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UPDATED JUL 6, 2026💡 Everything you need to know to hire and manage employees in Portugal through Toku. Toku handles payroll processing, tax withholding, social contributions, and statutory compliance. This guide covers what you need to plan costs and manage your team.
At a Glance
| Item | Detail |
|---|---|
| Currency | Euro (EUR) |
| Payroll cycle | Monthly. Toku runs one payroll per month in Portugal. |
| Estimated employer costs on top of salary | Approximately 24-26%, plus mandatory 13th and 14th month allowances |
| Onboarding lead time | 5-7 business days |
| Standard working week | 40 hours over 5 days |
| Probation period | 90 days (per Toku's employment agreement) |
| Annual leave | 22 working days |
| 13th month salary | Required: both a holiday allowance and a Christmas allowance, each equal to one month's salary |
| Minimum notice on termination | 15-75 days depending on length of service |
Onboarding a New Hire
Plan for 5-7 business days between submitting a new hire and their start date. Toku registers each new hire with Portuguese social security no later than the day before their start date, so start dates cannot move at the last minute.
Submit your new hire through the Toku platform and we take it from there: local employment agreement, statutory registrations, and payroll setup. See Onboard Contributors as a Client Admin in Toku for the step-by-step process, and the Country Readiness Live Tracker for lead times across all countries.
Employer Costs
On top of gross salary, employers in Portugal pay the following:
| Cost | Rate | Notes |
|---|---|---|
| Social security | 23.75% | Covers pension, family benefits, and unemployment; no salary ceiling |
| Work accident insurance | Variable, risk-based | Mandatory policy from an authorized insurer |
| Holiday allowance (14th month) | One month's salary per year | Paid before the employee takes annual leave |
| Christmas allowance (13th month) | One month's salary per year | Paid by December 15 |
As a rule of thumb, total cost of employment is roughly 124-126% of gross salary, and because of the mandatory holiday and Christmas allowances, the annual base equals 14 monthly salaries rather than 12. Budget accordingly when quoting a monthly salary.
Employees pay their own social security contribution of 11% and progressive income tax of 12.5-48% (plus a solidarity surcharge on very high incomes). These are withheld from gross salary, not charged on top. Toku calculates and remits all of the above.
Compensation & Payroll
Toku runs one payroll per month in Portugal, and employees receive a detailed payslip each cycle. The national minimum wage for mainland Portugal is EUR 920 per month from January 1, 2026 (EUR 980 in Madeira and EUR 966 in the Azores), paid 14 times per year. The two extra payments are fixed by law: the holiday allowance is paid before annual leave and the Christmas allowance by December 15. Meal allowances are a common pay component and are tax-free up to EUR 6.15 per day in cash or EUR 10.46 per day via meal card.
Employment Contracts & Probation
- Toku issues a compliant local employment agreement for every hire.
- The indefinite-term (permanent) contract is the default. Fixed-term contracts are only allowed for genuinely temporary needs, capped at two years and three renewals.
- Probation under Toku's employment agreement is 90 days, which is the general statutory period for most employees (Portuguese law allows up to 180 days for positions of special trust or complexity and 240 days for senior executives).
- During probation, either party can end the contract without cause; after 60 days of probation the employer owes 7 days' notice, and after 120 days, 30 days' notice.
Working Hours
The standard week is 40 hours over five days, with a maximum of 8 hours per day and a break of 1-2 hours after five consecutive hours of work. Overtime is capped at 2 hours per day and 150-175 hours per year (depending on company size), paid at 125% for the first weekday hour, 137.5% for additional hours, and 150% on weekends and public holidays. Night work carries a 25% supplement. Portugal also protects the right to disconnect: employers may not contact employees outside working hours except in cases of force majeure.
Leave Entitlements
| Leave | Entitlement | Who pays |
|---|---|---|
| Annual leave | 22 working days, plus the holiday allowance | Employer |
| Sick leave | 3-day unpaid waiting period, then 55-75% of pay depending on duration, up to 1,095 days | Social Security |
| Initial parental leave | 120 days at 100% or 150 days at 80%, with bonus days and higher rates if shared between parents | Social Security |
| Paternity leave | 28 mandatory working days at 100% (plus 7 optional days) | Social Security |
| Extended parental leave | Up to 3 months at 25% (40% if shared) | Social Security |
| Marriage leave | 15 consecutive days | Employer |
| Bereavement leave | 2-20 days depending on the relationship | Employer |
| Carer's leave (child under 12) | Up to 30 days per year at 65% | Social Security |
Sick pay and parental leave are funded by Social Security rather than the employer, so their direct cost to you is limited. Annual leave accrues based on the prior calendar year (2 days per month up to 20 days in the year of hire) and cannot be paid out in cash except on termination.
Public Holidays (2026)
Portugal observes 13 national public holidays in 2026, and each municipality typically adds one local holiday.
| Date | Holiday |
|---|---|
| January 1 | New Year's Day |
| April 3 | Good Friday |
| April 5 | Easter Sunday |
| April 25 | Freedom Day |
| May 1 | Labour Day |
| June 4 | Corpus Christi |
| June 10 | Portugal Day |
| August 15 | Assumption of Mary |
| October 5 | Republic Day |
| November 1 | All Saints' Day |
| December 1 | Restoration of Independence Day |
| December 8 | Immaculate Conception |
| December 25 | Christmas Day |
Employees who work on a public holiday are typically entitled to compensatory time off or 150% pay.
Benefits: Required vs. Common Extras
Statutory (included in employer costs above): social security coverage for pensions, disability, unemployment, sickness, and parental benefits, public healthcare through the National Health Service, mandatory work accident insurance, and a minimum of 40 hours of professional training per year.
Toku offers fully sponsored international health coverage through Remote Health. See Remote Health, Your Global Insurance Plan for coverage details and enrollment.
Common extras in the Portuguese market include meal vouchers (the most widespread benefit, typically EUR 7-10 per working day), private health insurance, transport allowances, life insurance, and supplementary retirement plans. Meal allowances are tax-advantaged within the daily limits; most other benefits in kind are taxable. Toku can advise on the cost impact of any benefits you want to add.
Ending Employment
Portugal does not permit at-will termination: every dismissal needs just cause (disciplinary) or objective grounds (redundancy or unsuitability), each with a formal procedure, and unlawful dismissals can lead to reinstatement or significant compensation. Involve Toku before taking any steps. For the process, see How to Terminate an Employee or Contractor.
| Service | Notice |
|---|---|
| Less than 1 year | 15 days |
| 1-5 years | 30 days |
| 5-10 years | 60 days |
| Over 10 years | 75 days |
For dismissals on objective grounds under contracts signed since May 2023, severance is 14 days of base salary (plus seniority allowance) per year of service, with the salary base capped at 20 times the minimum wage and the total capped at 12 months' salary. Fixed-term contracts carry severance of 24 days per year of service. Pregnant employees, recent mothers, breastfeeding employees, and employees on parental leave have enhanced protection and cannot be dismissed without prior approval from the equality authority.
Hiring Someone from Overseas?
EU, EEA, and Swiss nationals can work in Portugal without a permit. Other nationals generally need a residence visa and work authorization; the main routes include the standard work visa, the Tech Visa for highly qualified professionals, and the Digital Nomad Visa, with processing times ranging from several weeks to several months. Nationals of Brazil and several other Portuguese-speaking countries may benefit from simplified procedures. Talk to Toku before extending an offer to a candidate who needs sponsorship.
Last verified July 2026. This guide is for general information and doesn't constitute legal or tax advice. Your Toku account manager can confirm specifics for your situation.