Employer of Record Portugal: A Comprehensive Guide for 2024
Expanding your business into new markets is an exciting venture, and Portugal is becoming an increasingly popular destination for global businesses. So, how can companies set foot in such vibrant destinations without an exhausting bureaucratic process? One of the most efficient ways to hire employees in a foreign country like Portugal is through an Employer of Record (EOR). This guide will walk you through everything you need to know about using an EOR in Portugal, including the benefits, processes, and key considerations.
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What is an Employer of Record (EOR)?
An Employer of Record (EOR) is a third-party organization that acts as the official employer for your employees in a foreign country. The EOR handles all the administrative tasks related to employment, such as payroll, taxes, and compliance with local labor laws, allowing you to focus on your core business operations. Using an EOR can significantly simplify the process of hiring international employees and mitigate the risks associated with global expansion.
Why Choose Portugal for Business Expansion?
Portugal offers numerous advantages for businesses looking to expand internationally:
Economic Stability: Portugal has a stable economy with a growing GDP and a business-friendly environment.
Skilled Workforce: The country boasts a highly educated and skilled workforce, particularly in the tech and engineering sectors.
Strategic Location: Located at the crossroads of Europe, Africa, and the Americas, Portugal provides excellent access to various markets.
Incentives and Support: The Portuguese government offers several incentives and support programs for foreign investors.
Step-by-Step Guide to Hiring through an EOR in Portugal
1. Deciding Between an EOR and a Legal Entity
When expanding into Portugal, you can either set up your own legal entity or use an EOR (actually, you can also consider the Foreign Employer set-up, but we’ll dive deep into this in another post). Here’s a comparison:
Legal Entity:
Pros: Tailored HR policies, and complete control over operations.
Cons: Time-consuming setup (it can take months), high initial costs, and complex compliance requirements.
EOR:
Pros: Quick setup (done in a matter pf days), handles compliance on your behalf, lower initial cost.
Cons: Potentially higher long-term costs, and less control over HR policies.
2. Choosing the Best EOR for Your Business
Consider the following when selecting an EOR:
Service Range: Ensure the EOR offers the services you need, such as payroll, benefits, and compliance.
Geographic Coverage: Verify that the EOR operates in all the countries where you plan to hire. Alternatively, you can also rely on several local EORs - this can be more time-consuming, but ensure you are fully compliant.
Data Protection: Check the EOR's data protection measures, especially compliance with GDPR. At BRIDGE IN we take compliance seriously and have our internal legal team.
Automation: Look for EORs that offer automated solutions for onboarding and other HR tasks.
Support Model: Choose an EOR with accessible, knowledgeable support staff.
3. Hiring and Onboarding Portuguese Employees
To hire employees through an EOR in Portugal, you need to collect the following information:
Name and contact details
Date of birth and hire
Identification Number or Passport Number
Social Security number (NISS)
Tax identification number (NIF)
Bank account details
Salary and bonuses
While a written contract is not mandatory, it is highly recommended to draft one to outline the key working conditions and protect both parties in case of disputes. The EOR will localize and distribute employment agreements, ensuring they comply with Portuguese laws.
4. Running Payroll through an EOR
In Portugal, salaries are typically divided into 14 payments per year, including holiday bonuses. The EOR will handle salary payments and withhold legally required taxes such as:
Income Tax: Progressive rates based on income.
Social Security Tax: 11% from each paycheck.
Employers are also responsible for contributions, including:
Social Security Contributions: 23.75% of wages.
Labor Accident Insurance: 1.75% of gross income.
5. Ensuring Compliance with Portuguese Labor Laws
Compliance with local labor laws is crucial. The EOR will manage all compliance aspects, including:
Drafting compliant employment contracts.
Ensuring adherence to working hours, minimum wage, and termination policies.
Managing collective bargaining agreements, which can vary by region.
Frequently Asked Questions About EOR in Portugal
How much does an EOR cost? EOR costs typically follow two pricing structures: a fixed monthly fee per employee or a percentage of payroll plus taxes. Additional fees may apply for administrative tasks and onboarding. At BRIDGE IN, we charge a monthly fee, with different tiers, based on the level of support you will need from our team.
What is the difference between an EOR and PEO? An EOR acts as the sole employer for your international workforce, while a Professional Employer Organization (PEO) co-employs your workforce and provides HR services but doesn’t allow hiring in countries where you lack a local entity.
Does an EOR protect your sensitive information? Yes, reputable EORs comply with GDPR and have robust data protection measures in place. BRIDGE IN has an in-house legal team to guarantee full compliance with national and international regulations.
Does an EOR help with Portuguese tax filings? Yes, an EOR will handle all necessary tax filings for your local team. You will not need to file any corporate tax return if you do not have a Portuguese entity.
What are the mandatory benefits for Portuguese employees? Mandatory benefits include pensions, workers' compensation, employee training, and a minimum of 22 vacation days plus public holidays. Social security covers sick leave, disability leave, and parental leave.
EOR in Portugal - Case Studies and Examples
Case Study 1: iMovo
iMovo, a tech company based in Malta, collaborated with BRIDGE IN to expand into Portugal. Facing the challenges of creating local legal entities during the pandemic, iMovo opted to use BRIDGE IN's EOR services to quickly and compliantly employ their Portuguese candidates. The EOR solution allowed iMovo to start operations swiftly and focus on its growth strategy. BRIDGE IN provided end-to-end services, including employee care and logistics, which were critical during the pandemic. This partnership enabled iMovo to establish a presence in Portugal without the initial burdens of setting up a legal entity.
Case Study 2: Design Pickle
Design Pickle, an IT and creative services company headquartered in Arizona, explored Portugal for their European tech hub. They needed a compliant solution to pay and run payroll locally for their newly hired team. BRIDGE IN provided EOR services, ensuring compliance with local regulations and handling payroll, benefits, and taxes. This solution allowed Design Pickle to start with a small team and gradually expand. The EOR model facilitated a smooth transition to setting up a local subsidiary, with BRIDGE IN continuing to support as a local country manager, handling all payroll and HR-related tasks.
Expanding your business into Portugal through an Employer of Record can streamline the hiring process, ensure compliance with local laws, and minimize risks. By understanding the steps and considerations involved, you can make informed decisions and successfully grow your global workforce.
Book a call here and employ compliantly in Portugal.
