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Minimum wage in Portugal
Payroll in Portugal
Statutory benefits in Portugal
Other employee benefits in Portugal
Compliant, seamless payroll and benefits in Portugal and beyond
Payroll and benefits in Portugal
Employers that want to hire Portuguese workers need to understand the ins and outs of payroll in Portugal. This helps them to ensure their business is compliant with the relevant regulations and provides employees with the smooth and consistent payroll experience they expect.
In this section, we’ll take you through everything you need to know about payroll in Portugal, including the rules surrounding 13th and 14th salary payments, and the statutory benefits that Portuguese employers must provide to their workers.
Understanding payroll in Portugal
As in all countries, payroll in Portugal is subject to specific rules and requirements. For example, employers must provide employees with a payslip after each payroll period and keep payroll records for at least five years. Employers are also responsible for deducting and paying taxes and social charges on behalf of their employees.
Statutory and additional benefits
Employers in Portugal are required by law to provide their employees with certain benefits, like annual leave. Employers can also choose to provide additional benefits to reward their employees and improve talent attraction and retention.
Outsourcing payroll in Portugal
Businesses that want to hire workers without the hassle of running payroll can choose to work with a payroll provider in Portugal, such as an employer of record (EoR). EoR providers handle payroll (as well as other HR tasks like benefits administration and onboarding) on behalf of their clients.
Minimum wage in Portugal
The minimum wage in Portugal is expressed as a monthly salary, which is the minimum employers can pay their workers before tax. Portugal has three different minimum wages for different regions, which we’ll discuss below. As of 1 January 2024, the minimum monthly salary for most of the country is EUR 820.
Understanding 13th and 14th month pay
In Portugal, employees are entitled to two bonus payments each year, which are each equivalent to one month’s pay. These are typically paid in June and December. This means that an employee’s annual salary in Portugal is divided into 14 annual instalments, not 12. Accounting for this, the minimum salary an employer can pay an employee per month is EUR 705.
Different minimum wages in Portugal
There are three different minimum wages in Portugal, depending on the region where the employee works. However, these are very similar. In 2024, the minimum monthly wage for each region in Portugal is as follows:
- Azores: EUR 740.25 per month (14 salary instalments)
- Madeira: EUR 722 per month (14 salary instalments)
- Rest of the country: EUR 705 (14 salary instalments)
Minimum hourly wage in Portugal
Minimum wage in Portugal is expressed as a monthly salary. For employees working the standard 40-hour work week, the minimum wage for most of the country would amount to EUR 4.40 per hour, in addition to two bonus payments equivalent to one month’s pay each year. With the bonuses included, the minimum hourly wage in Portugal is EUR 5.14.
Minimum wage in Portugal after tax
Employees in Portugal must pay both income tax and social security contributions on their income. Tax is calculated using a progressive scale, with rates between 13.25% and 48% depending on the employee’s income level.
An employee earning the minimum wage for most of Portugal would earn a total gross income of EUR 9,870 per year. After social security contributions and income tax, their take-home pay would amount to EUR 7,559.02 per year or EUR 629.92 per month.
Payroll in Portugal
Employers should be aware of the particularities of payroll in Portugal before hiring employees. For example, it’s important to understand your obligations when it comes to withholding and paying employee taxes and social security contributions, plus how the 13th and 14th salary work in Portugal.
Employee taxes in Portugal
Employees in Portugal are subject to income tax on their wages. Income tax in Portugal is paid according to a progressive scale, with rates from 13.25% to 48%. High-income earners are also subject to an additional ‘solidarity rate’ of either 2.5% or 5%. Non-residents only pay income tax on income earned in Portugal, which is charged at a flat rate of 28%. Portuguese employers are responsible for withholding taxes from their employee’s wages and remitting them to the tax authorities.
Employer and employee social security contributions in Portugal
Both employers and employees in Portugal make social security contributions each month, which are based on the employee’s wages. This pays for things like unemployment, sick pay, maternity leave, and pensions. The employee’s contribution amounts to 11% of their gross pay, and the employer’s contribution is 23.75%. Employers must also contribute 1% of the employee’s gross salary to the Portuguese Wage Guarantee fund and pay 1.75% to cover insurance for occupation-related accidents.
Payroll cycle in Portugal
The typical payroll cycle in Portugal is monthly. Employees are usually paid before the last day of the month. Employers must then declare the taxes they have withheld to the tax authority by the 10th of the following month and pay by the 20th. At the end of the year, employers in Portugal have to file a tax declaration detailing how much they withheld and paid during the previous calendar year.
