Portuguese employment relationships are governed by the Código do Trabalho (Labour Code), which sets minimum standards for contracts, working time, pay, and termination that employers cannot contract below. Key figures for 2026 include a national minimum wage (Retribuição Mínima Mensal Garantida) of €920/month effective January 1, 2026, a standard working time cap of 8 hours/day and 40 hours/week, and an employer Social Security contribution rate of 23.75% of gross pay (on top of the 11% withheld from the employee). Anyone hiring staff in Portugal — including through their own newly formed company — needs to budget for these mandatory costs and follow the Labour Code's rules on contract types and termination.
Newcomers setting up a business and hiring local staff, or those being hired as employees themselves, need to understand that Portuguese labour law is protective of employees by default: fixed-term contracts are restricted in duration, working hours and rest periods are tightly regulated, and dismissal without just cause typically triggers a legally calculated severance payment. Getting these basics wrong is a common source of costly disputes for first-time employers in Portugal.
Key Facts
2026 national minimum wage (Retribuição Mínima Mensal Garantida): €920/month, effective January 1, 2026, fixed by Decreto-Lei n.º 139/2025 (up from €870 in 2025).
Employer Social Security contribution rate (general regime, for-profit entities): 23.75% of gross salary, per gov.pt.
Employee Social Security contribution rate: 11% of gross salary, withheld by the employer, per gov.pt.
Combined Social Security rate (Taxa Social Única): 34.75% for profit-making employers (22.3% employer / 33.3% total for non-profit/IPSS employers).
Social Security contributions are due monthly, between the 10th and 25th of the month following the reference month.
Standard working time limit: 8 hours/day and 40 hours/week (Código do Trabalho, articles 198 and 203, as commonly cited); a daily rest break is required after up to 5 consecutive hours of work, and at least 11 consecutive hours of rest is required between two working days.
Common contract types: permanent (contrato sem termo, the default/preferred form), fixed-term (contrato a termo certo), and open-ended fixed-term (contrato a termo incerto) — the latter two are restricted to specific justified circumstances and maximum durations under the Labour Code.
Probationary period (período experimental) for fixed-term contracts: 15 days if the contract term is under 6 months, 30 days if 6 months or more (reduction or exclusion possible by written agreement).
Minimum paid annual leave: 22 working days per year; in the first calendar year of a new contract, employees accrue 2 working days of leave per month worked, up to a maximum of 20 days.
Employees are entitled to two extra mandatory payments per year on top of monthly salary: subsídio de férias (holiday allowance, generally paid before the holiday period) and subsídio de Natal (Christmas allowance/"13th month").
Statutory severance for dismissal (e.g., collective dismissal or termination not attributable to employee fault) is generally calculated at 14 days of base pay and seniority-related allowances per full year of service for contracts as currently governed, with different historical formulas (12, 18, 20, or 30 days/year) applying depending on when the contract began; total compensation is capped (reported cap of 12 months' base pay or 240 times the minimum wage, whichever the specific rule applies) — the exact days-per-year figure depends on the contract's start date, so confirm the applicable transitional rule for any specific employee before calculating.
Steps
1. Choose the right contract type — Default to a permanent contract (contrato sem termo) unless a fixed-term contract is legally justified (e.g., temporary increase in activity, replacement of an absent worker, launch of a new activity). Fixed-term contracts must state the justifying reason in writing.
2. Register the employee with Social Security and issue a written contract — Employers must register new hires with Segurança Social and provide required contract terms in writing, including pay, working hours, and job role.
3. Apply correct working-time and rest-period rules — Track daily/weekly hour limits, required rest breaks, and weekly rest days; use adaptability regimes (individual or collective, allowing averaged hours over a reference period) only where a valid agreement is in place.
4. Withhold and pay Social Security contributions and IRS — Withhold the 11% employee Social Security contribution and applicable IRS withholding tax from payroll, and pay both the employee withholding and the 23.75% employer contribution to Segurança Social monthly (10th–25th of the following month).
5. Follow proper termination procedures — For dismissals not related to employee conduct (e.g., redundancy/collective dismissal), follow the Labour Code's notice and consultation procedures and calculate severance based on the seniority-days formula applicable to the contract's start date.
Costs
Employer Social Security contribution: 23.75% of gross salary (on top of gross pay itself), for profit-making employers.
2026 minimum wage: €920/month gross (14 payments/year including holiday and Christmas allowances, i.e., an annual minimum of €12,880 gross for a full-time employee on minimum wage).
Timelines
Social Security monthly contribution payment window: 10th to 25th of the month following the reference month.
Probationary period: 15 days (fixed-term contract under 6 months) or 30 days (fixed-term contract of 6 months or more).
Annual leave scheduling: leave dates generally must be set by April 15 each year (commonly cited Labour Code practice — confirm against current Código do Trabalho text for edge cases).
Common Mistakes
Treating fixed-term contracts as freely renewable/indefinite in practice — Portuguese law caps their justified use and maximum duration, and misuse can result in automatic conversion to a permanent contract.
Underestimating total employer cost: gross salary plus 23.75% Social Security plus the extra holiday and Christmas allowance months.
Miscalculating severance by applying the current 14-days-per-year rule to contracts that began under an earlier legal regime, when a different historical rate may apply for part or all of the employee's tenure.
Not tracking mandatory rest periods (11 hours between working days, breaks after 5 consecutive hours) when scheduling shift or flexible work.
Assuming minimum wage figures from prior years still apply — the Retribuição Mínima Mensal Garantida is updated annually (€920/month from January 1, 2026).