Portugal is ranked 32nd among the 158 countries in the Readiness for Frontier Technologies Index. Tech start-ups are opening all over the country which in turn strengthens their IT sector. This has led to more opportunities for the Portuguese talent pool and for investors.

Aside from Portugal’s IT industry, their industrial structure focuses more on foreign trade as they leverage agricultural exports.

Major Economic Hubs:

Lisbon, Madeira

Skills in Demand:

ICT Professionals, Marketing, Creative And Design Professionals, Hospitality, Teaching Professionals, Health-Related Occupations, Tourism Professionals

Personal Income Tax

All resident individuals are taxed on their income, while non-resident individuals are taxed on their income derived in Portugal.

Social Security

Contribution to the Portuguese social security is mandatory.

The employer and employee contributions include —

Employers must make sure to withholding employee contributions toward social security as part of payroll process.

Statutory Benefits

Statutory benefits are the obligations of employers as they pertain to their employees.

Statutory benefits in Portugal are —

Employers must offer workers' compensation insurance to all employees working in  

Portugal. The employee benefits involve

Temporary/partial disability greater than 30%: 70% of an employee's earning capacity for up to twelve months. The amount increases to 75% after the twelfth monthm

Temporary total disability: 80% of the earnings capacity of the disabled employeem

Absolute and permanent disability: 80% of the (gross) pensionable salary.  

Medical treatments, hospitalisation, surgery, medicines, ambulance expenses, and appliances are additionally providedm

Death due to workplace accidents: 30% of the (gross) pensionable salary is offered as a spousal pension. Orphan’s pension include —

In cases of a single child: 20% of the pensionable income

Two children: 40% of the pensionable income

Three or more children: 50% of the pensionable income 13th and 14th-month pay are mandatory in Portugal. The 13th and 14th-month pay are offered in June (for holidays) and December (for Christmas). The working hours in Portugal are forty hours each week divided into eight hours a day. Employers must clearly outline the working house in the employment contract or via collective bargaining agreements.

Any additional work hours requested by an employer must be compensated with overtime pay of 150 hours annually. Overtime pay is calculated as

• For the first hour: 125% of an employee's gross salary

• More than one hour of overtime: an additional 135% of an employee's gross salary

• Work done on public holidays and rest hours: 150% of an employee's gross salary

Fringe Benefits

Fringe benefits are additional employee benefits that an employer offers in addition to statutory benefits and statutory leaves.

Commonly provided fringe benefits in Portugal include —  

• Gym
 membership
• Meal allowance  cards
• Flexible working  hours
• Reimbursement of commuting costs
• Office equipment such as laptops/ desktops and mobile phones
• Additional
 paid time off
• Training or refresher courses

Exempt Benefits

While in Portugal, all employee benefits are exempt from taxation. This includes any fees paid to the Portuguese trade union or labor organization as well.

The trade union fees must not constitute

• Education expenses
• Social security contributions
• Health insurance premiums
• Insurance premiums  
• Elderly support expenses

150% of the total expenses as fees are exempt with a maximum of 1% of the gross employment and/or pension income

Long-term Incentives

Long-term incentives (LTIs) are employee benefits offered for over twelve months (or one year). As a strategic plan, certain employee benefits such as stock options are offered to key employees.

Commonly provided LTIs in Portugal include —

• Employee stock options for employees that hold key positions

• Health insurance with the addition of dental covers

• Life insurance covers

• Employer-sponsored pension plans

Termination Process

In Portugal, terminating an employee’s contract has many occurrences. It could be a collective dismissal due to a company that is downsizing, an employee’s retirement, an employee’s unsuitability for the current role, etc.

Employers are responsible to give their employees a notification in writing not less than ten days before the effective date of termination. During the ten days, the employee or other personnel may express their opposition to the decision in writing. Employers will then have time to evaluate and reach a decision.

Notice Period

The notice period for employees in Portugal is in the range of 7 to 30 days.

Severance Pay

The calculation for the employee’s severance pay is based on their seniority period. Regular employees in service for 3 years will receive 18 days of their salary. For every year in excess of the 3 years, they will get an additional pay of 12 days.

Employees who have less than 3 years of work in the company, will be given a fraction of the 18 day-salary.

The base salary and seniority are taken into account to calculate the pay which may not be over 20 times the guaranteed minimum salary. The overall amount of the severance pay may also not exceed 12 times the employee’s salary and seniority.