13th and 14th salary in Portugal
In Portugal, employees are entitled to two annual bonuses which are each equivalent to a month’s pay. This essentially means that an employee’s annual salary is divided into 14 instalments instead of 12. These bonuses are generally paid in June and December, to coincide with employees’ holidays.
Other payroll requirements in Portugal
Employers in Portugal must provide employees with a payslip after each pay period, which details their gross pay, the deductions that have been made, and their net pay. This can be either digital or in paper format.
Statutory benefits in Portugal
Employees in Portugal are covered by a strong social security system, which provides protection in the case of disability, unemployment, and illness. Employers and employees both pay into this system through monthly payroll contributions. There are also certain employer-provided benefits that employers in Portugal are legally obliged to grant their employees.
Social security benefits in Portugal
The social security system in Portugal provides many of the benefits to employees that might otherwise be provided directly by employers. It’s paid for by monthly contributions from both employees and employers.
Social security covers things like:
- State pension: Employees in Portugal can access the state pension once they reach the retirement age, which is currently 66 years and four months. This is a monthly payment designed to replace income from work for retirees.
- Unemployment benefits: These are provided to workers in Portugal who are temporarily out of work and looking for a new position. The amount employees can get depends on their previous salary.
- Sick leave: Employees in Portugal can get sick leave for up to 1095 days. After the first three days, they can receive sick pay from social security.
- Disability benefits: When someone is unable to work due to a disability in Portugal, they can access the disability pension (Pensão de invalidez). This may be paid on a temporary or permanent basis.
Employer-provided statutory benefits in Portugal
Employers in Portugal are also required to provide their employees with certain other benefits, as defined by the Labour Code and other legislation. For example, employers must provide their employees with at least the following:
- Annual leave: Employees are entitled to at least 22 working days of fully paid holiday leave each year.
- Maternity, paternity, and parental leave: Employees are entitled to paid leave when they or their partner has a baby, or when they adopt a child. Parents can choose to share their total leave entitlement between them.
- Workers compensation insurance: Employers in Portugal must carry workers compensation insurance, which covers employees in the case of injuries or accidents at work.
- Meal allowance: In the public sector, employers in Portugal must pay their employees a daily meal allowance of EUR 6 per working day. This isn’t obligatory in the private sector, though some employers choose to provide a meal allowance.
- Statutory holidays: In addition to their annual leave entitlement, employees in Portugal have the right to paid time off on public holidays, or compensatory time off. There are 13 public holidays per year.
- Employee training: Portuguese employees have the right to at least 40 hours of learning to enhance their professional skills each year. For employees on fixed-term contracts, this amount is reduced proportionately to the length of their agreement.
Other employee benefits in Portugal
Employers in Portugal can choose to grant their employees additional benefits, even though they’re not required by law. This can help Portuguese employers to attract and retain talent by making their offer more attractive to potential employees.
Popular employee benefits in Portugal
Here are some popular employee benefits in Portugal that you might consider offering to your mployees:
- Meal allowances: Providing employees with a daily meal voucher or allowance is a common employee benefit in Portugal. If an employer provides this benefit through a tax-exempt card or voucher, they are tax-exempt up to EUR 8.32 per day.
- Health, dental, and vision insurance: Employees in Portugal can access healthcare through the public system. However, some employers choose to offer private healthcare as an employee benefit in Portugal. This can help employees to access faster wait times and a guaranteed quality of care.
- Additional PTO: Offering paid time off in addition to the statutory 22 days of leave can be a valuable benefit to employees in Portugal. Many employers choose to grant their employees 25 days of leave.
- Transportation allowance or company cars: Offering employees company cars and transportation allowances are fairly common employee benefits in Portugal. These can be valuable in helping employees to manage the cost of commuting to work.
- Life insurance: Employers in Portugal can also choose to take out life insurance for their employees as an additional employee benefit. This can help to support the employee’s family in the event of their death. Employers can choose to pay all or part of the premiums for supplemental life insurance coverage.
- Childcare vouchers: Childcare vouchers are a popular employee benefit for working parents in Portugal. Providing this option helps employees to balance their work and home life more effectively, without having to pay a lot for childcare.
Compliant, seamless payroll and benefits in Portugal and beyond
Getting payroll and benefits right is not just a legal issue. Every country also has its own customs, norms and expectations about employee compensation. And if your operations aren’t in line with your workers’ expectations, they may not stick around for long.
Thankfully, we know what we’re doing. When you work with CXC to engage workers in Portugal, we’ll handle everything from tax withholding to employee bonuses on your behalf.
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