If your business is planning to hire in Portugal, you’re not alone. Portugal has a large population of highly educated remote workers, many of whom speak English well, making it a strategic and cost-effective country for overseas recruitment. For U.S. companies, hiring in Portugal requires a lot of knowledge about the country’s laws, its position as an EU member, and its work culture.

We’re looking at how to hire in Portugal legally and compliantly, and how working with ke Payoneer Workforce Management can make hiring employees in Portugal streamlined.

How to hire in Portugal

American companies hiring in Portugal have three main options, and each method has benefits and drawbacks.

1) Set up a legal entity in Portugal

To hire in Portugal, U.S. companies can register their business as a legal entity in the country. This allows you to directly hire employees in Portugal, just like you would when hiring in the U.S. Setting up a legal entity can be a good option for large companies looking to set up a long-term, permanent presence in Portugal. 

However, the process to set up a legal entity can be time-consuming and expensive. For companies looking for a fast and flexible solution to hiring in Portugal and other countries around the world, establishing legal entities in every country isn’t the best option.

2) Hire contractors in Portugal

Instead of hiring employees in Portugal, you may be able to hire contractors for smaller or short-term projects. Contractors aren’t subject to the same regulations as employees in Portugal, so they can be a good option for some companies.

However, companies cannot treat contractors like employees. That means contractors have the freedom to choose when, where, and how they work. Claiming employees are contractors to avoid adding them to payroll or giving them statutory benefits is considered employee misclassification. 

In Portugal, penalties for employee misclassification may include:

• Retroactive contributions to Social Security
• Retroactive benefits such as vacation days, bonuses, and meal allowances
• Retroactive severance pay in the case of a misclassified employee being dismissed unlawfully

3) Use a workforce management platform

Typically, companies prefer to work with an Employer of Record (EOR). However, the EOR model may not be permitted or recognized in Portugal, so you may use a workforce management platform.

These third-party companies can hire employees on your company’s behalf, without setting up a local entity.

They also support with the HR responsibilities for the local workers, handling employment contracts, taxes, social security contributions, payroll, leave management, and more. This may allow American companies hiring in Portugal to grow their team compliantly.

Learn more about using a workforce management platform in Portugal.

Where to find employees in Portugal

To hire in Portugal, you first need to find top candidates. Here are the most common ways to handle recruitment in Portugal.

Popular job boards in Portugal

Posting job listings on local Portuguese job boards is a great way to reach top talent. Here are some popular job boards in Portugal:

• Net-Empregos: This job board requires an NIF (a Portuguese tax number) to post openings. Companies need to set up a local entity or work with a workforce management platform to gain access.
• Alerta Emprego
• SAPO Emprego
• Jobs in Lisbon: This site focuses on English-language positions.

Work with local recruitment agencies

Working with a local recruitment agency is a great way to offer Portuguese language support to candidates. Local agencies will also know exactly where to look to find the talent you need, and can speed up the hiring process.

However, using an external recruitment agency to hire in Portugal gives your team less control and increases the overall cost of hiring.

Recruit with the support of a workforce management platform

If you’d prefer to screen applications and run interviews yourself, working with a workforce management platform can help you maintain control while getting support with the more complex HR tasks from a third party. 

Payoneer Workforce Management can help you handle the essential HR admin, including employment contracts, onboarding, benefits, and payroll compliance.

Onboarding employees in Portugal

Once you’ve found your dream candidate to hire in Portugal, you’ll need to get them set up for their first day. Here are some key steps for onboarding employees in Portugal:

• Run a background check to make sure the information on the applicant’s resume is accurate.
• Send an official offer letter that details their start date, probation period, job details, payment details, and other key details.
• Take care of the administrative work, including:
  • Legal agreements
  • Tax forms
  • NDAs
  • Benefits enrollment
  • Payroll setup
• Configure and send any company devices the employee will need.
• Set up their accounts for the company tech stack (services like Slack, Zoom, Outlook, etc).
• Prepare a welcome pack with resources such as:
  • An employee handbook
  • A team directory
  • Company information
  • An agenda for their first day or week
  • Training materials
• Schedule an orientation or welcome call.
• Send a welcome email to greet them on their first day.

Key employment laws and requirements in Portugal

Here’s an overview of the most important laws and regulations to keep in mind when hiring in Portugal.

