How to Hire in Portugal: Should You Consider EOR?

Portugal's labor law runs on a different logic than most of Europe. Termination without cause is nearly impossible to execute cleanly, salaries are paid over 14 months rather than 12, and collective bargaining agreements can quietly override the terms in an individual contract.

This guide walks you through what to get right about the country's employment rules. Find out if Portugal fits the needs of your business.

Overview

Employment in Portugal is governed by the Labor Code (Código do Trabalho, Law No. 7/2009), most recently overhauled by the 2023 "Decent Work Agenda" reforms.

In Portugal:

• Salary is paid 14 times a year, not 12. Two extra months are statutory, not a bonus.

• There is no at-will employment. Every dismissal needs a legal ground and a documented process.

• Collective bargaining agreements (CBAs) are everywhere and routinely set pay and conditions above the statutory floor.

• Social security is uncapped, so employer cost scales with salary all the way up.

CBAs vary by sector and can override the minimums in this guide. Check whether one applies to the role before you finalize an offer.

Employment Contracts

Contracts must be in writing for everything except standard permanent roles, and in practice you should always put those in writing too.

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⚠️ A fixed-term contract must state the specific temporary reason for it, such as a defined project or a seasonal spike. Use one for an ongoing role and it can be reclassified as permanent. This is the single most common contract mistake foreign employers make here.

What the contract must cover

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• Both parties, job title, duties, workplace, and start date

• Salary, including the 13th and 14th month payments and any meal allowance

• Working hours and schedule

• Contract type, duration if applicable, and probation period

The applicable CBA, if there is one

Probationary periods

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Notice during probation depends on how far in you are:

• First 60 days: either side can walk away, no notice, no reason.

• After 60 days: employer gives 7 days' notice.

• After 120 days: employer gives 15 days' notice.

Employees can resign during probation without notice. Skip the notice you owe and you pay salary for the missing days.

Note: Confirm the probation period and its length in writing within the first 7 days of employment. Miss that window and the law assumes there is no probation at all.

Confidentiality and non-compete clauses

NDAs can be included directly in the contract at no extra cost. However, Portuguese law places tight restrictions on non-compete agreements:

• Written, with a defined duration, geographic area, and scope of activity

• The employer must pay compensation for the restricted period. No payment, no enforceable clause.

• Blanket non-competes across a whole workforce, or nationwide restrictions without justification, get struck down

Candidate screening and GDPR

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Employers may only verify information directly relevant to the role, and only with the candidate's informed consent.  

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Criminal record checks are limited to specific cases, like roles involving minors, security, or financial risk. Questions about family plans, health history, or union membership can also be treated as discriminatory.

🌍 Hiring non-EU nationals

EU, EEA, and Swiss citizens don't need a work permit. For everyone else, the process starts with a signed contract or formal offer, followed by two stages: a residence visa from a Portuguese consulate, then a residence permit from AIMA after arrival.  

Employers should plan for 2 to 6 months, longer if the role requires a labor market test.

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Working Hours and Overtime

The standard is 8 hours a day, 40 hours a week. Plenty of CBAs set less, commonly 35 to 39 hours.

Overtime

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• Compensatory rest: employees who work on a mandatory weekly rest day are entitled to a paid day off within the following three working days.

• Night work (22:00 to 07:00) carries a 25% pay premium, unless the role is inherently night-based or a collective bargaining agreement substitutes an equivalent benefit.

• Employees have the right to refuse overtime, and in the absence of accurate time records, disputes are generally resolved in the employee's favour.

Flexible arrangements

Two legal ways to vary hours, both needing employee agreement or a CBA:

• Flexible schedule (horário flexível): the employee picks start and end times within your core hours.

• Bank of hours (banco de horas): hours rise in busy periods and fall in quiet ones, as long as the annual total balances and overtime caps hold.

Portugal also has a statutory right to disconnect. Contacting staff outside working hours, emergencies aside, is a labor offence. Worth flagging managers in other time zones.

Minimum Wage

As of 2026, the national minimum wage (Retribuição Mínima Mensal Garantida, or RMMG) is:

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• Annual minimum: €920 × 14 = €12,880 on the mainland, because of the 14-payment structure.

• Rising each year: €970 in 2027 and €1,020 in 2028 under the current tripartite agreement.

• Trainees and apprentices in certified programs can be paid up to 20% below minimum, for a maximum of one year.

• Part-timers are paid pro-rata.

Note: Minimum wage is set annually by government decree. Confirm the current rate with Portugal's Directorate-General for Employment and Labor Relations (DGERT) before finalizing offers.

