Hiring in Portugal Without Breaking the Law

Hiring in Portugal looks like a smart move and it is. The country offers a skilled workforce, competitive labor costs, and easy access to the EU market. But many foreign companies get tripped up by one thing: compliance. Labor laws in Portugal are strict, and even small missteps around contracts, taxes, or benefits can lead to serious consequences. If you’re planning to hire in Portugal from abroad, it’s not just about finding great talent, it’s about doing it the right way.

Before jumping in, it’s worth understanding what most foreign employers tend to get wrong when trying to hire in Portugal.

What Foreign Employers Get Wrong About Hiring in Portugal

Hiring talent in Portugal looks simple from the outside but many global companies make costly missteps by underestimating local rules, cultural expectations, and legal structures. Here are the most common traps:

• Assuming Freelance Contracts Are “Good Enough”

Companies often use freelance agreements to move quickly, assuming it sidesteps local compliance. But Portugal closely monitors worker classification. If a contractor has set hours, uses your tools, and reports to a manager, they’re likely an employee and misclassification can result in back pay, penalties, and forced contract conversions.

• Believing EU Laws Are the Same Everywhere

Portugal follows EU labor standards, but its local employment laws, payroll deadlines, and required benefits differ significantly from other EU countries. Treating the EU as a single legal zone leads to mistakes in contracts, entitlements, and tax reporting that could have been avoided with localized understanding.

• Thinking Local Payroll Is Just a Bank Transfer

Transferring funds internationally is not the same as running compliant payroll. In Portugal, employers must calculate taxes, handle mandatory contributions, and file government reports on strict timelines. Missing any step can result in fines or missed benefits for employees and erodes trust with your local team.

• Underestimating the Importance of Language

While English is widely spoken, employment documents in Portugal should be in Portuguese to hold up legally. Many foreign employers issue contracts in English only, which can create legal ambiguity. In case of disputes, Portuguese documentation will always take precedence in local labor courts.

• Delaying Entity Setup Without a Backup Plan

Some companies begin hiring before establishing a local legal entity, only to realize too late they can’t onboard talent or run payroll compliantly. Without a fallback solution like an Employer of Record (EOR), growth stalls, and companies risk losing top candidates to competitors who are prepared.

Key Legal Requirements for Hiring in Portugal

Hiring talent in Portugal means following a strict legal framework. Here’s what every foreign employer needs to get right from the start:

• Employment Contracts Must Be in Writing

While indefinite contracts can be verbal under Portuguese law, written contracts are the norm and strongly advised. For fixed-term or part-time roles, a written agreement is mandatory. Contracts must clearly outline role responsibilities, salary, benefits, working hours, and termination terms. Portuguese is the preferred language for legal documentation. If you’re hiring from abroad, ensure contracts are either bilingual or officially translated to avoid misinterpretation or challenges during labor inspections or disputes.

• Minimum Wage and Standard Working Hours

As of 2025, the national minimum wage in Portugal is approximately €850/month, subject to annual updates. A standard workweek consists of 40 hours, capped at 8 hours per day. Any overtime must be pre-agreed and compensated at increased rates, typically 125% for the first hour and more thereafter. Employers must also consider sector-specific agreements or CBAs that could introduce different rules. Ignoring these standards may result in wage claims or labor violations down the line.

• Mandatory Holiday and Christmas Bonuses

Portugal legally requires a 13th-month (holiday) and 14th-month (Christmas) bonus, each equivalent to one full month’s salary. These must be paid in June and December, respectively. They are not optional or performance-based, but statutory entitlements. Missing or miscalculating these payments can lead to employee grievances, fines, and serious reputational damage. Foreign employers often overlook these mandatory bonuses, especially when drafting compensation packages. Ensure these payments are clearly stated in employment contracts and paid on time.

• Social Security Contributions and Employee Registration

Employers must register each employee with the Portuguese Social Security system before their first working day. The employer contribution is around 23.75% of gross salary, while the employee contributes 11%. These are mandatory, regardless of contract type. Monthly payroll reporting (Declaração de Remunerações) must be filed accurately to avoid penalties. Social security also covers benefits like parental leave, sick leave, and unemployment which means incorrect or late filings can negatively affect your employee’s access to state protections.

• GDPR and Employee Data Protection

Portugal follows the EU’s General Data Protection Regulation (GDPR), which imposes strict rules on how employee data is collected, stored, and processed. Employers must provide transparent privacy notices, limit data collection to what’s necessary, and secure explicit consent for sensitive data. Non-compliance can lead to hefty fines, both from Portuguese regulators and EU-wide enforcement. Many companies overlook the need to localize their data practices. Ensure your HR systems and contracts are GDPR-compliant and clearly explain data handling procedures to employees.

