Employer of Record Guide in 

Portugal

Vacation Leave

Portuguese employees are entitled to 22 working days of paid annual leave after completing one year of service. During the first year, employees accrue vacation days proportionally (1.83 days per month worked).

Additional Vacation Entitlements:

• 1 extra day for each 3 years of service (maximum 25 days)
• Cannot be waived or compensated in cash except upon termination
• Must be taken within 18 months of earning the right

Sick Leave

Portuguese sick leave is managed through the social security system:

Short-term Illness:

• First 3 days: Unpaid (some employers provide full pay)
• Days 4-30: 55% of average daily wage (paid by social security)
• Days 31-90: 60% of average daily wage
• Days 91-365: 70% of average daily wage

Medical Certification:

• Required from day 4 onwards
• Must be issued by National Health Service or approved private doctors

Maternity Leave

Portuguese maternity leave provides comprehensive protection:

Standard Entitlement:

• 120 days of paid leave (can extend to 150 days at reduced pay)
• 100% of average salary for 120 days
• 80% of average salary if extended to 150 days
• Funded by social security, not employer

Flexibility Options:

• Can be shared with partner (minimum 42 days for mother)
• Can be taken part-time with employer agreement

Paternity Leave

Portuguese fathers receive generous paternity leave:

Mandatory Leave:

• 5 working days immediately after birth (100% paid)
• 20 additional days within 6 weeks of birth (100% paid)

Optional Extensions:

• Can share maternity leave with partner
• Additional unpaid leave available by agreement

Bereavement Leave

Portuguese employees receive paid bereavement leave:

• 5 consecutive days for spouse or equivalent, children, parents
• 2 consecutive days for siblings, grandparents, grandchildren
• 1 day for other family members

Personal & Family Leave

Family Support Leave:

• Up to 15 days per year for child illness (ages 0-12)
• 4 hours per quarter for school meetings
• Emergency family leave as needed

Marriage Leave:

• 15 consecutive days for employee's own marriage

Summary

Termination Types

Termination with Just Cause:

• Serious misconduct, repeated violations, or criminal behaviour
• No notice period or severance required
• High burden of proof on employer

Termination without Cause:

• Requires specific legal grounds (redundancy, unsuitability, company closure)
• Must follow strict procedural requirements
• Notice and severance payments required

Mutual Agreement:

• Both parties agree to terminate
• Terms negotiated between employer and employee
• Can include enhanced severance packages

Notice Period Requirements

Notice periods in Portugal depend on length of service:

Payment in Lieu:

• Employers can pay salary instead of working notice
• Employee entitled to full salary and benefits during notice period

Severance Pay

Portuguese severance pay is calculated as:

Standard Formula:

• 12 days of base salary per year of service
• Minimum: 3 months of base salary
• Based on base salary only (excludes bonuses and allowances)

Enhanced Severance:

• Employees over 45 with 15+ years service may receive additional compensation
• Collective agreements may provide higher severance rates

Probationary Periods

• Standard roles: 90 days
• Senior management: 180 days
• Highly qualified technical roles: 180 days

During probation, either party can terminate with 7 days' notice (30 days after 60 days of service). No severance pay required during probation.

Final Pay Requirements

Employers must provide final payment within 10 days of termination, including:

• Outstanding salary
• Accrued vacation pay
• 13th and 14th month salary (proportional)
• Any applicable severance

Anti-Discrimination & Retaliation Laws

Portuguese law prohibits termination based on:

• Pregnancy or maternity leave
• Trade union membership or activities
• Filing complaints or exercising legal rights
• Protected characteristics (race, gender, religion, disability)

Violations can result in reinstatement orders and significant compensation awards.

National Public Holidays

Portugal observes 13 national public holidays annually:

Municipal Holidays

Each municipality may observe one additional local holiday, typically honouring the local patron saint. These vary by location and are determined by local authorities.

Holiday Pay Rules

Eligibility:

• All employees entitled to holiday pay regardless of tenure
• Part-time employees receive proportional holiday pay

Payment Requirements:

• Employees working on public holidays receive 100% premium pay plus a substitute day off
• If holiday falls on weekend, substitute day provided during working week

Religious Observances

Portugal respects religious diversity while maintaining Catholic traditions in the public holiday calendar. Employers should accommodate reasonable requests for religious observances not covered by public holidays.

