--- title: "The Real Cost of an Employee for a Portuguese Company" description: "Practical guide to calculating the real cost of an employee in Portugal. Gross salary × 14 ÷ 11, social security, insurance and occupational health." lang: en json-ld: | [ { "@context": "https://schema.org", "@type": "Article", "headline": "The Real Cost of an Employee for a Portuguese Company", "description": "Practical guide to calculating the real cost of an employee in Portugal. 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The Real Cost of an Employee for a Portuguese Company [Back to blog](/en/blog) [custos empresa](/en/blog?tag=custos%20empresa)[salários](/en/blog?tag=sal%C3%A1rios)[tsu](/en/blog?tag=tsu)[gestão](/en/blog?tag=gest%C3%A3o)[rh](/en/blog?tag=rh)[contabilidade](/en/blog?tag=contabilidade) # The Real Cost of an Employee for a Portuguese Company ![Pedro Flores](/images/authors/pedro-flores.png) [Pedro Flores](/en/blog/author/pedro-flores)[](https://www.linkedin.com/in/pedroflores/) 25 February 2026· 3 min read Share ![The Real Cost of an Employee for a Portuguese Company por Pedro Flores - Grupo Your Contabilidade](https://xmvtahclopqwmxwnbimy.supabase.co/storage/v1/object/public/blog-images/grupo-your-custo-real-colaborador-empresa-portuguesa.jpg "The Real Cost of an Employee for a Portuguese Company por Pedro Flores - Grupo Your Contabilidade") ## In this article - [Introduction](#introduction) - [Why × 14 and ÷ 11?](#why-14-and-÷-11) - [The 14 Monthly Salaries](#the-14-monthly-salaries) - [The 11 Effective Working Months](#the-11-effective-working-months) - [The Complete Calculation for €1,200 Gross](#the-complete-calculation-for-1200-gross) - [1\. Social Security (Employer Rate)](#1-social-security-employer-rate) - [2\. Work Accident Insurance](#2-work-accident-insurance) - [3\. Occupational Health](#3-occupational-health) - [Annual Cost Table - Employee at €1,200 Gross/month](#annual-cost-table---employee-at-1200-grossmonth) - [Real Monthly Cost Table](#real-monthly-cost-table) - [Formula Summary](#formula-summary) - [What Does This Mean for Management?](#what-does-this-mean-for-management) - [Simulate your company costs](#simulate-your-company-costs) ## Introduction When a company hires an employee with a gross salary of €1,200 per month, the reality is that the effective cost to the company is significantly higher. A common management error is to consider only the agreed monthly salary - ignoring mandatory allowances, social charges, and the concept of effective working months. This article explains, clearly and objectively, how to calculate the real monthly cost of an employee in Portugal, and why the correct calculation is to **multiply the salary by 14 and divide by 11**. ## Why × 14 and ÷ 11? ### The 14 Monthly Salaries In Portugal, the law requires companies to pay not 12, but **14 salaries per year**: - 12 regular monthly salaries - 1 holiday allowance (usually paid in June/July) - 1 Christmas allowance (paid by December 15) That is, for an employee earning €1,200 gross/month, the company actually pays: **14 × €1,200 = €16,800 gross per year** ### The 11 Effective Working Months Although the employment contract covers 12 months, the employee is entitled to **22 working days of holiday** per year - equivalent to approximately 1 month of work. This means that, in practice, the company has the employee producing for only **11 months per year**. To calculate the real monthly cost (per month effectively worked), the annual cost should be divided by 11 rather than 12. ## The Complete Calculation for €1,200 Gross To obtain the real cost, it is not enough to simply apply the 14/11 formula to gross salary. You must add the **mandatory charges** the company pays on behalf of the employee. ### 1\. Social Security (Employer Rate) The employer pays **23.75% Social Security contribution (TSU)** on all wages paid to the worker, including allowances. On the employee's side, the contribution is 11% - if you want to know how much each employee actually takes home after deductions, use our [Net Salary Simulator](/en/salary-simulator). ### 2\. Work Accident Insurance Required by law, the average premium ranges between **0.5% and 2%** of the [payroll](/en/payroll "Payroll Services"), depending on the sector. For this example, we use 1%. ### 3\. Occupational Health Mandatory medical surveillance represents an estimated annual cost of **€100 to €150** per employee. ## Annual Cost Table - Employee at €1,200 Gross/month Cost Component Value Annual gross salary (14 × €1,200) **€16,800.00** Employer Social Security (23.75%) €3,990.00 Work Accident Insurance (~1%) €168.00 Occupational Health (estimate) €120.00 **TOTAL ANNUAL COST** **€21,078.00** ## Real Monthly Cost Table Metric Value Nominal monthly cost (÷ 12 months) €1,756.50 Real monthly cost (÷ 11 productive months) **€1,916.18** **DIFFERENCE vs nominal gross salary** **\+ €716.18/month** ## Formula Summary **Real Monthly Cost = Gross Salary × 14 ÷ 11 × 1.2375 (TSU)** €1,200 × 14 ÷ 11 × 1.2375 ≈ **€1,890/month** (TSU only) 💡 To quickly convert any gross salary to net, use the [Net Salary Simulator 2026](/en/salary-simulator) - and see how much actually reaches the employee's pocket. ## What Does This Mean for Management? Understanding the real cost of an employee is essential for: - Correctly calculating the **selling price** of products and services - Setting adequate **profit margins** - Preparing rigorous **budgets and financial forecasts** - Assessing the **feasibility of new hires** - Negotiating **client contracts** based on real costs In conclusion: an employee with a gross salary of €1,200 costs the company approximately **€1,916 per productive month** - that is, about **60% above the salary value**. Ignoring this reality is one of the most common and most expensive mistakes in managing small and medium-sized Portuguese companies. ### Simulate your company costs Use our [Business Cost Simulator](/en/business-cost-simulator) to calculate the real cost of all your employees, vehicles, office and professional services - all in one place. If you want to calculate each employee's net salary individually, try our [Net Salary Simulator 2026](/en/salary-simulator). _Note: The values presented are estimates based on current Portuguese labour legislation. For specific calculations, consult a certified accountant or HR manager._ 0 0 Share ### Get the latest tax news Subscribe to our newsletter and receive articles, tax alerts and tips directly in your inbox. Subscribe I agree to receive email communications from Grupo Your. I can unsubscribe at any time. My data will be processed according to the [privacy policy](/en/privacy-policy). ### Need help with your company? Talk to us and receive a proposal tailored to your business. 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