Employment Law Guide for Companies hiring in Portugal
This guide is available for download here.
Portugal’s labor law is governed by the Portuguese Labour Code (Código do Trabalho), which outlines the rights and obligations of both employers and employees. This law is supplemented by the Portuguese Constitution, which establishes core labor rights, including protection from unfair dismissal, fair wages, and the right to unionize.
In addition to national legislation, Collective Bargaining Agreements (CBAs), also known as Collective Regulation Instruments (IRCTs), play a significant role. These agreements, negotiated between employers and trade unions, may provide terms that exceed the statutory minimum, offering benefits like higher wages or additional leave entitlements.
The Authority for Working Conditions (ACT) is responsible for enforcing compliance with labor laws. Employers must comply with the legal requirements to avoid penalties.
Companies operating or intending to operate in Portugal must thoroughly understand the Labour Code to ensure compliance with local legal requirements. They should also identify any relevant Collective Bargaining Agreements (CBAs) that apply to their industry, as these agreements may impact their obligations and employees’ rights. Employees who believe their labor rights have been violated can report such issues to the Authority for Labour Conditions (ACT), which is empowered to investigate and impose penalties on employers found to be in non-compliance. This highlights the critical need for international companies to prioritize strict adherence to labor laws in their employment practices in Portugal.
Hiring Employees in Portugal
Hiring EU/EEA/Swiss Citizens
Employees from the European Union (EU), European Economic Area (EEA), or Switzerland can live and work in Portugal without requiring a residence permit or visa. However, if they intend to stay for more than three months, they must obtain a Residence Certificate from the local city hall.
Hiring Non-EU Citizens
Hiring non-EU citizens is a more complex process. These employees typically require a work visa and a work permit. A job offer from a Portuguese employer is generally required to apply for a work visa.The process involves sponsorship by the employer, and various visa options exist depending on the nature of the job (e.g., job seeker, skilled workers, highly qualified professionals, digital nomads).
The Agency for Integration, Migration, and Asylum (AIMA) handles immigration procedures, replacing the Portuguese Immigration and Borders Service (SEF).
The prospective employee should apply for a Residence Visa for work (type D visa) at a Portuguese consulate in their home country. To support this, the employer needs to provide a job offer or employment contract.
The visa application is reviewed by the immigration authorities (now AIMA) and, if approved, the consulate issues a residence visa typically valid for 4 months, allowing the individual to travel to Portugal. After entry, the employee must obtain a Residence Permit card to legally reside and work longer-term.
In addition to a traditional job visa, Portugal offers specific visa categories that facilitate hiring foreign talent, including the Tech Visa, the Highly Qualified Visa, and the Digital Nomad Visa.
Employment Contracts
Employment contracts in Portugal can be either written or verbal. Certain types of contracts, such as those with non-EU workers, temporary contracts, remote work agreements, part-time contracts, fixed-term contracts, contracts with multiple employers, and management contracts, must be formalized in writing. Contracts should detail essential terms, including the nature of the work, salary, working hours, and termination conditions.
In some instances, the drafting of legal contracts by non-qualified agents may be considered unauthorized legal practice. To ensure full compliance with the Portuguese Labour Code and other applicable legislation, it is advisable that employment contracts are drafted with appropriate legal expertise, thereby safeguarding the company’s adherence to labor regulations.
There are various types of contracts:
Open-ended contracts (“contrato sem termo”), the most common, are indefinite and permanent.
Fixed-term contracts (“contrato a termo certo”) are for specific projects or to replace absent employees, with a maximum duration of two years and renewable up to two or three times. This type of contract is highly restricted.
Part-time contracts (“contrato a tempo parcial”) must be in writing and involve a reduced work schedule.
Short-term contracts (“contrato de muito curta duração”) are used for seasonal or temporary work, lasting no more than 35 days per term or 70 working days per year, and may not always require a written agreement.
Remote work agreements based on mutual agreement between the employer and employee, allowing for either certain days of telework or full remote work. Typical employment characteristics, including the employer’s direction, still apply.
Probationary Periods
Probationary periods are standard in Portuguese employment law, with duration varying based on the contract type and employee role. During probation, both employer and employee can terminate the contract with minimal notice, although specific requirements apply once the probation period exceeds certain lengths.
Employers must inform the employee in writing about the probationary period’s duration and conditions within 7 days, or the probationary period will be considered non-existent. It is best to include a probationary period clause in the employment contract.
