Expanding into a new country is a time-consuming and complex process with many challenges. These include adhering to ever-changing labor regulations, raising the minimum wage to meet the most up-to-date requirements, and ensuring that the terms of all employment contracts comply with each country’s local laws.
To streamline hiring in Portugal, consider working with an Employer of Record (EOR). An EOR like Borderless specializes in global hiring, enabling a seamless process so you can focus on growing your business.
This article will guide you through the benefits of using an EOR to hire employees from Portugal.
Why Hire Talent from Portugal?
Portugal has become an increasingly favorable destination for employers looking to expand their workforce into Europe. Portuguese workers possess a strong work ethic and variety of skill sets and can offer a unique cultural perspective to enhance a company’s global presence.
Portugal boasts a highly educated workforce, with graduates specializing in engineering, IT, and business fields. Moreover, a significant number of Portuguese workers are fluent in several languages, including English, making them desirable candidates for foreign employers operating internationally.
In recent years, Portugal’s growing popularity with digital nomads has been matched by its expansion of digital infrastructure. The increase in wifi networks and coworking offices has made cities such as Lisbon, Porto, and Lagos the most in-demand choices for remote workers.
Lastly, Portugal’s low cost of living translates into a lower cost of hiring skilled talent for foreign employers.
How to Legally Hire Employees from Portugal
There are a few ways foreign employers can hire from Portugal. The first way is offering independent contractor agreements. Portugal is a contractor-friendly country and so hiring freelancers is not uncommon. However, independent contractor agreements don’t grant employee status and may carry the risks of misclassification.
Another way to hire new employees in Portugal is doing so as a local legal entity. This requires setting up the business in Portugal as a local entity, if it isn’t already, in accordance with local labor and tax laws. The compliance with changing regulations and the vast amount of resources often needed can pose a big challenge for companies.
A third, popular route involves using the services of an EOR, one of the most cost-effective, simplest, and fastest ways. An EOR is a third-party organization that acts as a broker for hiring talent outside of your home country. An EOR like Borderless provides employers with local knowledge surrounding employment and guidance on meeting compliance.
What Does an Employer of Record Do?
Employers may encounter new and more complex challenges when hiring employees from Portugal c than in their home countries. Currency, payroll cycles, leave entitlements in accordance with the country’s public holidays, and type of employment contract , among others, are aspects to consider.An EOR will handle the major areas of global hiring for you, so you can focus on growing your company.
An EOR is an entity that serves as the foreign company’s legal employer. Handling matters related to employees abroad, an EOR’s responsibility includes managing payroll, benefits, taxes, and more, ensuring your compliance with labor laws and regulations.
Contracts and Documentation
An employment contract in Portugal must include specific information, such as a remote work clause, salary, benefits, and working hours. Portugal is also one of the countries that offers mandatory 13th and 14th salary bonuses, paid out in June and December. The employment contract must include the details of this bonus.
In Portugal, employment contracts are generally indefinite rather than fixed-term. In the instance that you hire a Portuguese employee under a fixed-term contract, it cannot exceed two years and can only be renewed twice.
Working with an EOR will ensure that the appropriate type of employment contracts containing all the necessary information are offered , and that they comply with local employment law. An EOR will also make sure all the correct documentation, such as work permits where necessary, banking information, and more, are collected.
Insurance and Benefits
Independently providing benefits for Portuguese employees is a long, complicated process. Using an EOR to hire employees in Portugal will guarantee that employees have proper insurance coverage and the necessary benefits required by local laws and regulations. This includes healthcare and unemployment benefits.
An EOR will also take care of supplemental benefits for employees, like dental, vision, life insurance, and retirement savings plans. With global hiring becoming increasingly competitive, it pays to offer remote employees supplemental benefits.
Paid Time Off, Leave, and Public Holidays
Employees in Portugal are entitled to 20 days of leave in their first year of employment. After they complete one year of service, they are entitled to 22 days. Paid time off can be carried into the following year, but it must be used by the end of April.
