Services

Why CXC

Resources

Connect

Global Hiring Contact us

Let´s talk

OUTLINE

Hiring in Portugal

Background checks in Portugal

Hire employees in Portugal

Language requirements in Portugal

Corporate presence requirements for payroll processing in Portugal

Easily hire employees in Portugal with our EoR solution

Employer of record in Portugal

When you hire employees in Portugal, you’re responsible for withholding and paying income tax and social security contributions based on their wages. Your business will also be subject to certain payroll registration requirements, which can be administratively taxing. You may even need to set up a legal entity in Portugal, which is a time-consuming process. There is another solution: hire employees through an employer of record in Portugal.

What is an employer of record (EoR)?

An employer of record (EoR) is an organisation that hires employees on behalf of employers. Many companies use employer of record services to hire workers in countries where they don’t yet have a legal presence, which greatly simplifies the expansion process. Employers of record handle HR tasks like payroll, tax withholding, benefits administration, and more on behalf of their clients.

Hiring through an EoR in Portugal

If you want to hire employees in Portugal, using an EoR could make the process much easier. When you work with an employer of record in Portugal, the EoR will become your workers’ employer for legal and tax purposes. That means they’ll be responsible for withholding and paying employee taxes and social security contributions on behalf of your employees.

Depending on the employer of record provider you choose, they may also take on various other HR tasks and processes. For example, an EoR may be able to assist you in obtaining the relevant visas and work permits for any employees coming to Portugal from overseas. In Portugal, employer of record providers are also responsible for compliance with the relevant labour laws, which govern things like wages, working hours, benefits, and termination procedures.

Hiring in Portugal without an EoR

If you choose to hire employees without working with an EoR in Portugal, you’ll need a thorough understanding of the labour laws, tax legislation, and other relevant regulations that apply to your business. You’ll need to know about your rights and obligations as an employer, as well as those of your employees. In this guide, we’ll take you through everything you need to know to confidently and compliantly hire employees in Portugal — with or without an employer of record.

Hiring in Portugal

Portugal’s low employment costs and strategic location in Europe make it a popular destination for foreign companies looking to expand their operations. Portugal also has a strong economy, and its government encourages foreign direct investment through simplified administrative processes and tax incentives.

But hiring in Portugal does require a thorough understanding of the labour laws and regulations that will apply to your company, as well as the processes for withholding, declaring and paying taxes and social security contributions for your employees. We’ll cover what you need to know in this section.

Labour laws in Portugal

Before hiring in Portugal, companies should have a good understanding of Portuguese labour laws, which are mostly set out in the Labour Code (Código do Trabalho). This important piece of legislation covers various aspects of employment in Portugal, including maximum working hours, annual leave entitlements, rest periods, and overtime pay. We’ll discuss these in more detail in the sections below.

Collective bargaining agreements in Portugal

Many employers in Portugal are covered by a collective bargaining agreement (CBA). These are negotiated between unions and employers, either individually or as part of an employers’ federation. Industry-level agreements are the most common type of CBA in Portugal, but company-level agreements and agreements covering several companies are also possible.

There are also rules for what happens when different agreements contradict each other, which companies hiring in Portugal should be aware of. Specifically, single-company agreements take precedence over multi-company and industry agreements, and multi-company agreements take precedence over industry ones.

Employment contracts in Portugal

Written contracts are not mandatory in Portugal, which means that you can theoretically agree on employment terms verbally instead. However, certain terms must be in writing for some types of contracts, like fixed-term contracts. It’s best practice to provide written agreements to all employees for the sake of clarity. Probationary periods (trial periods) are permitted in Portugal and typically last for 90 days.

Taxes and social security contributions in Portugal

Companies hiring in Portugal are responsible for deducting both taxes and social security contributions from their employees’ wages and remitting payments to the relevant authorities.

When it comes to taxes, non-residents in Portugal pay a flat rate of 25%. For everyone else, taxes are calculated using a progressive system based on the employee’s income, with rates varying between 13.25% and 48%. High earners also pay an additional surtax called the ‘solidarity rate’. This is 2.5% for people earning EUR 80,000 or more, and 5% for those earning over EUR 250,000.
Employee social security contributions are paid at 11% of the employee’s gross salary, while employers pay 26% in total contributions. Of this, 23.75% goes to social security, 1% goes to the Portuguese Wage Guarantee Fund, and 1.75% pays for insurance for occupation-related accidents.

