Global HR Compliance in Portugal

If you hire an international workforce, or plan to hire, then Hiring and Firing Workforce in Portugal Guide below will help you understand the nuances of labor legislation in the country. When the company is planning to enter a new foreign market of Portugal and has a need to employ a local national there, the first question to answer is how it is going to make local hires. We have designed a Global Employer of Record service to help you outsource global employment of your foreign workforce to companies like ours. This solution helps you employ your global sales force in Portugal as well as in other 190+ countries of the world, and provide pay and benefits to your employees, as well as administer any business expenses with our help. Our solution is different from other hiring modes in that it helps you engage your foreign workforce in full compliance with the local labor legislation. This means you are protected from any non-compliance and employee misclassification risks while we bear all employment risks, not you. So, it looks very much like hiring your in-house sales force in your home country. However, you focus on only on your global business development while we admin your global HR. In addition, you don’t need to open your own entities in the foreign countries and can leverage our infrastructure in Portugal instead. With our service, you can become a global company with reduced costs and minimized time and effort on your end. Your employed foreign sales force will devote 100% of their time to your company product and may stay with you longer than foreign independent sales reps. Global Employer of Record solution is 100% compliant solution that guarantees you and your employees fully compliance with local legislation in Portugal . We are experts in global workforce employment in Portugal, and our goal is to become your single provider. Instead of working with numerous local staffing agencies and legal advisors, Acumen International can solve your global business challenges and save you time, costs, and resources. Our team of English-speaking professionals frees you from working through language nuances. Acumen International works 24/7 and can assist you whenever you need, regardless of time zones. Our goal is to create tailored labor solutions for you that are managed legally and in full compliance with the local employment laws. With our knowledge and deep understanding of local nuances, you easily satisfy your need for skilled professionals in your global industry. With our qualified local partners, you can trust that your global workforce satisfies all local tax, social security, and immigration requirements in Portugal.

See Hiring and Firing Workforce in Portugal Guide below for a general overview of labor rules and regulations in the country. Or contact us if you need to employ workers in Portugal or would like to get more details.

Firing and Hiring Workforce in Portugal Guide

All things considered, the processes involved in operating business in Portugal can be so convoluted and cumbersome that it can make it almost impossible for any foreign business to thrive on its own without an external help. Apart from the bureaucratic procedures for starting business in Portugal, there is need for one to familiarize, understand and comply with the labor laws of the country, or otherwise face the stiff penalties of breaking any of the legal requirements. The good news is that Acumen International, a global Professional Employer Organization (PEO) has designed a workable solution that can help you work through the long-involved processes of doing business in Portugal. Before we proceed to explore how Acumen International can help you expand to and succeed in Portugal, we will first consider a few fundamental things about employment in Portugal.

Employment Agreements

Permanent employment contracts  The standard legal form of hire is the permanent employment contract.  Under a permanent employment contract, it is under the probationary period (only) that the employer enjoy maximum flexibility to evaluate whether it wants to maintain the employment relationship or to terminate employment unilaterally without having to justify its decision and without having to pay the employee any compensation as a result. Term contracts  Term contracts are qualified as exceptional by law. As a general rule, the possibility of hiring employees under term employment contracts is therefore confined to situations resulting from a temporary need of the employer and the duration of the contract is limited to that of the need in question. Employment contract under a commission of service regime  Board or equivalent positions, directorship or managerial positions that report directly to the board or general manager, or equivalent, their secretarial personnel, or any other positions that presuppose a special relationship of trust may be performed under an employment contract under a commission of service regime. An employment contract under a commission of service regime has more flexible termination rules when compared to a standard permanent employment contract - termination.

Employment Termination and Severance Pay (Dismissal)

According to Portuguese law, the termination of an employment contract depends on very strict rules that demand the gathering of grounds and several formal procedures. The contract may terminate in the following situations:

Expiry
Mutually agreed termination
Dismissal for disciplinary grounds subject to prior internal dismissal disciplinary procedure
Collective dismissal (for economical, structural or technological reasons), subject to an internal procedure and prior notice periods which depend on the seniority of the employees affected by dismissal
Dismissal for extinction of labor position subject to an internal procedure and prior notice periods in which the notice period will also vary according to the seniority of the employee
Dismissal for employee’s failure to adapt to a working position, also subject to internal formalities and prior notice periods.

The contract expires in one of these situations: once its term elapses; supervening impossibility, absolute and definitive, of the employee rendering work of the employer receiving such work; and  with the employee`s retirement for age or disability.

It is prohibited to dismiss

There are categories of employees that enjoy special protection against dismissal; namely, employees’ representatives and employees during pregnancy, maternity leave and during the breastfeeding period, as well as those on parental leave, have special protection against dismissal.  In this situation, all dismissals for reasons attributable to the employees are presumed to be without just cause.

Notice period

For redundancy dismissal and dismissal due to unsuitability for the job, the following notice is required:

15 days if the employee’s seniority is less than 1 year
30 days if the employee’s seniority is at least 1 year but less than 5 years
60 days if the employee’s seniority is at least 5 years but less than 10 years
75 days if the employee’s seniority is 10 years or longer.

