Employing in Portugal
Portuguese Payroll
Optimise your business operations by outsourcing your payroll in Portugal through PeoplePay Global. Our team of global payroll experts will provide comprehensive payroll processing, ensuring accuracy and compliance with all Portuguese labour laws, including social security contributions, tax withholdings, and statutory reporting.
By partnering with our experts, you can reduce administrative burdens, minimise compliance risks and costly mistakes, and ensure timely, accurate payroll payments. Outsource your payroll today for secure, efficient payroll management to support tailored company growth.
Payroll Services Portugal
Improve your business operations by partnering with professional payroll services in Portugal through PeoplePay Global. Our team of experts will provide efficient solutions for managing your payroll, including income tax (IRS) withholding, Social Security contributions, employment contracts, and mandatory reporting. Ensure your business is free from administrative burdens by allowing us to deliver accurate salary calculations, timely submissions and strict adherence with Portuguese labour laws.
We will manage every step of the process for you with care and precision, including overtime payments, employee benefit administration, and detailed payslip preparation, using secure, data-protected systems. Each of our specialists will stay up to date on regulatory changes to ensure your company remains compliant and avoids penalties and compliance risks.
Whether you are a startup company or a multinational organisation looking to improve your existing payroll solutions and processes, our scalable payroll services can provide reliable support. Contact us today to gain the peace of mind that your payroll operations are handled securely and accurately, with compliant management.
In Portugal, pay and taxation are based on gross salary, minus any mandatory deductions, including income tax and social security contributions. Employers are also required to contribute additional social security contributions on top of gross pay.
The minimum wage in Portugal is approximately €920 gross per month, based on a full-time workweek of 40 hours. Part-time workers will receive the pro rata minimum wage. The 40-hour working week is split into 8-hour days over 5 days, with a maximum average of 48 hours per week.
Employees’ gross salary is then reduced by income tax and social security contributions. Employers will pay an additional ~23.75% in Social Security on top of gross salary.
Portugal uses a progressive tax system for income tax, as follows:
- 14.5% up to €10,000
- 23% between €10,001 – €20,000
- 28.5% between €20,001 – €40,000
- 37% between €40,001 – €80,000
- 45% between €80,001 – €250,000
- 48% above €250,000
Employees are also required to pay 11% of their gross salary to social security contributions, with employers paying 23.75%. This contribution covers pensions, unemployment, sickness, maternity and healthcare benefits.
In Portugal, pension contributions are primarily handled through the state social security system, with optional private schemes for any additional retirement income.
Portugal works on a pay-as-you-go state pension scheme. Contributions are mandatory for both employers and employees. They are paid at 11% of gross salary for employees, deducted from monthly pay, and at 23.75% of gross salary for employers, paid on top of gross salary. These contributions are made to fund old-age pensions, disability benefits, survivors’ pensions and unemployment and sickness benefits. Full pension eligibility depends on years of contributions, with a minimum of ~15 years for a partial pension and ~40 years for a full pension.
Many employees will supplement their state pension with either an occupational pension or a private personal pension. Contributions are salary-based and typically range from 2% to 7% of gross salary. Employers must also contribute by matching pay or by a fixed percentage. Once an employee retires, they can receive the payment as a lump sum or as monthly annuity payments.
In Portugal, working hours are regulated by the Labour Code and the EU Working Time Directives.
The typical full-time working week is 40 hours, averaged over 8 hours a day.
The maximum weekly hours employees can work is 48. Overtime is paid or compensated with time-off in lieu. A standard overtime rate is typically 125-150% of normal pay.
In Portugal, statutory leave and time off are regulated by the Labour Code. Employees are entitled to paid annual leave, public holidays, sick leave, and family-related leave, with legal protections to support a satisfactory work-life balance.
Annual leave in Portugal has a minimum of 22 working days per year for full-time employees. Part-time employees will receive pro-rata leave. Employees are often offered up to 30 days of annual leave; however, this is a standard practice. Any unused leave generally carries over to the next year, but it must be used within 12 months of the grant.
Portugal has 12 national/public holidays, during which employees are entitled to paid leave if they fall on a normal working day. If they must work, they are paid premium pay or receive a compensatory day off.
Employees are entitled to paid sick leave, with payments split between the employer and Social Security. For example:
- 1 – 3 days of sick leave:
- This will be paid by the employer, as either a partial or full salary, depending on the contract.
- 4 – 30 days of sick leave:
- Social Security will pay this as a percentage of a normal salary, typically 55-75%.
- After 30 days of sick leave:
- The employee will continue to receive Social Security benefits, depending on disability rules.
Employees are required to provide a medical certificate when taking sick leave.
Maternity leave is provided with 120-150 days of paid leave. This is paid by Social Security at 100% of the normal salary, with job protection guaranteed. For paternity leave, 20 working days are provided and paid via social security. Parental leave includes an additional 3 months of unpaid leave, with full job protection.
In Portugal, termination of employment is strictly regulated under the Labour Code. Employees are afforded strong protections, and employers are required to follow formal procedures in practice.
An employee may be terminated only for redundancy, poor performance, or serious misconduct. Employers must document the reasons for termination and follow strict procedures; otherwise, their dismissal may be considered unfair.
If the employee has made the termination, they must resign with notice. Notice periods from employees are determined as follows:
- 15 days for < 6 months of service.
- 30 days for 6 months to 2 years of service.
- 60 days for 2 – 5 years of service.
- 75 days for 5 – 10 years of service.
- 90 days for 10 – 15 years of service.
- 120 days for any service over 15 years.
Notice can be shortened by mutual agreement between the parties and replaced with a payment in lieu.
Severance pay may be provided to employees terminated due to redundancy or employer-initiated dismissal. This will typically be ~1 to 3 months’ salary per year of service.
