How To Hire Top Talent With an Employer of Record in Portugal

Thinking about expanding your team to Portugal?

Portugal is a thriving hub of talented professionals, especially in technology, tourism, and renewable energy. 

In fact, the technology sector alone has seen an annual growth rate of 6.4% over the past few years, contributing significantly to the country's economy. 

Portugal's culture embraces innovation and a high standard of education, making it ideal for businesses looking to expand with top-tier talent.

But, navigating Portugal's labour laws requires the right know-how.

Enter the Employer of Record (EOR) in Portugal. They simplify the hiring process, ensure compliance with local regulations, and take on the administrative burden so you can focus on growing your business.

Let me show you how partnering with an EOR in Portugal can make hiring there a breeze. 

Ready? Let's roll.

What Is an Employer of Record in Portugal?

An Employer of Record in Portugal is a third-party organisation that handles your local team's legal employment responsibilities. 

From managing payroll and tax compliance to overseeing contracts and adhering to Portuguese labour laws — they’ve got it covered.

My pro tip:  If you're curious about EORs, look at my detailed guide on "What Does EOR Stand For?" for more info.

In other words, while the EOR becomes your team's legal employer, you stay in control of their day-to-day roles and responsibilities.

Why Do Businesses Choose an EOR in Portugal Over Hiring Directly?

Here are some key reasons why so many companies work with an EOR in Portugal:

• Risk Mitigation: Avoid penalties and compliance issues by having experts manage local labour laws and regulations.
• Rapid Market Entry: Establishing a local entity can take several months. With an EOR, you can get started in just a few weeks, making market entry faster and more efficient.
• Compliance Expertise: Portugal's labour laws can be complex, but an EOR helps you navigate them seamlessly.
• Cost Efficiency: Skip the costs of opening a physical office or establishing a legal entity.

An EOR lets you tap into Portugal's deep talent pool while avoiding administrative headaches. 

But what makes Portugal such an attractive hiring market? Let’s find out.

Understanding the Portuguese Employment Landscape

When I first explored hiring in Portugal, I quickly learned that its employment landscape has some unique quirks. 

Portugal is business-friendly, but its labour regulations require careful attention. 

For instance, you must deal with mandatory social security contributions and understand the complex requirements around employee terminations.

Here’s what else you must know when hiring in Portugal.

Standard Working Hours and Overtime

In Portugal, the standard workweek is 40 hours, spread over five days. Work-life balance is highly valued here, with many companies offering flexible hours and hybrid working models.

Overtime pay is regulated, generally compensated at a higher rate (usually 125% to 150% of regular pay) or with additional time off. 

You need to monitor and document overtime closely to ensure compliance with legal requirements and avoid penalties. Portuguese authorities are strict about compliance with labour law.

Compensation and Currency

Portugal uses the Euro (EUR), and wages vary based on the region and industry. 

Salaries tend to be higher in Lisbon and Porto, reflecting the cost of living, while other regions may offer lower wages.

The minimum wage in Portugal for 2024 is set at EUR 820 per month, but salaries can be competitive, especially in tech and renewable energy sectors. 

Many Portuguese employers also provide meal allowances or transportation subsidies, making roles even more attractive.

Public Holidays and Vacation Leave

Portugal celebrates several public holidays that can vary regionally. Key national holidays include:

• Freedom Day (April 25)
• Portugal Day (June 10)
• Christmas Day (December 25)

Full-time employees are entitled to 22 days of paid annual leave and, depending on the region, around 13 public holidays. 

Businesses must account for these holidays when planning their operations.

Next, let’s look at taxes and social contributions.

Taxes and Social Contributions

To stay compliant in Portugal, understanding the tax system is essential. Here’s what you need to know:

Income Tax

Income tax in Portugal is progressive, ranging from 14.5% to 48%, depending on earnings. Employers must withhold these taxes from employee salaries.

Social Security Contributions

Employers contribute around 23.75% of an employee’s salary towards social security, which covers healthcare, pensions, and unemployment benefits.

To give you an idea, social security contributions can add approximately 23.75% on top of gross salaries, significantly affecting total employment costs. 

For instance, hiring an employee with a monthly salary of EUR 2,000 would require an additional EUR 475 in social security contributions, making it essential to factor in these costs for budgeting.

Leave Policies and Parental Benefits

Portuguese employees are entitled to paid sick leave, with benefits based on the duration and nature of the illness. 

Parents in Portugal also enjoy generous parental leave policies — mothers are entitled to 120 to 150 days of paid maternity leave, and fathers can take up to 20 days of paternity leave.

Probation Period and Termination

Probation periods in Portugal typically last between 90 to 180 days, depending on the contract. 

Notice periods for termination vary, often depending on the employee's tenure and position, and must comply with Portugal’s Labour Code to ensure fair treatment.

See why working with the best EOR in Portugal is so important? But how do you find the best EOR? Let me help.

Choosing the Best EOR in Portugal

Selecting the right Employer of Record in Portugal is key to your success. Here’s what to look for:

• Local Expertise: Your EOR should know Portuguese labour laws inside out.
• Strong Local Network: An established network helps navigate bureaucratic challenges.
• Comprehensive Services: Ensure they handle HR, payroll, compliance, and employee benefits.
• Transparent Pricing: Look for clear and straightforward fees.
• Proven Track Record: Check for testimonials and success stories from other businesses expanding into Portugal.
• Cultural knowledge: Cultural knowledge can significantly impact employee satisfaction and integration, making it an important factor to consider.

Does all of this sound far too complicated? Don’t worry; you have alternatives.

Look Beyond Portugal’s Labour Market

Portugal is an amazing choice, but other European countries also offer great opportunities.

Markets like Spain, the United Kingdom, and the Netherlands have vibrant workforces with unique benefits.

Or you could pick the South African labour market.

South Africa has a rapidly growing tech sector, and partnering with an employer of record in South Africa can connect you to a multilingual talent pool ready for international business.

My Final Thoughts

And there you have it: Hiring in Portugal doesn’t have to be a challenge.

With the right employer of record in Portugal, you can focus on finding top talent while they manage the complexities of compliance, payroll, and local regulations.

Let your EOR handle the paperwork so you can focus on scaling your business. After all, the sooner you have your team in place, the sooner you can start making money.