For open-ended contracts, the probation period is typically 90 days, extendable to 180 days for roles requiring technical complexity and responsibility, and up to 240 days for senior positions. For fixed-term contracts, the probation period is 30 days for contracts lasting six months or more, and 15 days for contracts shorter than six months.
Managing the Employment Relationship in Portugal
Working Hours and Overtime
The standard full-time working week in Portugal is 40 hours, with a maximum of 8 hours per day. Overtime is limited to 2 hours per day and 150 to 175 hours annually, depending on company size. Overtime must be compensated at higher pay rates, 125% of the regular hourly wage for the first hour on weekdays, 137.5% for additional hours, and 150% for work on weekends and public holidays. If an employee exceeds 100 overtime hours annually, higher rates may apply.
Employees are entitled to a minimum 11-hour rest period between workdays and a rest break of 1 to 2 hours if working over five consecutive hours, typically taken as a lunch break. Employers must also grant at least one day off per week, generally on Sunday.
Paid Annual Leave and Sick Leave
Employees are entitled to 22 working days of paid annual leave (“paid vacation”) each year. In their first year, employees accrue two days of leave per month, typically up to a maximum of 20 days, with leave available after six months of service. Unused leave generally expires on January 1st but can be taken until April 30th. Cash in lieu of unused leave is usually not permitted, except in specific circumstances.
Sick leave (“baixa médica”) in cases of illness or injury is provided by the Portuguese social security system with the first three days potentially being unpaid. After this period, sick pay is granted based on a percentage of the employee’s salary, for up to 1,095 days. Self-employed individuals usually need to be ill for at least 10 days to qualify for compensation, except in cases of hospitalization or tuberculosis.
Parental Leave and Other Types of Leave
Portuguese labor law offers comprehensive parental leave entitlements. Mothers are entitled to up to 30 days of maternity leave before childbirth, with a mandatory 42 days of leave post-childbirth. Fathers are granted 28 days of paternity leave within the first 42 days, with 7 consecutive days taken immediately after birth. Parental leave can be shared between both parents, lasting between 120 and 150 days, with possible extensions. During this period, employees typically receive full salary compensation through the Social Security system.
Additional leave entitlements include marriage leave, bereavement leave, family care leave, and unpaid leave, each subject to specific legal conditions.
Employee Compensation and Benefits
The national minimum wage for 2025 is €870 per month. Employees are also entitled to mandatory Christmas and holiday bonuses, each equivalent to one month’s salary. Additional benefits like meal vouchers and transport allowances may be offered by employers.
Data Privacy
Data protection is a crucial element of Portuguese employment law, with personal data processing governed by the General Data Protection Regulation (GDPR). Employees’ personal data is given strong protection under this framework, ensuring that any data related to an employee’s performance is used only under specific, justified circumstances (e.g. payroll). It cannot be utilized in ways that may negatively impact the employee’s rights or interests. Know more about data privacy in Portugal.
Non-Compete Clauses
Under Portuguese law, non-compete clauses are enforceable in employment contracts, particularly for employees in higher-level positions with access to sensitive company and industry information. These clauses can extend up to three years after the termination of employment, and employees must be financially compensated for the restriction imposed on their post-employment activities.
Employment Termination in Portugal
Under Portuguese law, the termination of employment is generally only permissible with just cause, with exceptions made during the probationary period or in cases of mutual agreement between the employer and the employee.
Employee Resignation
Employees have the right to voluntarily resign from their position, provided they issue a written notice to the employer. The required notice period depends on the employee’s length of service and the type of employment contract in place. After the probationary period, the resignation notice period typically ranges from 15 to 60 days, depending on the employee’s tenure and type of employment contract.
Employer-Initiated Termination
Employers may terminate an employment contract for various reasons, each of which is subject to specific procedural requirements. The primary grounds for employer-initiated termination include:
Just Cause and Disciplinary Dismissals
Occur due to serious misconduct occurs when an employee’s conduct or failure to fulfill legal or contractual obligations justifies termination. Common grounds for disciplinary dismissal include disobedience to employer instructions, violations of worker’s rights, damage to company property or unjustified absenteeism.
The process for disciplinary dismissal requires the employer to follow a formal procedure, which includes the issuance of a written notice (“Nota de Culpa”), detailing the reasons for the dismissal. The employee is granted the opportunity to respond and present a defense. Notably, no notice period is required for dismissals based on disciplinary grounds.