Background checks in Portugal

Conducting background checks on potential hires can help employers to verify information provided by candidates and to confirm their suitability for a role. However, employers should be aware of the specific rules surrounding background checks in Portugal before proceeding.

Required background checks in Portugal

Employers in Portugal are required to verify that the people they hire have the legal right to work in the country. For non-EU citizens, that means checking the applicant’s visa or work permit.

Employees are also required to subject new employees to a pre-hire occupational health consultation to confirm their ability to meet the physical demands of the job in question. This should normally happen before hiring but can be delayed until after the employee starts work if there’s an urgent need for them to start straight away. In this case, it must be completed within the employee’s first 15 days of employment.

Other types of background checks in Portugal

Employers can also choose to run various other types of background checks in Portugal, though some are subject to certain limitations. Here are some of the most common background checks you could choose to conduct on your Portuguese employees:

Reference and education checks: Employers can contact candidates’ references to find out about their experience and work ethic. They can also validate academic qualifications.
Credit checks: These are generally only allowed if there is a clear job-related purpose. For example, it may be possible to run a credit check on a potential employee if their role would involve significant responsibility for the company’s finances. Running a credit check involves obtaining the candidate’s information from the Portuguese Central Credit Register (Central de Responsabilidades de Crédito).
Criminal record checks: Employers can only perform criminal background checks on potential employees if they have a valid reason related to the role. Running this type of background check in Portugal involves a criminal record certificate from the Justice Administration General Directorate (JAGD) or asking the candidate to provide one.
Drug testing: In some circumstances, employers in Portugal can ask potential employees to undergo drug testing. However, this is only possible if it’s necessary to protect the employee or others.
Social media checks: Employers in Portugal can also browse public information about potential employees on social media sites. However, employers are advised to proceed with caution since there’s a possibility that this type of background check could infringe on the employee’s privacy rights.

Limitations on background checks in Portugal

Employers in Portugal are not allowed to ask potential employees for information on their personal life, health, or pregnancy unless this is strictly necessary for the role in question. They are also not permitted to perform background checks to obtain this information.

All background checks in Portugal must comply with data protection regulations, which are overseen by the Portuguese Data Protection Authority (CNPD). Employers always need a lawful basis to process data related to candidates or employees, which might include fulfilling a legal obligation. In some circumstances, having the candidate’s explicit consent can be counted as a legal obligation.

Hire employees in Portugal

Before you hire employees in Portugal, you’ll need to consider which employment option will work best for your business. For example, if you’re hiring a worker for a specific, short-term project that’s not related to your business’s core activity, it may be possible to take them on as an independent contractor.

However, if you need a worker on a more long-term basis and expect to exercise significant control over their work, you’ll likely need to hire them as an employee. It’s important to ensure all of your workers in Portugal are classified correctly in order to avoid fines and other legal consequences.

Main hiring options in Portugal

There are three main options for businesses wanting to take on workers in Portugal:

Employee: Employees are hired directly by their employers under employment contracts. Employers must withhold and pay taxes and social security contributions on their behalf. Employers are also granted certain rights and protections under the Portuguese Labour Code and other legislation. In Portugal, employees can be hired on a fixed-term or permanent basis, to work part-time or full-time hours.
Independent contractor: In Portugal, independent contractors are professionals who work without an employment contract, and who have a large amount of control over their work. They are not covered by Portuguese employment law. Whether or not you instruct the workers on how to complete their work and their level of integration into your company are two of the biggest factors influencing independent contractor status.
Agency worker: Agency workers can only be engaged in Portugal when they are required to fulfil a temporary need. They can be employed for a maximum of two years. Their contracts can be renewed without limitation as long as this maximum is not surpassed. Agency workers have the right to equal treatment to employees concerning pay and other benefits.

The importance of correctly classifying workers in Portugal

The Portuguese government takes the misclassification of workers seriously, and companies that engage workers as independent contractors when they are really employees could face serious consequences. For example, they may receive fines and penalties, and be required to pay back taxes, wages, and other benefits for the time the worker has been employed.

To figure out whether a worker is an employee or an independent contractor, employers in Portugal should ask themselves the following questions:

Are the worker’s working hours set by the employer?
Does the employer decide on the location where the work takes place?
Does the employer provide the worker with tools or equipment?
Does the worker receive regular, fixed payments for their work?
Does the employer provide instructions on how to complete work?
Is the worker integrated into the employer’s organisation?

If the answer to two or more of the above questions is yes, the worker is legally presumed to be an employee. If they have been classified as an independent contractor, the employer could face consequences including significant fines and penalties.