Required Documents for Employment

Employment Contract Requirements:

• Written contract mandatory for all employees
• Must include job description, salary, working hours, vacation entitlement
• Probation period and termination clauses clearly defined
• Available in Portuguese (English translation acceptable with Portuguese version)

Employee Documentation:

• Portuguese Tax Number (NIF): Required for all employees
• Social Security Number (NISS): For social security contributions
• Portuguese Bank Account: For salary payments
• Work Permit: For non-EU citizens
• Health Insurance: Proof of coverage (public or private)

Work Authorization

EU/EEA Citizens:

• Right to work immediately
• Must register with local authorities within 30 days
• No work permit required

Non-EU Citizens:

• Work visa required before starting employment
• Employer must demonstrate job cannot be filled by EU citizen
• Residence permit required for stays over 90 days

Background Checks & References

Portuguese employers may conduct:

• Criminal background checks: With employee consent and job relevance
• Employment verification: Previous employer references
• Educational verification: Degree and qualification confirmation
• Credit checks: Only for financial or senior management roles

Privacy Compliance:

• Must comply with GDPR and Portuguese data protection laws
• Employee consent required for all background checks
• Data retention limits apply

Data Protection & Privacy

GDPR Compliance:

• Employee consent required for data processing
• Clear privacy policies must be provided
• Data minimisation principles apply
• Right to access, correct, and delete personal data

Cross-Border Data Transfers:

• Additional protections for data sent outside EU
• Adequacy decisions or standard contractual clauses required

IP Assignment & Confidentiality

Intellectual Property:

• Work-related inventions belong to employer by default
• Clear IP assignment clauses recommended in contracts
• Employee moral rights protected under Portuguese law

Confidentiality Requirements:

• Non-disclosure agreements enforceable
• Trade secret protection available
• Post-employment restrictions limited and must be reasonable

Onboarding Timeline

What the EOR Handles

Borderless AI manages:

• Employment contract drafting and compliance
• Tax number and social security registration
• Payroll setup and monthly processing
• Local labour law compliance
• Portuguese language documentation
• Government reporting and filings

Worker Classification: Employee vs. Contractor

Portuguese law strictly regulates worker classification to prevent false self-employment:

Employee Indicators:

• Works under employer direction and control
• Uses employer's equipment and facilities
• Integrated into company's organisational structure
• Receives regular monthly salary
• Entitled to vacation, sick leave, and social security

Contractor Indicators:

• Operates independently with own business
• Uses own equipment and bears business risks
• Invoices for services provided
• Works for multiple clients
• Responsible for own taxes and social security

Misclassification Risks:

• Automatic reclassification as employee
• Retroactive social security contributions
• Penalties and interest charges
• Employment law protections apply retroactively

Collective Agreements & Unions

Portugal has strong collective bargaining traditions:

Sectoral Agreements:

• Many industries covered by collective agreements
• Set minimum wages above national minimum
• Define working conditions and benefits
• Automatically apply to all sector employees

Union Rights:

• Employees have right to join unions
• Union representatives protected from discrimination
• Collective bargaining legally protected
• Strike action permitted with proper procedures

Cultural Norms & Workplace Expectations

Communication Style:

• Formal business relationships initially
• Personal relationships important for business success
• Hierarchy respected but not rigid
• Direct communication appreciated when respectful

Work-Life Balance:

• Long lunch breaks common (1-2 hours)
• Family time highly valued
• August vacation period widely observed
• Flexible working increasingly accepted

Remote Work Considerations

Legal Framework:

• Remote work legally recognised since 2021
• Employee and employer rights clearly defined
• Written remote work agreements required

Employer Obligations:

• Provide necessary equipment and technology
• Cover internet and communication costs
• Ensure workplace health and safety standards
• Respect right to disconnect outside working hours

Cross-Border Considerations:

• EU employees can work remotely from other EU countries
• Tax and social security implications for extended remote work
• Non-EU remote work requires careful visa consideration

Writer's Note: Please double-check all specific rates, dates, and legal requirements as employment law details may have changed since this template was created.