Disciplinary proceedings must be conducted by an impartial individual or body well-versed in the complexities of such procedures and committed to upholding the rights of both the employee and employer, thereby guaranteeing a fair and equitable process. The right to a fair procedure is mandated by the Portuguese Constitution, and failure to uphold this right may render the disciplinary process unlawful.
Objective Dismissal and Redundancy
Objective dismissal refers to termination due to factors unrelated to the employee’s conduct, such as economic reasons; structural changes or technological advancements (e.g., redundancy or position elimination)
In these cases, the employer must adhere to a consultation process and notify the affected employee in writing. The notice period for objective dismissals varies according to the employee’s length of service, ranging from 15 to 75 days.
Collective Dismissal
Collective dismissal applies when an employer is required to terminate the contracts of multiple employees due to the objective reasons outlined for objective dismissal. In companies with fewer than 50 employees, at least two employees must be dismissed, and in companies with 50 or more employees, at least five employees must be dismissed. The collective dismissal process involves consultation with employee representatives and mandatory notification to the Ministry of Labor.
Termination by Mutual Agreement
Employment contracts may be terminated by mutual consent between the employer and the employee. Such agreements must be in writing. Employees have a seven-day window to revoke the agreement, unless it has been notarized.
Severance
In the case of objective dismissal, the employee is generally entitled to severance pay. If a dismissal is found to be unlawful, the employee may be entitled to reinstatement, back wages, and compensation for damages.
Certain employees enjoy enhanced legal protections, including those who are pregnant, on maternity leave, or on parental leave. Dismissing these employees is subject to stricter legal conditions.
Tax and Social Security considerations for International Companies and Employees
When managing employees in Portugal, understanding tax and social security obligations is essential for compliance. Here’s a more detailed look at the relevant tax and social security considerations:
Taxation of Employees
Tax Residency: For tax purposes in Portugal, individuals are considered tax residents if they spend more than 183 days in the country in a 12-month period or have a habitual residence in Portugal. Tax residents are subject to Portuguese income tax on their worldwide income, while non-residents are taxed only on Portuguese-sourced income. This means that international employees moving to Portugal should be aware of their residency status and how their income will be taxed.
Progressive Tax Rates: Portugal follows a progressive income tax system for residents, with rates increasing with higher income levels. The rates for 2025 range from 14.5% to 48%, depending on the individual’s income (additional surtaxes may apply). The specific tax bracket will depend on the employee’s salary.
Non-Resident Taxation: Non-resident employees, who are those not meeting the tax residency criteria, typically face a flat rate on their employment income earned in Portugal, which is set at 25%. This rate may differ depending on specific circumstances or the nature of the employment (e.g., temporary assignments, contract work).
Tax Incentives
Portugal has previously offered the Non-Habitual Resident (NHR) program, which provided significant tax benefits, such as a 20% flat income tax rate and exemptions on foreign-sourced income. While the NHR program is now closed to new applicants, a transitional period may apply until March 2025 for those who met specific criteria by 2023.
The Tax Incentive for Scientific Research and Innovation (IFICI) regime, or NHR 2.0, has replaced the NHR program. This regime targets qualified professionals and entrepreneurs in science, technology, education, and innovation, offering a 20% flat tax rate on income from eligible activities in Portugal and exemptions on most foreign-sourced income (excluding pensions) for up to 10 years. Know more about the IFICI.
Additionally, the Youth PIT (IRS Jovem) tax benefit offers partial tax exemptions for young individuals under 35 who earn income from employment or self-employment.
Social Security Contributions
In Portugal, both employers and employees are required to contribute to the social security system, with employers contributing 23.75% and employees contributing 11% of the employee’s gross salary. Employers must also provide work accident insurance and may offer optional benefits such as meal vouchers, transportation allowances, and supplementary health insurance.
Employers are responsible for registering with the Social Security Institute, obtaining a Social Security Identification Number (NISS) for each employee, and notifying the Institute of new hires at least 24 hours before employment begins.
They must also calculate, withhold, and remit social security contributions, maintain employment records, and provide written contracts. Additionally, employers must ensure workplace safety and offer professional training when required.
