Hiring in Portugal

Portugal's employment framework is governed by the Codigo do Trabalho (Labour Code), last significantly revised by Law 93/2019. The code applies to all private-sector employees and sets baseline protections that collective agreements can improve but not reduce. The standard workweek is 40 hours spread across five days, with a daily limit of 8 hours. Employers must register working hours for every employee, and the Autoridade para as Condicoes do Trabalho (ACT) actively inspects compliance. Two main contract types exist: the contrato sem termo (open-ended, the default) and the contrato a termo certo or incerto (fixed-term or uncertain-term), which can only be used for temporary needs and carry strict renewal limits of up to 4 renewals over a maximum of 2 years.

Terminating an employee in Portugal is one of the most regulated processes in Europe. Employers cannot dismiss an employee at will. Dismissal for just cause (justa causa) requires proof of serious misconduct and a formal disciplinary process including a written note of charges, a 10-day employee response period, and a reasoned final decision. Collective redundancy rules apply when cutting 2 or more jobs in companies with up to 50 employees, or 5 or more in larger firms, and require a 15-day negotiation phase with worker representatives plus notification to the Ministry of Labour. Individual redundancy for role elimination (extincao do posto de trabalho) requires showing no suitable alternative position exists. Courts frequently reinstate workers if procedures were not followed correctly.

Notice periods depend on contract type and tenure. For open-ended contracts, employees must give 30 days notice with up to 2 years of service, or 60 days with more than 2 years. Employers must give 15 days notice for contracts under 1 year, 30 days for 1-5 years, 60 days for 5-10 years, and 75 days for 10 or more years. Fixed-term contracts require 15 days notice from either party. Severance pay (compensacao) for contracts started after October 2013 is 12 days of base salary plus seniority payments per year of service. For contracts started between November 2011 and September 2013, the rate is 18 days per year. There is no severance cap on total months, but the daily rate calculation uses a ceiling of 20 times the national minimum wage (currently EUR 870/month in 2025).

Employees earn 22 working days of paid vacation per year, accruing during the first year of service. Portugal observes 13 mandatory public holidays and 1 optional local municipal holiday. Vacation pay includes a holiday bonus (subsidio de ferias) equal to one month's salary, paid before the vacation period starts. On top of that, every employee receives a Christmas bonus (subsidio de Natal), also equal to one month's salary, due by December 15. These 13th and 14th month payments are mandatory under the Labour Code and apply to all employees regardless of contract type.

Employer social security contributions (Taxa Social Unica, or TSU) are 23.75% of gross salary, covering pensions, unemployment insurance, and family benefits. Employees contribute 11% of gross salary. Employers also pay a 1% work accident insurance premium (seguro de acidentes de trabalho), which is mandatory and provided through private insurers. The meal allowance (subsidio de alimentacao) is a near-universal benefit in Portugal, with a tax-exempt threshold of EUR 6.00/day in cash or EUR 10.20/day on a meal card as of 2025. Most employers pay at or above these thresholds.

Overtime is paid at 125% of the normal rate for the first hour and 137.5% for subsequent hours on working days. Weekend and holiday overtime pays at 150% of normal rate. Annual overtime is capped at 150 hours for most employees, extendable to 200 hours by collective agreement. Initial parental leave (licenca parental inicial) is 120 days at 100% pay or 150 days at 80% pay, funded by Social Security. Parents can share an additional 30 bonus days if both parents take at least 30 consecutive days of leave. The father has a mandatory 28 consecutive days of paternity leave (7 of which must be taken immediately after birth), fully paid by Social Security. Parental leave protections prohibit dismissal from the start of pregnancy until 120 days after childbirth.