Sociedade Anomina – requires a minimum of five shareholders and an investment of €50,000.
    • Partnership or Sociedade em Nome Colectivo – two partners with personal liabilities.
    • Limited Liability Partnership or Sociedade em Comandita – two partners with unlimited liability and sleeping partners with limited liability.

    There are enough business opportunities in Portugal. There are many benefits of incorporating a holding company in Portugal. With a ten percent share, the dividend income can be tax exempted while the capital gains from the company attract a low tax rate. It is ideal to speak to a specialist on this matter before venturing into Portugal.

    Professional Employer Organization (PEO)

    Usually, people confuse EORs and PEOs. Both operate in the HR domain but are different from one another. A professional employer organization in Portugal is more like your co-employer, and you need to set up your business identity in the country before starting to hire or start operations. That is not the case when you work with an EOR.

    Skuad has expertise in both domains. As an EOR, we handle the entire hiring and HR processes independently without any need for your business to incorporate a business entity in Portugal. On the other hand, as a PEO service provider, we share your responsibilities in the HR landscape and ensure compliance with local laws to work seamlessly with your business set up in Portugal.

    Conclusion

    Setting up a remote workforce in Portugal can be daunting unless you decide to work with a specialist like Skuad as your Employer of Record in Portugal. We support you in saving your time, money, and resources. With us around, you do not have to get involved in intricate matters of interpreting local labour laws or corporate laws. Based on your exclusive business needs, you can choose to work with us as an EOR or PEO.

    Take this further and speak to our experts, Contact us today!

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