Language requirements in Portugal

While Portuguese is the main language used in Portugal, there are no statutory language requirements for employment documents. That means that employers are free to draft contracts in English (or any other language) as long as both parties understand the terms of the agreement. However, labour courts require a Portuguese contract or an official translation, so it’s a good idea to provide a bilingual version in case of litigation.

Language requirements for Portuguese visas and citizenship

Applicants for Portuguese citizenship need to prove that they have at least A2-level proficiency in Portuguese according to the Common European Framework of Reference for Languages (CEFR). To do this, they must pass an exam called the CIPLE (Centro de Avaliação de Português Língua Estrangeira). There are no language requirements for a residency permit in Portugal.

English language in Portugal

English is fairly widely spoken in Portugal, particularly in large cities. Portugal ranked eighth in the world and seventh in Europe for English language proficiency in the EF English Language Proficiency Index 2023.

Corporate presence requirements for payroll processing in Portugal

Foreign companies can engage employees in Portugal without setting up a local legal entity, subject to certain business, corporate, and tax considerations. All employers in Portugal must have the proper payroll registrations, withhold tax from their employees’ wages, and pay it to the proper authorities.

How to set up payroll in Portugal

Here are the steps to follow if you want to set up payroll for your Portuguese employees:

Register with the Commercial Registry: All businesses operating in Portugal must be registered with the Commercial Registry (Registro Comercial). Employers can register via an online application.
Register with social security and tax authorities: Employers also need to register with both the Portuguese Tax and Customs Office (Autoridade Tributária e Aduaneira) and with Social Security (Segurança Social). They’ll then receive a taxpayer number which they will need to withhold and pay employee taxes.
Register new hires with social security bodies: Employers must then register any employees with social security bodies at least 24 hours before the official start of their contract. This can usually be done online, unless the employee has never worked in Portugal before and has no social security number.
Take out occupational accident insurance: Employers must take out occupational accident insurance before their employees’ first working day. This ensures employees are protected in the case of injuries at work.
Sign up for the national compensation fund: In addition, all employers must sign up for the national compensation fund, which protects employees from loss of income in the case of the company going bankrupt.
Provide payslips and keep payroll records: Employers in Portugal are required to issue employees with payslips after every pay run. They must also keep payroll records for at least five years.

Do you need a local bank account to run payroll in Portugal?

Yes, employers in Portugal must set up a local bank account in order to process payroll and make payments to the tax and social security authorities.

Easily hire employees in Portugal with our EoR solution

Hiring employees in Portugal usually means setting up a legal entity, which can be costly and time-consuming. Employers can avoid this hassle by working with an Employer of Record (EoR), like CXC.

Through our EoR solution, you can confidently hire employees in Portugal, without worrying about compliance issues. We’ll handle everything from payroll to benefits to employment contracts on your behalf — so all you have to think about is finding the right person for the job.

Read about EoR services

FAQ's

What are the options for hiring employees in Portugal?

Companies can hire people in Portugal by setting up a local entity, using an Employer of Record (EOR), engaging independent contractors or using a licensed temporary work agency.

Setting up a Portuguese entity allows a company to employ people directly and manage its own payroll, employment contracts and local obligations. An Employer of Record provides another option for companies that want to hire employees in Portugal without establishing their own local entity. The EOR becomes the legal employer while the company manages the employee’s day-to-day work.

An EOR is not a separately defined category under Portuguese employment law. The arrangement must be structured in accordance with the Labour Code and other applicable rules. If it involves the temporary assignment of employees to a client company, the provider may need to comply with Portugal’s licensing and regulatory requirements for temporary work agencies.

Independent contractors can be engaged for genuinely self-employed work, but companies need to be careful about worker classification. Under Article 12 of Portugal’s Labour Code, factors such as company-set working hours, company-provided equipment and working under the company’s direction can indicate an employment relationship.

Temporary workers can also be engaged through an agency licensed by Portugal’s Institute for Employment and Vocational Training (IEFP).

Do you need a local entity to hire employees in Portugal?

No. A foreign company does not need to set up its own legal entity in Portugal to hire employees if it uses an Employer of Record (EOR). The EOR employs the worker locally and manages the employment contract, payroll, tax, social security contributions and other local employment requirements. However, the EOR arrangement must comply with Portuguese employment law and must not amount to an unauthorised supply of labour. Where the arrangement constitutes temporary agency work, the relevant provider must hold the required Portuguese authorisation.

