By Derek Harper
Summary: Whether you are searching for jobs in Portugal or considering self employment there, this article offers insight into the various types of employment contracts, self employment methods, tax issues and paid holidays.
If you are considering moving to Portugal and intend to find work it is important you consider the difference in salaries before making a life changing move. Although the cost of living is significantly less in Portugal, it is proportional to the income. Many unskilled jobs in Portugal will be at the minimum wage rate, which is 475€ per month (as 2010). An inability to speak or comprehend any Portuguese will also further reduce your employment opportunities in Portugal.
Jobs in Portugal
Although you may be able to find work in tourist areas such as the Algarve and Silver Coast without having to learn any Portuguese, there will be a high demand for these jobs, which do tend to be seasonal. One option many foreigners choose to follow is opening up an accommodation or tourism based business. Although this may seem an easy route to achieving a regular income in Portugal, even this type of business has implications of licensing, regulations and, of course, registering the business/service enabling them to pay taxes on the income.
If you are lucky enough to secure work in Portugal as a foreigner, it is important to understand the different contracts of employment as well as your rights. Below we have outlined some of the basic information you will need to be aware of if you are working in Portugal.
Please note though any income generated in Portugal is subject to taxation in Portugal. At present the United Kingdom and Portugal enjoy a double taxation agreement which ensures you will not be taxed twice, but will have to submit tax returns in the country in which the income was earned.
Contracts of Work in Portugal
Working in Portugal, you will be furnished with a contract of employment. This can be a fixed term, temporary or permanent contract depending up on the type of work you will be undertaking.
If you are on a fixed term contract (renewal up to three times with one given employer prior to being inducted into the permanent staff of the company), your contract should include your job description, hours of work and the agreed upon salary.
If you have any questions about working in Portugal, your local representative at the Job centre (Centro de Emprego) should be well versed to inform you of your rights (codigo de trabalho).
First and foremost if you have been employed on a permanent contract basis in Portugal, you will be delighted to know you are entitled to 22 days paid holiday per year. This is increased by a further three days in the tax year if you have taken only one days' sick leave. Employees who are employed on a fixed term contract are entitled to two days per month for every month they work, if the period of employment is less than 12 months.
By law, the company that is employing you will also pay you holiday pay (one month extra, usually in August). In addition to this you will receive an additional months' pay in December.
Wages and Salaries in Portugal
Wages in Portugal are considerably lower than in other European countries. The minimum wage in Portugal is only 475€ per month as of 2010 and most unskilled workers will expect to receive this. 11% will be deducted at source by employers for Social Security contributions (Segurança Social). Employers are bound by law to pay full time employees a food allowance each day (subsidio de alimentação), meaning the average take home pay for someone on minimum wage is around 550€ per month. The average income in Portugal is around 800€ per month.
Working Hours in Portugal
In Portugal, if you are employed on a full time basis, then you will normally be expected to work 40 hours per week, generally starting at 9 am and working through until 7pm with a two hour break for lunch. However this will vary depending upon where you are employed. Any overtime has to be scheduled and pre-booked up to two days prior and you are able to refuse without any consequences.
In addition to the paid holiday entitlement, there are 13 additional statutory national holidays in Portugal and one local one, which employees are entitled to take.
Maternity Leave in Portugal
Maternity leave in Portugal is fairly generous with women entitled to take up to 120 days including up to six weeks prior to the birth if they need to. However, fathers are not provided the same luxury and can legally only take up to five days following the birth.
Self Employment in Portugal
If you are interested in becoming self employed in Portugal, it is best to consult with professionals prior to making any lasting decisions. If you are an European Union national or a permanent resident of Portugal with the appropriate residence card (autorização de residençia), you can work as a self-employed person or as a sole trader in Portugal.
There are two methods of becoming self employed in Portugal, one of which requires a minimum investment of capital and does ensure any liabilities are limited and depends upon the amount of trade you will be expecting to carry out.
Unlimited Sole Trader (trabalhador por conta própria)
If you are going to be providing a service such as a journalist, photographer or part-time teacher to clients on an irregular basis, then the simplest and possibly the least expensive method of becoming self employed, is to register with the local tax office as a self employed worker under the correct criteria of service you will be providing - trabalhador por conta própria. This system allows you not only to be self employed but employed on a permanent basis at the same time. The only tax you would pay would be at the end of the year is based upon the income earned, much like the rest of Europe by submitting your personal tax return.
By registering at the tax office as self employed (trabalhador por conta própria), you will be able to purchase a Receipt Book (Caderneta de Recibos) from them to issue receipts for all the monies earned. Then, at the end of the financial year, you will have to submit copies of all receipts along with your self assessment tax form. In the first year of registering as a self employed person under this system the government does provide financial incentives, notably exemption from paying social security contributions (segurança social) for the first 12 months. There after, though, these are charged at the normal rate.
If you are providing a specialist service such as an electrician, you will have to ensure prior to registering as self employed, your qualifications from your country of origin have been recognised by the Portuguese authorities and are registered with the relevant governing bodies.
One of the disadvantages of the trabalhador por conta própria system is its limitations. The system is designed for workers with specific skills and does not suit persons who must purchase specialist goods or equipment to provide this service. If, for example, you are a plumber and not only provide services of a plumber but provide the equipment. The receipts you charge out will of course include the cost of the materials and goods. However, these receipts will not be classed as tax deductible in this system. And, before very long, you will be eligible to register for value added tax (IVA) for your services, adding an extra 21% (23% in 2011) to the bill for your customers.
Sole Trader with Limited Liability (Estabelecimento Individual de Responsabilidade Limitada EIRL)
Perhaps a better system for those who will need to purchase equipment for work under the self employed system is to be a Sole Trader with Limited Liability. This is slightly different to creating a company (Unipessoal), though still limits the liability of the sole trader. As a sole trader you would not be expected to employ others, but can ensure once you have lodged your minimum 5,000€ capital share, any costs can be deducted from the total turnover in one year. Different to creating an individual shareholder company, you can create a sole trader with limited liability situation by simply registering at the local Conservatória.
Whichever form of self employment or business you choose to take, Gekkoportugal strongly advises that you speak with a qualified Portuguese accountant and solicitor to ensure you are fully informed of the implications and responsibilities which will be expected of you as an employed or employer in Portugal.
First Published: Dec 19, 2010