How to Hire Your First Employee in Portugal: Everything You Need to Know
Hiring your first employee is a major milestone for any business. It's a sign that your company is growing - but it also brings legal, tax, and administrative responsibilities that many entrepreneurs are unfamiliar with. In this practical guide, we explain all the steps to make your first hire in Portugal correctly, safely, and without complications.
1. Before Hiring: What You Need to Define
Before posting a job offer, there are important decisions that will shape the entire process:
Type of Contract
In Portugal, employment contracts can be:
- Permanent contract - the most common and stable form, with no defined end date
- Fixed-term contract - defined duration (minimum 6 months, renewable up to 3 years)
- Uncertain-term contract - for replacing workers or projects with an unpredictable end
- Temporary work contract - through a temporary employment agency
- Service provision contract - only for true independents; beware of employment presumption
⚠ Warning: hiring someone as a service provider when there is a subordinate employment relationship can be considered undeclared work by the ACT (Working Conditions Authority), with heavy fines.
Professional Category and Collective Agreement
Each worker must have a defined professional category, which determines the minimum applicable salary according to the sector's Collective Labor Agreement (IRCT). Check which collective agreement applies to your activity - often the sectoral minimum wage is higher than the national minimum wage.
Salary and Benefits
In 2026, the National Minimum Wage in Portugal is €920 gross per month. Beyond the base salary, consider:
- Holiday allowance: equivalent to one month's salary, paid before holidays
- Christmas allowance: equivalent to one month's salary, paid in December
- Meal allowance: usually paid in cash or meal card
- Other negotiated benefits: health insurance, flexible hours, remote work, etc.
Use our Salary Simulator to calculate net salary and employer charges.
2. The Hiring Process Step by Step
Step 1 - Social Security Communication
Before the worker starts, the company must communicate the admission to Social Security - ideally the day before, but never after the first day. This is done online through the Social Security Direct portal.
⚠ This communication is mandatory even during the trial period. Failure to communicate can result in fines between €2,040 and €20,400.
Step 2 - Written Employment Contract
Although verbal contracts are valid in some cases, the law requires written contracts for fixed-term contracts, part-time work, remote work, and temporary work. The contract must include party identification, professional category, workplace, schedule, remuneration, and start date.
Step 3 - Trial Period
All employment contracts include a trial period during which either party can terminate without notice or compensation:
- Permanent contracts: 90 days (180 days for management positions)
- Fixed-term ≥ 6 months: 30 days
- Fixed-term < 6 months: 15 days
Step 4 - Social Security Direct Registration
Confirm the worker admission is correctly registered in Social Security Direct and that all data is up to date.
Step 5 - Internal HR Registration
Create the worker's individual file with ID copies, signed contract, personal and banking data, and IRS declaration.
3. Real Costs of Having an Employee
Many entrepreneurs underestimate the total cost of a worker. Beyond the gross salary, the company has significant additional charges.
Simulate the real cost with our Business Cost Simulator.
Monthly Employer Charges
- Gross monthly salary (e.g.: €1,000)
- Employer Social Security: 23.75% → €237.50
- Work accident insurance: typically 1% to 3% → ~€10 to €30
- Meal allowance: ~€7.63/working day in cash
For a €1,000/month gross salary, the total monthly cost is approximately €1,350 to €1,400 - excluding meal allowance.
⚠ Rule of thumb: the real annual cost of a worker is approximately 14 to 15 times the gross monthly salary.
4. Monthly Employer Obligations
- Payroll processing: calculate salaries, IRS withholdings and SS deductions
- Salary payment: by the last working day of the month
- Monthly Remuneration Declaration (DMR): submitted to Tax Authority by the 10th
- Social Security Remuneration Declaration: by the 10th
- SS contribution payment: by the 20th
Check our Tax Calendar to never miss a deadline.
5. Worker Rights You Should Know
Holidays
Workers are entitled to 22 working days of annual leave per full year. In the first year, leave entitlement starts after 6 months.
Absences
There are justified absences (marriage, family bereavement, medical leave) and unjustified absences that may result in salary deductions or disciplinary proceedings.
Sick Leave
From the 4th day of sick leave, Social Security covers part of the remuneration. The first 3 days are unpaid (unless the collective agreement states otherwise).
Parental Leave
Initial parental leave is 120 or 150 days, shareable between parents. SS replaces employer payment during this period.
6. Contract Termination
- Mutual agreement: simplest form, requires written agreement
- Dismissal for just cause: requires disciplinary proceedings
- Collective dismissal or position extinction: subject to specific rules and compensation
- Expiry (fixed-term): ends automatically with prior notice
- Worker resolution with just cause: worker entitled to compensation
⚠ Errors in contract termination are a major source of labor disputes. Always consult a specialist.
7. The Importance of Professional Payroll
Payroll errors can result in tax fines, worker conflicts, ACT audit issues, and reputational damage.
Grupo Your offers complete payroll outsourcing - we calculate salaries, manage declarations and ensure full legal compliance.
Find out how much you can save with our Payroll Outsourcing Simulator.
Conclusion
Hiring your first employee requires preparation, but it doesn't have to be complicated. With the right support, you can manage all legal obligations simply and safely.
Contact us at grupoyour.com or comercial@grupoyour.pt.
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