Hiring Your First Employee in Portugal

Three ways to bring someone on

Before hiring an employee, decide which arrangement you actually need. A full employment contract (Contrato de Trabalho) gives you the most control but the heaviest obligations. A green-receipts contractor (Trabalhador Independente) is faster and cheaper but only legal if the relationship is genuinely independent — the labour authority (ACT) regularly reclassifies disguised employment, with serious back-payments due. An Employer of Record (EOR) like Deel, Remote, or Multiplier hires the person on your behalf for ~€500–€700/month — useful if you're a foreign company with no Portuguese entity yet, or hiring just one or two people.

The two main contract types

Portuguese employment contracts default to permanent (sem termo). Fixed-term contracts (a termo certo) are only legal in specific cases — replacing an absent employee, exceptional/temporary increases in activity, launching a new activity or establishment, or hiring someone in long-term unemployment. They can run up to 2 years (3 with renewals) before automatically converting to permanent. Trial periods are 90 days for most roles, 180 days for technical/qualified roles, and 240 days for management. During trial, either party can terminate without cause.

Real cost of an employee — a worked example

Portuguese salaries are typically quoted as gross monthly across 14 months: 12 normal months plus a holiday subsidy (Subsídio de Férias, paid in summer) and a Christmas subsidy (Subsídio de Natal, paid in December). For an employee on €2,500 gross monthly, the actual annual cost looks like this:

• Gross annual salary (14 × €2,500): €35,000
• Employer Social Security (23.75%): €8,313
• Work accident insurance (~1–1.5%): €350–€525
• Meal allowance (Subsídio de Alimentação): €10.20/day × ~220 days ≈ €2,244 (tax-free if paid via meal card)
• Total annual employer cost: roughly €46,000 — about 32% on top of the headline salary

Mandatory benefits and time off

Portuguese labour law sets a generous floor that you cannot contract below. Many of these are misunderstood by foreign founders and become expensive surprises.

• 22 working days of paid annual leave (more under some collective agreements)
• 13 paid public holidays per year
• 14-month salary structure (12 + holiday + Christmas subsidies) — non-negotiable
• Meal allowance €6.00/day cash or €10.20/day via meal card (2026 tax-free limits)
• Maximum 40-hour week, 8-hour day; overtime at 25% (first hour) and 37.5% thereafter
• Parental leave: up to 120–150 days at 100%/80% of salary, paid by Social Security
• Sick leave: from day 4, paid by Social Security at 55–75% of reference salary

Registering the employee

Before the first day of work, you must register the new hire with Segurança Social via Segurança Social Direta — the 'Comunicação de Admissão' filing. Failing to register, or registering after the start date, triggers fines from €1,224 upward per worker. You also need to take out work accident insurance (Seguro de Acidentes de Trabalho) — legally mandatory for every employee — and add the worker to your monthly payroll software. If they are joining from another EU country, ask for their A1 form to confirm where Social Security is paid during any transition period.

Termination: the part that surprises foreign founders

Portugal does not have at-will employment. Once the trial period ends, terminating a permanent employee requires either mutual agreement (with a negotiated severance), a documented just cause (serious disciplinary breach, with a formal procedure), or a structural reason (redundancy, position elimination, collective dismissal — all heavily regulated). 'Performance' is not a clean dismissal ground unless you've followed a multi-step performance management procedure. Statutory severance for redundancy is typically 14 days of base salary per year of service, capped at 12 months and at 20× the minimum wage. Most disputed dismissals end in court-ordered reinstatement or higher settlements.

When EOR or contractor makes more sense

If you're a foreign founder with no Portuguese LDA yet, an EOR is the fastest legal way to hire one or two people in Portugal — you avoid incorporation, payroll setup, and labour-law learning curve, at the cost of ~€6,000–€8,000/year per employee in EOR fees. For genuinely project-based work (a designer doing a 3-month brand sprint, a developer building a one-off integration), green-receipts contracting is fine — just keep the relationship genuinely independent: their own equipment, their own hours, multiple clients, no embedded reporting line. Once you're hiring three or more people in Portugal long-term, incorporating an LDA and running payroll yourself nearly always becomes cheaper than EOR.