Payroll and Taxes

The 14-payment structure

Employees get 14 salary payments a year:

• 12 regular monthly salaries

• Christmas subsidy (13th month), paid in December

• Holiday subsidy (14th month), paid before the main summer holiday, usually June or July

Each equals one full month of base salary. With employee agreement, they can be spread across the year instalments rather than paid as lump sums. Budget for these payments regardless: they constitute a legal entitlement, not a discretionary bonus.

Income tax (IRS)

IRS is progressive and withheld monthly on a pay-as-you-earn basis, using official tables that factor in marital status and dependants. For 2026 there are nine brackets, applied to taxable income (gross pay after the standard deduction) rather than gross salary:

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• Minimum wage earners are exempt from withholding in 2026, though they may still need to file a return.

• Tax residency: over 183 days in Portugal in a 12-month period, or a permanent home there, means worldwide income is taxed. Non-residents are taxed only on Portuguese-source income.

• Extras: a solidarity surcharge applies at the top end, and the Azores and Madeira run their own tables.

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Payslips and payment methods

Payslips (recibo de vencimento) are legally required and must be itemized, showing:

• Employee name and tax number (NIF); employer name and corporate tax number (NIPC)

• Pay period and payment date

• Earnings: base salary, overtime, bonuses, allowances, meal allowance, and any 13th or 14th month payment made that period

• Deductions: employee social security and IRS withholding

• Net pay

Pay employees monthly, by the last working day, via bank transfer — the only method that cleanly satisfies tax, social security, and audit requirements. Cash payments are heavily restricted, and transactions of €3,000 or more generally cannot be made in cash at all.

Registration

Register with the tax authority and Social Security, and get a Social Security Identification Number (NISS) for each employee before their first day.

Note: Brackets, withholding tables, and thresholds change annually with the State Budget. Verify current figures with the Autoridade Tributária or a licensed accountant.

Social Security Contributions

Contributions to Segurança Social are split between employer and employee, calculated on full gross salary with no upper cap:

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No ceiling means a €1,000 gross salary costs you roughly €1,237.50 before you even add the 13th and 14th months.

Work accident insurance is a separate mandatory cost. It's private cover priced by industry and role risk, so there's no fixed percentage. This is the line foreign employers most often forget to budget.

⏳ Payment deadline: between the 10th and 20th of the month after the salary it relates to.

Note: You no longer contribute to the labor compensation funds (FCT and FGCT). FCT contributions ended permanently on 1 January 2024 under Decree-Law 115/2023, and FGCT payments are suspended. Older guides and cost calculators still include roughly 1% for these, which will overstate your costs.

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Leave Entitlements

Annual leave

• Employees are entitled to 22 working days of paid annual leave per year, which cannot be exchanged for cash.

• In the first year of employment, leave accrues at a rate of 2 days per completed month, up to a maximum of 20 days.

• Carryover is limited and permitted only until 30 April of the following year.

Public holidays

Portugal observes 13 public holidays a year, marked on their actual calendar date regardless of the day of the week.  

Employees are paid in full for these days, and employers may not dock pay, count holidays against annual leave, or require the time to be made up.  

Employees who do work on a public holiday are entitled to overtime pay and, typically, compensatory rest.

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Each municipality adds its own local holiday, usually one day (Lisbon on 13 June, Porto on 24 June). Which one applies comes down to the workplace named in the contract, not where the employee lives.  

Sick leave

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• Capped at 1,095 days (three years) per illness, after which the case is assessed for disability.

• To qualify, the employee needs a medical certificate (CIT) and six months of contributions.

• Waiting period waived for hospitalisation and certain illnesses.

• Short absences: employees can self-declare online for up to 3 consecutive days, twice a year, without a doctor. Justified but still unpaid.

Note: Some sources claim the employer must pay 89% of salary for the first three days. That is not the statutory position: those days are a waiting period paid by neither Social Security nor, by default, the employer. Some CBAs do require a top-up, so check the applicable agreement.

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Parental leave

Portugal treats maternity and paternity as one shared parental leave system, paid by Social Security rather than by you:

• Mothers: 120 days at 100% pay, or 150 days at 80%. Up to 30 days can be taken before the birth; 42 days after are mandatory.

• Fathers: 28 days at 100%, taken within 42 days of the birth, with at least 7 consecutive days immediately after. A further 7 optional days can run alongside the mother's leave.

• Extensions: +30 days for twins or multiple births, or where parents share the initial period.

After the initial leave: each parent can take up to 3 more months at a reduced rate (25% to 40% of reference salary).

Other leave

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Note: Parental leave involves choices the employee makes directly with Social Security. Confirm specifics with Segurança Social when a request comes in.

