If you have ever visited Portugal, you might remember the country for its sunny beaches, delicious cuisine, and rich culture. However, one of the most overlooked aspects is that Portugal is a fantastic place to conduct business.
One of the main reasons behind this is its stable and resilient economy. After the pandemic, when many countries worldwide struggled with supply chain disruptions and government-mandated stay-at-home orders, Portugal’s economy bounced back incredibly quickly.
This stability offers a solid foundation for expanding businesses, providing confidence in long-term investment and growth opportunities.
However, as with all other countries, Portugal has local labor laws and regulations that every employer must adhere to. Some of the most basic include,
- Portugal's official language is Portuguese, which is also the fifth most spoken language in the world. Over the years, there has also been an increase in the demand for English, especially within the business sector.
- Portugal's official currency is the Euro (EUR, €).
- This country's standard working time is 40 hours per week (Monday to Friday).
- The current national minimum wage is estimated at €820.00 per month.
When you venture on this journey to hire employees in Portugal, you must also be aware of the common challenges you may encounter.
Challenges of Hiring in Portugal
Managing remote employees can be challenging for several enterprises if not done correctly. The same applies when you decide to hire in Portugal.
Let’s take a look at a few examples of this.
1) Employment laws
Portugal has some stringent labor laws. Navigating these while simultaneously ensuring compliance is often difficult for companies. This is especially true when they lack the necessary legal expertise and guidance.
Portugal's employment laws include some standard provisions.
- In the event of termination of employment, the notice period varies from 15-75 days.
- Overtime work is permitted in Portugal but cannot exceed 11 hours in a row.
- Employers are mandatorily required to provide 13th and 14th-month pay to their employees.
- Individuals are entitled to at least 22 working days of annual paid leave.
2) Payroll
Portugal also has a complicated payroll system that can often confuse employers. Some of the many provisions include,
- Both employers and employees are required to contribute to the social security system in Portugal.
- The general rate is 11% for employees and 23.75% for employers.
- Employers are also required to buy insurance to cover any accidents in the workplace.
- The cost of the insurance differs based on the work and risk classification.
Handling these payroll complications is not an easy task. You need to install a powerful payroll solution for this purpose. The only downside is that it can incur a lot of monetary resources and energy for companies to invest in such a service.
3) Competitive talent landscape
- When we analyze the talent landscape in Portugal, we see a consistent lack of skilled professionals, especially in the tech sector.
- With the increased demand for skilled workers in Portugal, companies often struggle to find the most suitable candidates to fulfill their needs.
- When this is coupled with the rise in competition from big enterprises worldwide, the complication is enhanced further, and there is no direct or easy solution.
4) Bureaucratic complexities
- Enforcing contracts in Portugal is slow, meaning it might take a while before you see any potential resolution.
- Several companies have often faced difficulties obtaining a business registration certificate in Portugal.
- One potential reason behind this phenomenon is Portugal's complicated legal system, which often takes months to conduct legislative procedures.
How to Hire in Portugal
Now, the most important question is how you can successfully hire employees in Portugal despite all these challenges.
Well, there are three most effective ways of hiring in Portugal. They include the following.
- Setting up a local entity
- Hiring employees via EOR (Employer of Record)
- Hiring contractors via AOR (Agent of Record)
By understanding the main differences between these three methods, you can select the one that best suits your organization's interests and needs.
Setting up a local entity
- In the simplest of terms, setting up a local entity means establishing a formal business presence in Portugal.
- Although it remains one of the most traditional methods of hiring, it has several difficulties in the long term.
- For example, this process usually involves extensive administrative intricacies and responsibilities while resource-intensive.
Hiring employees via EOR
- An EOR legally employs individuals and handles all HR and employment compliance tasks on your behalf.
- An EOR like Skuad manages the entire employment lifecycle of your global teams. It takes care of employment contracts, payroll, benefits administration, social security contributions, and other employee obligations.
- It allows enterprises to gain quick access to new markets and stay compliant without dealing with the complexities of setting up a local entity.