The Portuguese government offers social security contribution relief for employers hiring young individuals or long-term unemployed workers through programs like Estágios INICIAR, +Emprego, and +Talento. These programs provide financial support, including meal allowances, transport expenses, and reductions in employer contributions. International companies and startups should consider these programs to reduce hiring costs.
Cross-Border Workers and Non-EU Citizens: Social Security Considerations
For non-resident workers or those moving between EU countries for employment, social security coordination within the EU allows workers to retain their social security rights. Employees transferring from another EU country to Portugal should ensure they have a valid European Health Insurance Card (EHIC). They may also transfer their social security contributions to Portugal, in accordance with EU regulations.
Non-EU citizens employed in Portugal are generally subject to the same social security contributions as Portuguese residents. However, the application of bilateral social security agreements between Portugal and certain non-EU countries may affect contribution requirements. Employers should verify the existence of any such agreements and understand how they may influence the social security contributions of their non-EU employees.
Conclusion and Recommendations
Portugal’s labor laws provide clear regulations for hiring and terminating employees, applying equally to both local and foreign workers. The Portuguese Labour Code and Constitution ensure that international companies adhere to the same standards as local employers. EU/EEA/Swiss citizens can move freely but must register for stays over three months. Non-EU citizens need a work visa, often requiring employer sponsorship, and companies should be aware of changes in immigration responsibilities.
Employment contracts can be verbal or written, but written contracts are mandatory for certain employees, especially non-EU workers. Employers must comply with rules on working hours, leave, compensation (including minimum wage, bonuses, and social security contributions), and workplace safety. Employment termination requires just cause outside probation, and unlawful dismissals may result in legal consequences.
Companies should also consider tax benefits, such as the IFICI regime, which replaces the NHR program for new applicants, and explore available government incentives for hiring.
International companies are advised to consult expert lawyers on Portuguese employment and tax laws to ensure their employment contracts are legally sound and, when necessary, in writing. It is essential to establish clear employment policies and procedures, stay updated on changes to labor laws, taxes, and social security, and explore tax incentives and hiring grants to reduce costs.
By following these steps, international companies and startups can navigate the Portuguese employment landscape more effectively, ensuring compliance with all applicable regulations, managing risk, and fostering positive relationships with employees in Portugal. This proactive approach will help them build a strong foundation for sustainable growth and success in the Portuguese market.
Tips for International Employers
- Always use written contracts, especially for non-EU hires
- Check if CBAs apply to your industry
- Review immigration, tax, and social security rules regularly
- Consider legal advice for contracts, dismissals, and incentives
- Use available government hiring support programs to reduce costs
About GFDL Advogados
Our Employment Law practice supports companies with both litigious and non-litigious HR matters. We assist employers across all stages of the employment relationship — from drafting compliant employment contracts to handling complex dismissals and workplace disputes.
We provide legal guidance on:
- Employment policies and compliance with Portuguese labor law
- Disciplinary proceedings and litigation before labor courts
- Employment termination and redundancy procedures
- Workplace restructuring and collective dismissals
- HR strategy, employee benefits, and internal investigations
Our team ensures your employment practices align with both local law and international standards.
GFDL Advogados’ Global Talent Advisory practice assists employers in managing international workforce mobility.
The firm supports companies in securing temporary and permanent visas for new hires or seconded employees. We offer tax-efficient strategies for international assignments, design compensation and benefits packages, and ensure compliance with immigration, tax, and social security regulations.
Additionally, GFDL Advogados advises on near-shoring operations, helping businesses establish and manage teams in Portugal to serve European and American markets.
GFDL Advogados is a member of the Lexing® network, an international alliance of law firms specializing in digital and emerging technologies. This affiliation enables the firm to provide clients with access to legal expertise across more than 40 countries, ensuring comprehensive support for global operations.
The firm’s team comprises professionals fluent in multiple languages, including Portuguese, English, French, Spanish, Hungarian, and Romanian, facilitating effective communication with a diverse clientele.
For more information, visit our website www.gfdl.legal
This guide is available for download here.
Disclaimer
This publication or document contains general information and is not intended to be comprehensive nor to provide legal or tax advice or services. It should not be acted upon, relied upon, or used as a basis for any decision or action that may affect you or your business. Professional legal advice should be requested for specific cases. We do not undertake any continuing obligation to advise on future legal amendments or of the impact on the conclusions herein. Prior results do not guarantee a similar outcome. The contents of this publication or document may not be reproduced, in whole or in part, without the express consent of GFDL Advogados.