Employee Benefits

Statutory

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• 13th and 14th month payments (see Section 5)

• Work accident insurance for every employee

• 40 hours of training a year, provided or allowed for

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Market practice

Not required by law, but widely expected by candidates:

• Meal allowance (subsídio de alimentação): near-universal, paid per day actually worked. Tax- and social-security-exempt up to a daily limit, which is why the payment method matters:

• €6.15 per day paid in cash with salary

• €10.46 per day paid by meal card or voucher

Amounts exceeding the limit are taxed as salary and attract social security contributions on both sides. The card route gives employees meaningfully greater take-home pay for the same cost to the employer. Limits are set annually by government order (Portaria 51-B/2026/1 for 2026).

• Teleworking allowance: up to €1 per full remote day tax-free, or €1.50 under a CBA.

• Private health insurance: close to standard in tech, finance, and multinationals, despite universal public cover (SNS).

• Extra vacation days beyond the statutory 22, common in tech and professional services.

• Also common: transport allowance, company pension contributions, training budgets, and hybrid or remote arrangements.

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Termination Requirements

There is no at-will employment in Portugal. Every dismissal needs a recognized legal ground and a documented procedure. Get either wrong and the dismissal can be ruled unlawful, which means reinstatement or compensation on top of anything already owed.

Valid grounds

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Just cause (disciplinary): serious misconduct such as theft, violence, or repeated unjustified absence. No severance owed if it holds up.

Objective reasons: redundancy, role elimination, or unsuitability. Severance applies.

Collective dismissal: multiple redundancies, with extra consultation and notification steps.

Mutual agreement: written agreement to end the contract. Often the cleanest route on timing and terms.

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Notice periods (employer-initiated, objective dismissal)

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Employees resigning give 30 days (under 2 years of service) or 60 days (2+ years), unless you waive part of it.

Severance

For objective dismissals and redundancies on contracts started after October 2013:

• 12 days of base salary per full year of service, plus seniority-linked pay

• Capped at 12 times monthly salary, or 240 times the minimum wage

• Not owed for lawful disciplinary dismissals, or in the first 60 days of probation

Note: Severance formulas have changed several times since 2011 and depend on when the contract began. Confirm the applicable calculation with local counsel, especially for long-tenured employees.

The disciplinary procedure

A just-cause dismissal must follow a strict procedure: written notice of the alleged misconduct (the "note of fault"), a period for the employee to respond and present evidence (typically 10 working days), and a final written decision. Skipping any of these steps is the most common reason dismissals are subsequently overturned.

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Hiring Through an Employer of Record (EOR)

An Employer of Record lets you hire in Portugal without setting up a local entity. A local provider becomes the legal employer on paper, handling the contract, payroll, tax withholding, and social security, while you manage the day-to-day work.

Essential when:

• You're hiring your first one or two people and don't need an entity yet

• You want to test the market before committing to incorporation

• You need to move quickly

If you already have a Portuguese entity and mainly need payroll, filings, and compliance support, a Global Payroll or PEO arrangement is usually the better fit.

💡 Knit supports employers hiring in Portugal through EOR, Global Payroll, and PEO services. It's one option among several, and the right structure depends on your timeline, headcount, and long-term plans in the market.

Portugal gives you a skilled, multilingual workforce and straightforward EU market access. The trade-off is a labor code that leans firmly toward employee protection.

Get four things right and most problems never arise: the correct contract type, payroll built around 14 payments, proper social security registration, and a documented termination process. Whether you hire through a local entity or an EOR to move faster, those fundamentals stay the same.

Considering Portugal as a hiring partner or have more questions? Reach out to Knit.

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Frequently Asked Questions

Do I need a local entity to hire in Portugal?

No. You can set up an entity, or use an EOR to hire without one. Contractors are an option for genuine non-employment work, but misclassification risk applies if the relationship looks like employment.

What does it actually cost to employ someone?

On top of gross salary, budget employer social security (23.75%), work accident insurance, the 13th and 14th month payments (roughly two extra months a year), and usually a meal allowance. All-in employer cost typically runs 35% to 40% above base salary.

Can I use fixed-term contracts to stay flexible?

Only where there's a genuine, documented temporary need. They cap at 2 years including renewals, and using one for an ongoing role risks reclassification as permanent.

What happens if I skip the dismissal procedure?

A labor court can rule the dismissal unlawful and order reinstatement or compensation, potentially including back pay, on top of any severance already due.

Is probation mandatory?

No, but it's standard. It has to be agreed in writing within the first 7 days, or the law assumes there isn't one.

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