Professional Employer Organization (PEO) in Portugal

What is a Professional Employer Organization (PEO)?

For overseas companies that want to hire remotely in Portugal, one of the options they can choose is to work with a Professional Employer Organization or PEO. Signing on with a PEO means co-employing workers with them so they can jointly undertake the HR processes required to find, manage, and pay employees in Portugal, including:

  • Recruitment, hiring, and onboarding
  • Drafting compensation packages and implementing payroll processing
  • Administering statutory and supplementary benefits
  • Guaranteeing compliance with local employment practices

When a company enters into joint employment agreements with a partner PEO, the two entities share the legal liabilities and responsibilities between them. PEOs can accommodate the needs of their partners and can potentially run the entire HR pipeline. In fact, this is the core value proposition that makes a PEO a strategically advantageous option. PEOs can handle HR functions more efficiently — and, more importantly, in compliance with the local labor laws in the markets where their clients want to hire globally distributed teams.

With compliance handled and out of the way, the companies who rely on PEOs can turn their focus to expanding internationally, scaling their business with the backing of a partner that can ensure compliance and smooth HR processes as required.

This is especially useful because starting in-house compliance teams often falls flat as an expansion strategy due to the differences in employment legislation from country to country. An in-house compliance team needs to be able to support a company’s expansion into multiple territories, and mustering in-country expertise several times over quickly becomes unsustainable.

And when outsourcing to a specific region, such as Europe, for instance, companies may choose to rapidly expand to several countries at once. One such destination that is especially appealing for IT companies is the Portuguese Republic, which research firms like Gartner have identified to be an IT outsourcing hotspot. Portugal has been identified to be suitable for both offshoring and nearshoring with its workforce that is highly skilled in IT and business processes. In addition, the country’s mature domestic market, IT infrastructure, and adequately foreign business-friendly corporate environment give it an edge against similar markets in the EU region.

Of course, successfully building remote teams in Portugal requires due diligence and careful execution to adhere to local labor laws. This is where PEOs become quickly invaluable to any outsourcing strategy.

What are the benefits of using a PEO in Portugal?

Aside from the inherent benefits of offloading HR functions to a reliable platform and service provider, working with a PEO gives you competitive advantages by virtue of how it handles compliance to local labor laws. Some of these meaningful benefits include:

  • Ensuring compliance with local labor laws: Labor laws in Portugal govern the various aspects of employment practice in the country. Suppose you plan to do anything from conducting background checks for recruitment to considering the details of IP protections. In that case, you need to know the statutory components that Portugal’s employment legislation requires every step of the way. Otherwise, you open yourself up to potentially costly legal fees and fines.
  • Payroll processing and tax filing: PEOs also offer their secure, reliable payroll processing platforms to automate and streamline related tasks such as payroll and tax management. What’s more, since all their services are guaranteed to be compliant with local labor laws, you can be sure that using them won’t open you up to noncompliance risks. Well-managed payroll processing and tax filing is foundational for any healthy employer-employee relationship, and errors and delays in pay will increase your churn rate.
  • Risk mitigation: In light of guaranteeing compliance with local labor laws, PEOs not only provide HR services but essentially also shield you from the risks of noncompliance. The right PEO can even offer expert in-country legal counsel and advice outside of your current contract when you need it.
  • Administration of competitive benefits: Outsourcing to Portugal means developing job offers that are competitive with relevant markets and industries, and part of that is making sure the compensation packages you include also take into consideration attractive benefits. PEOs can help develop competitive benefits packages and also implement their administration efficiently once you hire talent.
  • Employment cost mitigation: Put together all the overhead costs of the abovementioned points, and it's not hard to imagine expenses snowballing to unsustainable sizes. Signing on with a PEO lets you mitigate much of the cost of outsourced employee management that you would otherwise need to shoulder and control in-house.

Explore Skuad’s services in Portugal to reap these benefits and more, allowing you to turn your focus and in-house resources toward growing your business.

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What are the differences between an EOR and a PEO?

As an option similar to a PEO, an Employer of Record (EOR) also lets foreign clients outsource to overseas markets. The way they work results in distinct differences in their approach and degree of control, however.