Termination by the employee: notice of 30 or 60 days is required, depending on whether the employment contract was in force for up to 2 years, or for a longer period. Notice periods in case of term contracts:

Fixed term contracts: 15 days for the employer and 8 days for the employee
Open-term contracts (eg, a contract to cover absence) (employer): 7, 30 or 60 days, where the employment contract was in force for up to 6 months, between 6 months and 2 years or more than 2 years respectively
If the notice period is not honored, payment in lieu of notice is required.
Garden leave is allowed during the notice period.

Severance payments

Fair dismissal based on objective grounds (redundancy) or dismissal due to unsuitability for the job: 12 days’ salary per year of service, up to 12 months’ base salary. The severance is partially (50%) paid by a fund (FCT) administered by Social Security, to which the employer has to make contributions.

Employee Benefits and Contributions

Mandatory benefits required by law to be provided by an employer  The Social Security System covers: sickness, maternity, paternity and adoption, unemployment, professional diseases, disability, old age and death. Holiday pay: Equal to one months salary paid before holiday leave period.  Christmas bonus: Christmas bonus equal to one months salary paid by December 15th.  Wage guarantee fund  Maternity and Paternity leave

Probationary period

Trial periods (initial probation) for permanent employees are 90 days, 180 days for high complexity, trust or responsibility roles and 240 days for management, directorate and equivalent responsibility roles. Fixed and unfixed term temporary contracts are subject to shorter probation periods  15 days if agreed for an expected or fixed duration shorter than 6 months; and 30 days for durations equal to or longer than 6 months. During the initial probation/trial period, the employer and the employee are free to terminate the employment.

Overtime

The employee may be required to provide overtime work:  when the company has to cope with temporary increase of work that do not call for additional employee recruitment; or in case of force majeure or when the overtime work is needed to prevent or remedy serious injury to the company or its viability. Overtime work is paid at the normal hourly rate plus:

25% for the first hour or part thereof, and plus 37.5% for every subsequent hour or part thereof, on working days
50% for the first hour or part thereof, on weekly rest, compulsory or complementary, or on bank holiday.

Overtime work rendered on weekly rest entitles the employee to a remunerated compensatory rest day, during one of the following three working days.

Work hours

The maximum weekly and daily working periods are set at 40 and 8 hours, respectively. However, subject to certain rules, these limits may be assessed on an average basis measured by reference to four or six month periods. This is a system known as adaptability and the additional work hours rendered by the employee on specific days or weeks exceeding the aforementioned 40 and 8 hour limits do not qualify and are not paid as overtime work but are, instead compensated by equivalent reduction of hours worked on other days or weeks.

Annual Leave

As a general rule, employees are entitled to a minimum 22 working days of holiday per calendar year. This right falls due on 1 January and relates to work performed in the previous year.  Special rules apply in the first year of employment, to contracts with a duration of less than six months, and on termination. Employees must take their holidays in the year they accrue.

Sick Leave

Employees are entitled to time off from work for illness or injury, which is paid by the state social security protection schemes, provided they meet all the eligibility requirements. The State social security protection schemes pay sick pay to employees absent from work due to illness or injury. The employee can receive sick pay for a total of 1,095 days. Sick pay is calculated based on the employee’s remuneration reference for Social Security purposes and varies between 55% and 75% depending on the period of illness. Collective labour agreements sometimes provide specific rules covering employee illness or injury.

Parental Leave

Rules on maternity and paternity and other parental rights are extensive and complex.  The main parental rights foreseen in the Labour Code are the following: Initial Parental Leave  For the birth of each child, the working mother or father are entitled to an initial parental leave of:  120 consecutive days Or 150 consecutive days.  Initial parental leave is not paid by the employer but paid by social security provided all applicable legal requirements are met. Shared Initial Parental Leave  If the parents choose to take a shared initial parental leave, the duration of the leave is extended by 30 days so that they are entitled to 150 or 180 consecutive days of leave. Shared initial parental leave is understood as that which is taken by both parents and in relation to whom the parent with the shortest leave period takes at least 30 consecutive days or two periods of 15 consecutive days of leave. Multiple Births  In case of multiple births (i.e., twins), the leave is extended by 30 days per each twin, excluding the first. Mother’s Initial Exclusive Parental Leave The mother must necessarily enjoy a period of 6 weeks after the birth of her child. In addition, the mother is entitled to take up to 30 days before the birth. Both these periods are deducted from the total initial parental leave period. Exclusive parental leave by the father  The father is required to take fifteen working days of exclusive parental leave in the 30 days following the birth, five of which must be consecutive and taken immediately after the birth. Following such leave period, the father may enjoy an additional ten working days (consecutive or not) of leave, provided that they are taken together with the mother’s initial parental leave.  In the case of multiple births, the father is entitled to two additional working days of leave per each twin, excluding the first. These periods are not deducted from the total initial parental leave period Acumen International can help you fast-track your possibilities of entering and expanding your business in Portugal by providing you with our Employer of Record services. Our unique mix of PEO/EOR solutions will enable you to jumpstart your global operations almost immediately, cost-effectively and compliantly without any requirement to set up a legal entity first or thereafter.