Hiring employees via AOR
- Companies that wish to hire contractors in Portugal often seek the services of an AOR.
- They help manage and ensure the legality of contracts with partners and vendors in the new market, which is particularly beneficial for international contractors.
Cost of Hiring in Portugal
Understanding the costs of hiring employees in Portugal ensures a seamless process. Let’s examine this in detail.
| Parameters |
Setting up a local entity |
Partnering with Skuad (EOR/AOR) |
| Initial costs |
High cost since you will have to deal with setup fees, legal expenses, and various other components included |
Low cost because AOR/EOR, like Skuad, already has an established presence in Portugal |
| Administrative costs |
High, since you must build separate teams for HR and office maintenance. |
Minimal, as EOR/AOR manages all HR services, thereby reducing the administrative burden on your part |
| Legal and Compliance |
The task is high and confusing, as you will need to navigate the employment laws in Portugal and simultaneously ensure compliance. |
EOR/AOR guarantees 100% compliance with all local labor laws. |
| Parameters |
Partnering with Skuad (EOR/AOR) |
Setting up a local entity |
| Initial costs |
Low cost because AOR/EOR, like Skuad, already has an established presence in Portugal |
High cost since you will have to deal with setup fees, legal expenses, and various other components included |
| Administrative costs |
Minimal, as EOR/AOR manages all HR services, thereby reducing the administrative burden on your part |
High, since you must build separate teams for HR and office maintenance. |
| Legal and Compliance |
EOR/AOR guarantees 100% compliance with all local labor laws. |
The task is high and confusing, as you will need to navigate the employment laws in Portugal and simultaneously ensure compliance. |
In addition to this, there are two other types of costs involved. They include,
- Direct costs: Talent discovery and acquisition, onboarding, and training, as well as salary and wages.
- Indirect costs: Administrative costs, legal and compliance, and workplace safety.
With Skuad’s country cost calculator, you can quickly estimate the total cost of hiring employees in Portugal hassle-free.
A Brief About Employment Laws in Portugal
The primary employment law in Portugal is the Codigo do Trabalho, commonly called the Labor Code. It governs various aspects of the employee-employer relationship, such as,
- The Portuguese Constitution and Labor Code regulate workers' fundamental rights, covering wages, working hours, health and safety, vacation allowance, work-life balance, and equal opportunity access.
- Maternity leave benefit - Pregnant employees get 120-150 days of maternity leave.
- Paternity leave benefit - New fathers can opt for paternity leave, which is a minimum of 28 days.
- Social Security in Portugal—Employers must provide social security benefits to employees, such as pensions, unemployment insurance, and family allowances.
Hire in Portugal with Skuad
Many find it challenging to stay ahead of the ever-changing landscape of employment laws in Portugal. But don’t worry—with Skuad by your side, you can always ensure up-to-date information while also staying compliant.
From data privacy and security laws and regulations to avoiding misclassification risks, Skuad’s expert guidance provides an array of benefits to help you ease your international hiring journey.
Additionally, Skuad also provides immigration and mobility support. Our experts are well-equipped to handle the entire process of visas and work permits for your global team so that you can focus on the other essential aspects of your business.
Join us today and expand your global team with ease!
FAQs
Q1: How do I employ someone in Portugal?
Ans: One of the most cost-effective ways to hire in Portugal is to leverage the services of an EOR, such as Skuad. It is a comprehensive platform boasting robust capabilities to ensure a smooth employment lifecycle.
Q2: What is the difference between an employee and a contractor in Portugal?
Ans: An employee is an individual who provides services to an employer and is eligible for a regular salary. On the other hand, an independent contractor is a self-employed person who is not under the supervision of an employer.
Q3: What is the employment law in Portugal?
Ans: The primary labor regulation in Portugal is the Labor Code. One of its key provisions is that employees are entitled to 22 days of paid vacation every year.
Q4: What is the payroll tax in Portugal?
Ans: In Portugal, payroll taxes vary based on residency status. For example, non-residents working in Portugal are subjected to a flat payroll tax of 25%.
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