The Risk of Misclassification – Contractor vs Employee

In Portugal, misclassifying an employee as an independent contractor isn’t just a technicality, it’s a legal liability. Many foreign companies make this mistake trying to avoid payroll taxes, benefits, and long-term obligations, but the consequences are steep.

Portuguese labor law places strong emphasis on the nature of the working relationship, not the contract label. If a contractor works fixed hours, uses your tools, follows your instructions, and has no real autonomy, they may be considered an employee under the law, regardless of what their contract says.

If authorities determine that misclassification occurred, your company could face retroactive tax payments, social security contributions, fines, and even court-ordered compensation for benefits not provided. These cases often favor the worker, and legal disputes can become drawn-out and expensive.

When hiring in Portugal, especially from another country, err on the side of caution. If you intend to manage the person like a regular employee, consider hiring them through an Employer of Record (EOR) or establishing a compliant employment relationship from the start.

Do You Need a Local Entity to Hire?

Yes! if you want to hire full-time employees in Portugal directly, you’ll need to establish a local legal entity. That means registering a branch or subsidiary, getting a Portuguese tax identification number, setting up a business bank account, and enrolling with the local social security and labor authorities.

It’s a process that can take several months and comes with upfront legal, accounting, and administrative costs. You’ll also need to appoint a local representative, manage payroll internally or through a local provider, and keep up with ongoing compliance, including changes in labor laws, minimum wage updates, and reporting obligations.

For companies planning long-term operations in Portugal, setting up an entity may make sense. But if you’re looking to hire quickly, test the market, or onboard a few key team members, this route often creates more friction than flexibility.

That’s why many companies explore alternatives, like using an Employer of Record (EOR) to stay compliant without the delays or overhead.

How to Hire in Portugal Without a Local Entity (Legally)

If you’re looking to hire in Portugal without going through the long and expensive process of setting up a local company, an Employer of Record (EOR) is your best option. It’s a fully legal, recognized model that allows you to hire, pay, and manage employees while remaining compliant with local labor laws.

Here’s how it works: the EOR becomes the legal employer on paper, handling employment contracts, social security registration, payroll processing, and tax filings in Portugal. Meanwhile, you retain full control over the employee’s day-to-day responsibilities, performance, and integration into your team.

The EOR ensures the employee is properly classified, paid in euros, and receives all mandatory benefits, including holiday pay, 13th and 14th-month bonuses, and government-mandated leave.

This model allows you to:

• Hire quickly—onboarding in days, not months
• Avoid the costs of local entity setup
• Stay 100% compliant with Portuguese labor regulations
• Focus on growth, not admin or legal complexity

It’s ideal for companies testing the market, hiring a few key roles, or scaling globally without needing a full back-office in each country.

Why Businesses Choose EORs Over Traditional Expansion

For many global companies, setting up a local entity is overkill, especially when the goal is to hire a few employees, test the waters in a new market, or move fast. That’s where EORs come in, not just as a shortcut, but as a smarter, leaner way to build international teams.

With an EOR, you don’t need to worry about corporate registration, hiring local lawyers or accountants, or learning Portugal’s evolving labor code. All of that’s built into the service.

But speed and convenience are just the beginning.

EORs also reduce risk. They handle worker classification, draft compliant employment contracts, manage social contributions, and ensure you’re up to date on bonuses, holidays, and leave entitlements. For companies without in-house HR or legal teams familiar with Portuguese law, this isn’t just helpful, it’s essential.

In short, EORs give companies the ability to scale globally without adding complexity locally.

Whether you’re hiring one person or building a regional team, using an EOR lets you focus on finding the right talent while they handle everything behind the scenes.

How Remire Helps You Hire in Portugal Legally

Hiring in Portugal shouldn’t feel like navigating a maze of labor laws, tax codes, and bureaucratic hurdles. Remire makes it simple by acting as your legal Employer of Record, so you can focus on finding the right people, not setting up a local office.

With Remire, your employees in Portugal are hired compliantly under local labor laws, with legally sound contracts, social security registration, and access to all required benefits, holiday bonuses, health coverage, paid leave, and more. Everything is managed through a single platform, with transparent reporting and ongoing compliance monitoring.

Unlike DIY setups or juggling multiple vendors, Remire handles everything from offer letters to payroll filings. You retain full control over your employee’s day-to-day work, while we take on the legal and administrative responsibility.

Whether you’re hiring one engineer or building a full team in Portugal, Remire helps you move fast, stay compliant, and scale confidently, without setting up a local entity.

A Smarter Way to Build in Portugal

Hiring in Portugal doesn’t have to mean getting buried in paperwork, legal hurdles, or slow-moving bureaucracy. With the right partner, you can build a fully compliant team without setting up a local entity or risking misclassification.

Whether you’re scaling cautiously or expanding aggressively, the smarter move is one that keeps your operations clean and your growth unhindered. Remire gives you the structure, local knowledge, and speed you need to make hiring in Portugal feel easy and fully legal from day one.