EOR PEO
An EOR is the legal employer for any hired workers — not its client. PEOs and their clients are co-employers, flexibly splitting and sharing liabilities and responsibilities between them.
As the sole legal employer, EORs handle all the HR processes and functions required for ongoing engagement with hired workers from onboarding to payroll. PEOs can flexibly extend what HR functions and processes they handle as they essentially share these with their clients. In effect, clients can dictate a PEO’s involvement in HR management.
EORs hire on behalf of their clients, so the clients themselves do not need to register a local entity for HR purposes. PEOs are co-employer, so clients need to establish a local legal entity that can legally hire employees.
Performs all contract and agreement drafting on behalf of their clients. Clients perform contract and agreement drafting with assistance, where required.

Hiring in Portugal with a PEO

Revenues gained in the outsourcing sector in Portugal for the IT vertical alone are estimated to be around $781.3 million. The country produces more than 80,000 higher education graduates annually, and around a third of those are in science, technology, engineering, and mathematics fields. All in all, Portugal is an attractive outsourcing destination, especially for IT companies with a constant supply of skilled talent.

Of course, you can only access that talent if you can ensure compliance with the employment legislation in the country.

Partner up with Skuad’s services in Portugal and jumpstart your efforts to build remote teams in the country while always staying 100% compliant with local labor laws.

Payroll in Portugal is challenging. It’s easy when you use a PEO.  

One of the trickiest parts of HR pipelines and processes requires careful handling of financial data and personal information: payroll. Local labor laws also require strict adherence to any provisions meant to protect laborers, which extends to taxation and benefits, both of which need to be carefully accounted for in payroll processing.

Naturally, companies that build remote teams in Portugal may not have enough capacity in-house to manage this critical HR function. But when it's handled poorly, you can expect inaccuracies and delays in payment to your employees. This hurts your relationship and potentially puts you at risk for noncompliance penalties.

If you think you can handle all these requirements in-house at first, consider that as you expand and hire more people remotely, your compliance concerns and payroll requirements will expand as well. You might find that trying to do it all yourself actually hinders your growth.

This is one of the many reasons why reliable partners like Skuad are sought after as a strategic solution to offloading payroll processing. As a global HR management solutions provider, Skuad offers a payroll processing platform that addresses all the concerns highlighted above, giving you a reliable platform to leverage when expanding your business.

Request a demo from Skuad’s experts to know more.

What a PEO in Portugal can and cannot do for you

It’s understandable to think twice about such a big business decision, especially one that makes you a co-employer of remote workers. Signing a joint employment agreement with a PEO may seem daunting, but here is a brief overview of the top-level concepts that illustrate what PEOs can and cannot do:

A PEO can:

  • Run seamless HR management and payroll processing remote teams in Portugal and other markets, handling compliance concerns for you
  • Assist with recruiting, onboarding, and managing your employees in Portugal as well as in other countries
  • Reduce HR overhead costs associated with managing globally distributed teams and shield you from compliance risks

A PEO cannot:

  • Hire employees as the legal employer on behalf of your company
  • Take full control of your company
  • Be the sole decision-maker when hiring and terminating your employees

Businesses big and small can find value in partnering with a PEO in Portugal.

It’s clear that the basic building block in constructing globally distributed teams is a decent grasp of local labor laws. You need to be able to abide by the requirements of the relevant legislation, not only to legally function in foreign markets but also to provide your workers with excellent employee experiences. Few companies, regardless of their size, can handle that in-house, especially if their intention is to continue expanding into other overseas markets beyond Portugal.

You need a reliable PEO in Portugal to take the weight of compliance off your shoulders so you can turn your attention to actually running your business. A PEO can protect you from noncompliance risks and at the same time offer a streamlined, centralized HR platform that serves as the foundational infrastructure you can leverage to aggressively scale your organization.

You need Skuad’s centralized HR and payroll processing services. Skuad removes a lot of the stress in hiring remotely, not just in Portugal but practically anywhere you want. Skuad empowers you to easily hire, onboard, manage, and pay employees in Portugal while keeping completely compliant with local labor laws. Book a demo with Skuad today.

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