In recent years, employers across the world have realized that remote employment works remarkably well and opens up exciting opportunities for talent acquisition and expansion. Instead of filling roles with candidates who just happen to be local, businesses can now focus on finding the best candidate, no matter where they’re located.
When it comes to expanding a company’s operations or breaking into a new market, Portugal is a top choice. A part of the European Union, Portugal provides access to much of Europe while also allowing employers access to a diverse, well-educated, and growing workforce.
That said, hiring in Portugal isn’t without its challenges, especially if your organization isn’t yet equipped to handle the myriad complexities of international hires, including documentation, onboarding, compliance, and payroll.
To mitigate these difficulties, some businesses may turn to a Portugal-based professional employer organization (PEO). Let’s take a look at how a PEO can help you engage talent in Portugal and what you should know about employment practices there.
Pros and cons of working with a PEO in Portugal
A professional employer organization, or PEO, is an entity that helps businesses from other countries gain access to the workforce in the PEO’s home nation. Essentially, a PEO acts as a co-employer and handles some of the HR admin, compliance, and logistics on behalf of the company it serves. This allows businesses to set up faster in their new target market while also remaining compliant with labor laws, hiring practices, and social expectations.
PEOs in Portugal can help your business manage HR functions, payroll, and onboarding without your team having to devote in-house resources to handle local regulations. PEO services can also reduce costs and help ease your expansion into the country.
However, there are both pros and cons of using a PEO, and it may not be the best choice for your needs.
The biggest limitation of PEOs is that they don’t take on full legal responsibility or liability for the hires made in the country. Instead, your company and the PEO are in a co-employment relationship with shared risk and liability. What’s more, to be a co-employer of workers in Portugal, you need to establish a legal entity there, which can be a costly and time-consuming process.
How does a PEO differ from an EOR?
Some people use the terms PEO and EOR interchangeably, but they are distinct in their operations and shouldn’t be confused. A PEO provides HR and admin support, but is more limited in scope than an EOR which takes on full legal responsibility for hiring employees. For instance, using an EOR in Portugal allows a business to expand into the country without having to establish a legal footing there. This means your company can grow into a new market quickly and with as little hassle as possible.
At Oyster, we provide comprehensive global employment services to ensure that your company can grow easily and quickly, where the market demands. We have entities across the world and work with EORs in numerous countries to provide the widest possible reach.
Things to know about hiring in Portugal
The first step to successfully hiring abroad is to familiarize yourself with local hiring customs, laws, and expectations. Doing this allows you to make your position look attractive to the type of talent you want to pull in. Since each country has different types of worker protections and employment practices, you can’t assume that the norms in your own country will apply in another.
Portugal’s demographics
Portugal is a country of over 10 million people, and its workforce is diverse and well-educated. The number of college students graduating with degrees in science, technology, engineering, and mathematics (STEM) has been steadily increasing over the last two decades, leading to a pool of workers well-suited to many industries, such as information technology.
The national language of Portugal is Portuguese, but the country has a robust foreign language education system and a healthy tourism industry, meaning that many people are multilingual. The national currency of Portugal is the Euro, the international standard currency used by the EU.
Payment requirements and expectations
Perhaps the most important aspect of employment practices in Portugal for a business new to the country to note is the mandate for 13th and 14th month payments. These are two additional payments equal to an employee’s monthly salary that each employee is entitled to, regardless of their position or experience. These are generally paid in the fall and winter, and are legally required.
For a detailed breakdown of the cost of hiring Portuguese talent, check out our employment cost calculator for Portugal.
Working hours
The typical workweek is 40 hours and goes from Monday to Friday, though other schedules may be negotiated. Employees are not supposed to work for more than five hours without a rest break of at least one hour. Any hours worked over 40 in the week are to be paid at an overtime rate, and overtime hours should not exceed eight additional hours each week. Regular bonuses are not required, but they do make an offer more attractive to the top talent.
Leave
Employees in Portugal are generally entitled to 22 working days of paid time off per calendar year. This is in addition to nine national holidays and a number of regional holidays that will vary by locality.
In the first year of employment, an employee is entitled to two days of annual paid leave per month, up to a maximum of 20 days, which may only be used upon completion of six months of work.
Employees can take up to 1,095 days of sick leave, which means that up to three years of sick leave are protected and subsidized by Social Security. However, this benefit begins on the fourth day of absence due to sickness. For the initial three days of illness, neither the employer nor the social security authority provides sick leave compensation to employees. Although it isn’t mandatory for employers to pay salaries during these first three days, many companies choose to do so.
Other requirements and considerations
For remote workers, employers are required to provide all equipment and software necessary for the job. Many employers offer a monthly work-from-home stipend to help cover maintenance costs of equipment. Employees may also be given a monthly lunch stipend.
Non-compete agreements are legal in Portugal, provided they pertain to activities that could potentially harm the employer, and the employee must be compensated for adhering to the terms of the agreement. Such clauses are typically valid for up to two years but can be extended to three years if the employee has engaged in activities for the employer that involve a high level of trust or access to highly sensitive data.
Finally, it should be noted that Portugal does not have at-will employment, and any terminations must come with a justification. An employee terminated due to redundancy is entitled to a severance package dependent on their length of service.
To learn more about Portuguese employment laws and best practices, check out our complete guide to hiring employees in Portugal.
How Oyster can help you hire in Portugal
Oyster is a global employment platform that operates worldwide to help businesses hire the best person for the job, no matter what the role, where the company is based, or where the employee is applying from. We help you engage talent in over 180 countries and pay them in over 140 currencies, as well as offering benefits, equity, and more. We function as the legal employer for our clients’ international hires, and where we haven’t already established an entity, we work with trusted EORs to ensure an easy and reliable hiring process.
With Oyster’s automated platform, consultative approach, and global reach, you can confidently onboard talent in Portugal—and around the world. Learn more about how Oyster can help you scale your global team compliantly and competitively.
About Oyster
Oyster is a global employment platform designed to enable visionary HR leaders to find, engage, pay, manage, develop, and take care of a thriving distributed workforce. We let growing companies give valued international team members the experience they deserve, without the usual headaches and expense of hiring abroad.
Oyster enables hiring anywhere in the world—with reliable, compliant payroll and great local benefits and perks.