Employment contracts

In Portugal, employment contracts can be written or verbal (though getting a written contract is always a good idea). There are various types of contracts, including:

• Fixed-term
• Unspecified duration
• Indefinite duration (permanent)
• Short duration
• Part-time
• Temporary
• Provision of services

Every contract should include the following information:

• Company and employee identification
• Place of work (i.e., office location or remote work)
• Job description
• The start date and end date of the contract
• Information about employee holidays
• Criteria for termination of the contract
• Salary information and payment schedule
• Normal working hours
• Occupational accident insurance policy

Working hours and holidays

The labor laws in Portugal are outlined by the Código do Trabalho. This law dictates the following rules on working hours and holidays:

• Maximum work hours: Maximum working hours are 40 hours per week and 8 hours per day.
• Breaks: Employees are entitled to a break after 5 continuous hours of work.
• Rest between shifts: There must be 11 hours of rest between shifts.
• Weekly rest: Every employee is entitled to 1 day off per week.
• Overtime: The maximum amount of overtime is 8 hours per week.

There are 13 public holidays in Portugal, which must be given as paid days off if they fall on a workday:

Holiday	Date
New Year’s Day	January 1st
Good Friday	Date varies (usually March or April)
Easter Sunday	Date varies (usually March or April)
Liberty Day	April 25th
Labor Day	May 1st
Corpus Christi	Date varies (usually May or June)
Portugal Day	June 10th
Assumption of Mary	August 15th
Republic Day	October 5th
All Saints’ Day	November 1st
Restoration of Independence	December 1st
Feast of the Immaculate Conception	December 8th
Christmas Day	December 25th

In addition to public holidays, Portuguese workers are entitled to a minimum of 22 days of paid vacation per year (after their first year of service).

Workers earn 2 days of vacation per month (up to 20 days) during their first year with a company. They can use these vacation days after 6 months of service.

Tax obligations

In Portugal, employers must withhold income tax on behalf of the employee and send it to the Portuguese tax authorities. 

Income tax rates are progressive and vary based on an employee’s marital status and other factors. Portugal’s income tax rates span from a minimum of 13.25% for the lowest income bracket up to 48% for the highest earners. Furthermore, very high incomes are subject to additional solidarity surcharges.

Employers must also contribute 23.75% of the employee’s gross income to social security, which covers family, pension, and unemployment benefits. The employee contributes 11% of their income to social security.

Termination and severance

According to the Portuguese labor laws, employment contracts can end for the following reasons:

• Expiry
• Dismissal attributable to the worker
• Collective dismissal
• Dismissal for redundancy
• Dismissal for unsuitability
• Termination by the worker

When an employer terminates a contract, employees usually have the right to severance pay. The amount varies based on the exact circumstances and the nature of the termination.

Payoneer Workforce Management helps hire in Portugal

U.S. companies hiring in Portugal need to build an efficient, compliant process for recruitment, onboarding, and payroll. To stay compliant, you need to abide by regulations in the Código do Trabalho and stay on top of tax responsibilities to avoid penalties.

Payoneer Workforce Management can help companies hire independent contractors and full-time employees in over 160 countries, including Portugal. You don’t need to set up any legal entities in your target countries to work with us, and we can help you handle the toughest parts of hiring overseas. Our unified platform enables you to:

• Onboard local hires quickly and easily
• Run global payroll in a few clicks
• Guidance to stay compliant with local regulations
• Manage taxes, benefits, timesheets, and more

Request a demo today.

FAQs

1) Can a U.S. company hire an employee in Portugal?

Yes, there are three main options for U.S. companies hiring in Portugal. The first is to set up a local entity to officially do business in Portugal. This allows you to hire and manage employees directly. The process takes time to complete and comes with high administrative costs, but it’s a good option if you want to set up a long-term presence in Portugal.

Companies can also hire independent contractors. This approach is simpler than setting up a local entity, but the lack of benefits and Social Security contributions will make it harder to attract top talent. Additionally, you must not classify employees as contractors, because this can result in severe penalties.

For many American companies hiring in Portugal, working with a workforce management platform serves as a good solution. For instance, Payoneer Workforce Management can help you hire globally with support to manage employment contracts, payroll, and taxes, with compliant support.

2) How to pay an employee in Portugal?

You can pay an employee in Portugal via direct bank transfers, international payment platforms, or partner with a workforce management platform like Payoneer Workforce Management, who, in addition to paying employees, also support tax withholdings, benefits, onboarding, and compliance.

3) How much does Portugal pay workers per hour?

The minimum wages in Portugal change depending on where the employees live. These differences are due to the varying costs of living in each region. In mainland Portugal, the monthly minimum salary is currently EUR 870, which equals around EUR 5.40 per hour.