New mothers are entitled to maternity leave for 120 days, in which they are paid 100% of their salary by Social Security. However, in order to be eligible, they must have been employed with the company for at least 80 days in the 12 months before the expected due date.
Employees are also entitled to sickness benefits, but the rate at which they’re paid is dependent on their tenure at the company and the length of their sick leave. Portugal also offers paternity leave, parental leave, and marriage leave, and bereavement leave.
Portugal also has 13 holidays, in which employees are entitled to take off. As of 2023, the dates are as follows:
- January 1: New Year’s Day
- April 7: Good Friday
- April 9: Easter Sunday
- April 25: Freedom Day
- May 1: Labor Day
- June 8: Corpus Christi
- June 10: Portugal National Day
- August 15: Assumption of Mary
- October 5: Republic Day
- November 1: All Saints’ Day
- December 1: Restoration of Independence Day
- December 8: Immaculate Conception
- December 25: Christmas Day
Navigating and calculating paid time off, types of leave and public holidays in Portugal is complicated, and quite frankly, can be a headache. An EOR can take care of all the administrative tasks with vacation, sick benefits, and maternity leave.
Tax Obligations
Employers in Portugal must pay a range of taxes and social security contributions, which come up 26.5% divided among, health, unemployment, and labor accident insurance, and the wage guarantee fund. The wage guarantee fund is…
An EOR will ensure that you pay the most up-to-date rates, ensuring that your contributions to social security and remittance of taxes are correct.
Employer Responsibilities
While the EOR handles the majority of responsibilities in global hiring involving local legal and financial compliance, the employer fulfills the obligations of managing employees day-to-day. These include recruitment, interviewing, and onboarding. Once an employee is onboarded, the employer needs to maintain the subordinate working relationship.
In addition, foreign employers should establish communication and connect with their remote employees, taking into account time zone differences and cultural practices. Doing so will create a positive, welcoming work environment that encourages collaboration and inclusivity.
Advantages of Using an Employer of Record
Using an EOR in Portugal will save time, reduce costs, and mitigate risks of non-compliance. Setting up an entity in a foreign country can present numerous challenges. An EOR, already set up, enables a seamless and efficient process of hiring employees in Portugal.
An EOR is rich in local knowledge and has extensive experience in maneuvering intricate HR processes, meaning employers can rest assured they are in compliance with all legal requirements and avoid potential issues. Lastly, working with an EOR lowers expenditure and facilitates a positive employee experience under streamlined HR operations.
Choosing the Right Employer of Record
When it comes to choosing the right EOR, employers must do their due diligence. Employers should consider various factors. These include:
- Experience and expertise: When working with an EOR in Portugal, you want a partner that can offer local knowledge of employment laws and have experience of hiring employees in the country. Partnering with a reputable EOR w in Portugal and following mandatory procedures can help ensure you meet compliance.
- Range of services: Examine the range of services offered by the EOR in accordance with the needs of your business. Services related to hiring staff, including administering benefits and filing taxes in compliance with local governance and legal support are key.
- Data security: Protecting intellectual property is vital in a remote work environment. Portugal must adhere to the General Data Protection Regulation (GDPR) in the European Union (EU), so data privacy laws vastly differ from those in North America. cChoose an EOR that can provide a specific agreement of how sensitive information is secured. Further to implementing these tips for employers to manage system security, working with an EOR that is knowledgeable in data security can enhance the protection of the business.
Borderless: — The EOR For You
If you’re looking to hire employees in Portugal, an EOR is the optimal solution. With Borderless, hiring is easy, simple, and fast. Leave the heavy lifting to us so you can focus on your remote team and growing your presence in Portugal.
Book a demo today to see how we can help with your hiring needs in Portugal.
Disclaimer
Borderless does not provide legal services or legal advice to anyone. This includes customers, contractors, employees, partners, and the general public. We are not lawyers or paralegals. Please read our full disclaimer here.
