Spotlight on Portugal

Yellow street car

Portugal ranks as one of the most peaceful countries in the world, offering a high quality of life as well as a positive business environment that tends to be more employer-friendly than some of its regional neighbors. With one of the most cost-effective workforces in the European Union (EU), Portugal attracts multinational companies (MNCs) looking to harness innovative, digital-ready talent pools. As the government takes greater strides to attract foreign investments and develop talent, more businesses are adding Portugal to the top of their list for expansion and hiring.

Why Portugal?

  • The legal framework calls for non-discrimination in foreign investment opportunities, which enables MNCs in Portugal to more easily participate in economic sectors open to private enterprise.
  • The country scores high marks in key business areas for MNCs such as cross-border trade and enforcing contracts, according to data from the World Bank. Portugal also enforces strong protection for trademarks and intellectual property (IP).
  • Portugal offers one of the most cost-effective workforces in the EU, giving MNCs a strong return on investment (ROI) when hiring. At the same time, the country continues to rise in the ranks for innovation according to the EU Innovation Scoreboard, which assesses venture capital expenditures, resource productivity, business collaboration and product development.
  • Portugal’s ‘Golden Visa’, known officially as Autorização de Residência para Actividade de Investimento (ARI), is one of the most popular citizenship programs in the EU and allows expats to obtain residency in Portugal by making investments in the country.

Q&A with Ana Vizzotto, Director of Operations for the Americas, GoGlobal

What do multinational companies (MNS) need to keep in mind when hiring in Portugal for the first time?

Portugal’s labor framework is governed by the Portuguese Constitution and the Labor Code, which aim to strike a distinct balance of employee rights and employer freedom. As a result, unionization rates are quite low and the country has earned a reputation for being more employer-friendly than many of its EU neighbors.

Generally speaking, written employment contracts are not legally required but are very common and considered a best practice in Portugal. When an employment contract is in place, it must include details about an employee’s work hours and schedule. Portugal’s standard workweek is 40 hours, typically consisting of five eight-hour days. However, the Labor Code allows employers to exercise some flexibility in extending or reducing the workday as they see fit.

Wages must be paid at least biweekly, with the employer required to produce a paystub documenting payments and deductions. If an employer is required to work on a designated day off, they must be compensated at a 50% hourly wage premium. Overtime compensation applies when an employee works more than 40 hours a week, with the employee receiving a 25% premium for the first hour and 37.5% for any additional hours they put in.

Most employees in Portugal are entitled to receive a 13th-month bonus, equivalent to one month of wages. This must be administered to the employee by December 15. When a worker begins their tenure during the year, they receive a prorated bonus in December. In addition to this, most employees are entitled to a separate holiday bonus which is also equivalent to a month of wages. This is meant to be paid out before they take vacation leave.

In Portugal, there is a probationary period of 90 days for employees and 240 days for directors and higher management staff. The Labor Code restricts “at will” employment, so any termination must be triggered by just cause. Circumstances qualifying as just cause include insubordination, provocation of conflict with other employees, violations of other employees’ rights, disregard for obligations, unjustified absences, financially damaging an employer and willful disregard of health or safety.

Employees who have contributed to Portugal’s social security system for at least six months are entitled to take 120 to 180 days of paid maternity leave, with up to 30 days being taken before childbirth. There are additional allowances for multiple births or health risks encountered during pregnancy or childbirth.

In addition to nine paid national holidays, employees in Portugal are entitled to take 22 days of paid leave yearly. New employees with at least a six-month tenure are entitled to two days of vacation for each month they’ve worked, accruing up to 20 days. Unused vacation time may be carried over until April 30 of the next year, although no more than 30 vacation days should be taken in a calendar year. Up to 20 days may be exchanged for payment.

Employees in Portugal receive fairly comprehensive health and social benefits through the Serviço Nacional de Saúde (SNS). However, many employers offer supplementary coverage options as a customary benefit for their workforce, such as additional healthcare, pension contributions or life insurance.

Why are more MNCs seeking Employer of Record (EOR) services in Portugal?

While Portugal has much to offer MNCs in the way of business growth, a general rule of thumb is that setting up a legal entity will likely take more time and be more expensive than you originally anticipate. Some of the clients we take on are MNCs that originally began the expansion into Portugal or other EU markets with a ‘do-it-yourself’ approach, only to encounter costly and resource-draining obstacles along the way. Even though Portugal is more flexible than some other countries in allowing temporary workers and independent contractors, many MNCs discover the hard way this is not the right strategy when they’re looking for continuity and loyalty on their teams.

Because of these factors, more MNCs are looking to tap into Portugal’s innovative, developed workforce without having to bear the burdens and costs of setting up a legal entity. By implementing an effective EOR model, they can effectively avoid the hassles of setting up a business and mitigate the risks of employing locally. A reputable EOR partner has niche knowledge of Portugal’s regulatory environment so MNCs don’t need to worry about incurring regulatory violations.

What makes GoGlobal a partner of choice for MNCs in Portugal?

GoGlobal’s EOR solution has a proven track record of success in building fully compliant workforces in EU markets, being fully informed on complex regulatory compliance frameworks like the General Data Protection Regulation (GDPR). Uniquely, our company has a global mindset but we also have a dedicated team of local experts on the ground in each of the markets we serve. Our team in Portugal deeply understands the regulatory environment as well as the cultural customs, ensuring a positive hiring experience for clients and client-employees.

If you have a great employee experience in your home country, we will help you bring it to Portugal. Before we onboard the employee, GoGlobal’s team in Portugal will work hands-on with the hired employee to outline the specifics of how the EOR arrangement will operate. Even after onboarding, that same dedicated term serves as the point of contact for both the client and client-employee. We are always ready and available to answer questions on payroll, taxation or benefits.

In our service to clients and client-employees, our goals are agility, efficiency and peace of mind. By using our tested and proven EOR solution, MNCs free their internal HR teams from having to navigate Portugal’s labor landscape as it evolves with new regulations from local authorities or the EU. Our job is to handle all payroll functions and requirements, including contributions, taxation and benefits. This way, our clients can focus on growing core business and scaling new opportunities in Portugal.

Find additional detail on benefits and hiring in Portugal, or contact us to talk with an international HR expert.