A foreign company that wants to employ workers directly in its own name needs the appropriate registrations and local setup. This includes registering as an employer with Portugal’s Social Security Institute (ISS), completing the necessary tax registration with the Tax and Customs Authority (AT), and arranging mandatory work accident insurance.

Depending on the company’s circumstances, this may involve establishing a Portuguese entity or registering as a non-resident employer.

For companies that do not want to establish their own entity or employment setup, an EOR provides a way to hire and pay employees in Portugal while the company continues to manage their day-to-day work.

How long does it take to hire employees in Portugal?

Four to eight weeks is a realistic estimate for a company setting out to hire employees in Portugal from a standing start, even though the company registration itself may be completed quickly through Portugal’s simplified incorporation procedures. Most of that time goes on the tax activity declaration, employer registration, opening a bank account and putting work accident insurance in place. The actual timeframe varies according to the company structure, the registrations required and whether additional documentation must be obtained.

Once the employer side is set up, each individual hire has one hard deadline. The admission must be reported to the ISS no later than the start of the employment contract. Reporting within 24 hours after the start is allowed only as an exception where duly justified circumstances connected with very short-term contracts or shift work prevented earlier reporting.

Failure to report the employee within the applicable period constitutes a social security offence and can result in penalties and other legal consequences. Probation then runs 90 days for most roles and 240 days for senior management. A middle tier of 180 days covers technically complex, high-responsibility and high-trust positions, first-job seekers and the long-term unemployed.

Working with an employer of record removes the setup phase altogether for companies that hire employees in Portugal, since the provider is already registered.

When should companies use EOR services in Portugal?

Companies can use an Employer of Record (EOR) in Portugal when they need to hire quickly, access specialised talent, test the Portuguese market or build a local team without setting up its own entity.

It can also be useful when a business is entering Portugal for a specific project, hiring employees while its own entity is being established, or expanding an existing global workforce into the country. Larger companies may also use an EOR when they want to hire in Portugal without adding local payroll, HR and employment administration to their internal operations.

Speed can be another factor. With an established EOR, the local employment setup is already in place, allowing companies to focus on finding the right person rather than completing their own employer registrations first.

An EOR may also be considered when moving a Portuguese contractor into employment where the working arrangement is more appropriate for an employee.

What does an EOR in Portugal actually do?

An Employer of Record (EOR) in Portugal hires and employs workers on a company’s behalf, allowing the company to build a team in Portugal without setting up its own local entity.

The EOR becomes the legal employer and handles the local employment administration. This typically includes preparing the Portuguese employment contract, registering the employee with the Social Security Institute (ISS), running payroll, withholding income tax and social security contributions, and making the required employer contributions.

The EOR also manages statutory benefits and employment requirements, including annual leave, sick leave, public holidays, work accident insurance, and Portugal’s holiday and Christmas allowances. It maintains the required employment records and handles local employment formalities when an employee leaves.

The company still chooses who to hire and manages the employee’s role, responsibilities, priorities, performance and day-to-day work.

In short, the EOR handles the local employment side, while the company manages the actual work.

How much does an employer of record cost in Portugal?

Providers price an employer of record in Portugal either a flat monthly management fee per employee or a percentage of gross salary. Flat fees typically fall between 199.00 EUR and 699.00 EUR a month.

The EOR fee is separate from the cost of employing the worker. Employers also need to budget for the employee’s gross salary and statutory employment costs, including:

Employer social security contributions: generally, 23.75% of gross salary.

Work accident insurance: the cost varies by role, industry and level of risk.

Holiday allowance: generally equivalent to one month of base salary.

Christmas allowance: generally equivalent to one month of base salary.

Other benefits or costs: where required by the employment contract, applicable collective agreement or company benefits package.

The total cost of using an EOR therefore varies based on the employee’s salary, the provider’s fee and the employment costs that apply to the role.

What should you look for in an EOR provider in Portugal?

When choosing an EOR provider in Portugal, look at whether they employ workers directly, their knowledge of Portuguese employment law, the services included in their fee and the level of local HR support available throughout the employee lifecycle.

It is worth checking whether the provider employs people through its own Portuguese entity or relies on a third-party partner, as this affects who your employees deal with and how employment issues are managed locally. Companies should also confirm whether the provider holds any licence or authorisation required for the particular employment structure being used. You should also consider:

Employment compliance: Experience with Portuguese contracts, probation periods, fixed-term employment, working hours and collective agreements.

Payroll and statutory payments: Accurate payroll, social security contributions, tax withholding, holiday and Christmas allowances, and payslips.

Employee administration: ISS registration, work accident insurance, leave, sick pay and other local requirements.

Termination support: Local guidance on termination procedures, notice, final pay and applicable severance.

Pricing and service: A clear breakdown of what the EOR fee covers, any additional charges and who provides support when an issue comes up.

A strong provider should be able to support both your HR team and employees from onboarding through to payroll, ongoing employment changes and offboarding.

What is the permanent establishment risk of hiring in Portugal without an EOR?

Hiring without an employer of record in Portugal can create a risk that a foreign company will be considered to have a permanent establishment in Portugal, depending on how the employee works and the activities they perform. Article 5 of the Código do Imposto sobre o Rendimento das Pessoas Coletivas (CIRC) sets the test. A permanent establishment is any fixed place from which the company runs a commercial, industrial or agricultural activity.

A home office can meet that definition. Two things matter. The arrangement needs enough permanence, and the space needs to be genuinely at the company’s disposal. Article 5 has a second test as well. Someone who has and habitually exercises authority to conclude contracts binding the company may also create a dependent-agent permanent establishment, subject to the applicable statutory and treaty rules.

The Organisation for Economic Co-operation and Development (OECD) said in 2021 that pandemic homeworking would not create a permanent establishment. That was a temporary carve-out for extraordinary circumstances. It does not cover a deliberate, ongoing remote hire.

Once a permanent establishment exists, the foreign company is taxed in Portugal under the CIRC on the profits attributable to that permanent establishment. The rate is 19% in 2026, falling to 18% in 2027 and 17% in 2028. Using an EOR may reduce some employment-registration and payroll obligations, but it does not automatically eliminate permanent-establishment risk. The assessment depends on the employee’s actual activities, authority, working arrangements and the applicable tax treaty.

What is the Trabalho XXI reform and how does it affect hiring in Portugal?

Trabalho XXI is a proposed reform of Portugal’s Labour Code that included changes to fixed-term contracts, working time and dismissal rules, as of September 2026 its proposed changes had not been enacted and therefore its proposed changes do not currently apply to employers.

Companies hiring in Portugal should continue to follow the Labour Code and the changes introduced by Law 13/2023 for employment contracts, probation periods, working hours and termination.

The Trabalho XXI proposals included extending the maximum duration of certain fixed-term contracts, changes to working-time arrangements and higher minimum compensation for unfair dismissal. Employers should monitor the legislative process because the final content may change before any measure is approved and published.For employers hiring in Portugal, the main point is to follow the employment rules currently in force rather than treating the Trabalho XXI proposals as new legal requirements.

What makes CXC a trusted EOR partner in Portugal?

CXC combines 30+ years of workforce management experience with the local employment support and global infrastructure needed to hire and manage employees in Portugal and 100+ countries.

Through our Employer of Record service, CXC can employ talent in Portugal on your behalf without requiring you to set up your own local entity. We manage employment contracts, payroll, tax withholding, social security contributions, statutory benefits and ongoing HR administration in line with Portuguese requirements.

Our support also covers local requirements such as employee registration, holiday and Christmas allowances, leave administration and employment changes, as well as support when an employee leaves the business.

For companies hiring across multiple markets, CXC provides workforce support across 100+ countries, giving your HR team one partner for Portugal and other locations as your workforce grows.

Speak to our team to learn more about hiring and managing employees in Portugal with CXC.

Compliantly hire workers anywhere with CXC

With our EoR solution, you can engage workers anywhere in the world, without putting your business at risk. No more worrying about local labour laws, tax legislation or payroll customs — we’ve got you covered.

Learn more

DISCLAIMER: The information contained on this website is provided for general informational purposes only and should not be construed as legal, tax, or other professional advice on any subject matter. While we endeavor to ensure that the content is accurate and up to date, we make no warranties or representations of any kind regarding the completeness, accuracy, reliability, suitability, or availability of the information contained herein. The content on this site is not intended to be a substitute for professional advice. Users should not act or refrain from acting based on any information on this website without seeking the appropriate legal, tax, or other professional advice tailored to their specific circumstances from qualified professionals. We expressly disclaim all liability in respect to actions taken or not taken based on any or all of the contents of this website. Use of the information on this site does not create an attorney-client, tax advisor-client, or any other professional-client relationship between the user and the website or its authors.

BLOG

Helping businesess to compliantly engage talent since 1992