How to Find and Pay Remote Contractors in Portugal: A Guide for US Employers

US-based companies looking to hire remote team members abroad should consider hiring in Portugal, particularly if they're looking for workers in tech. Read our guide to learn what to consider when hiring in Portugal, and the best ways to find and pay remote contractors there.

Caitlin MacDougall
Caitlin MacDougall
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Of all the European countries, Portugal is one of the most hospitable for remote contract workers. With its low cost of living and year-round gorgeous weather, Portuguese natives and newcomers appreciate living and working in this beautiful country.

As a US-based company, you might look to Portugal for building a remote team. Particularly if your business is in the tourism or hospitality industry, your company will be well positioned for success, as these are some of Portugal's most popular industries. The tech industry is big in Portugal, too, accounting for almost 10% of the country's GDP.

No matter where you hire, you must adhere to employment laws that dictate employer-employee relationships and types of worker classifications. When your company adheres to labor code and tax law, you will avoid significant fines, backpay, and other potential consequences.

In this article, we will provide an outline of different types of contracts in Portugal, as well as tax regimes for both companies and contractors. We will also give you some tips on finding the right talent and compensating contractors.

Photo of a woman crossing a cobblestone street in Lisbon

Hiring contractors instead of employees 👷‍♀️

As in many countries around the world, Portugal has a different set of guidelines for self-employed, or independent, contractors rather than employees. Full-time employee contracts provide statutory benefits and protections under Portuguese law, such as sick leave, severance pay, or other types of benefits. Some companies looking to hire a global team may prefer to hire an independent contractor,  because there may be less tax liability and fewer legal requirements for that type of worker.

Here are the defining characteristics of different types of contracts:

Employment Contracts 📑

Employment contracts must be in writing, with the exception of very short duration contracts. Contracts must include information such as the identification of the employer and worker, the worker's set of duties, how and when the worker will be paid for the work performed, the location where the work is to be performed, and the starting date of the contract. Other information to include are paid leave benefits, such as maternity leave and sick leave.

Fixed term contract of employment

Fixed term contracts are those with a specific duration. Typically these contracts last for six months, but they may last for a maximum of three years. These contracts are typically used when replacing a worker, when a company needs a single project completed, or when a company requires seasonal work.

Contract of employment of indefinite duration

Unlike fixed term contracts, contracts of indefinite duration do not have a specific end date, and does not relate to any temporary need of a company.

Short duration contract of employment

Very short duration contracts are typically used for irregular seasonal work when there is a substantial increase in work activity. The work period may not last for more than 35 consecutive days, and may not exceed 70 days in a calendar year. Short duration contracts are often used for hiring agricultural workers or those who work in the tourist industry.

Part-time contract of employment

A part-time contract is appropriate for employees who work less than a full-time schedule. The maximum percentage of full-time hours a part-time employee may work depends on their industry, and may be determined by collective bargaining.

Provision of services contract

Self-employed workers, or independent contractors, use a Provision of Services contract to conduct their business. In this instance, the contractor is providing services for different clients and does not have an obligation to work for any one employer.

Minimum wage and working hours for employees ⏰

At present, the minimum wage in the Portuguese republic is €705, and the normal working period is a maximum of eight hours per day, or 40 hours per week. Any professional activity beyond those hours is considered overtime.

Holidays 🎊

Employees are entitled to 22 working days of holiday per calendar year, but special rules apply in the first year of employment to contracts with a duration of less than six months. After six months of working for an employer, employees receive two working days’ holiday for each month’s duration of their contract, up to a maximum of 20 working days. If the year ends before the employee has worked a total of six months, their holiday entitlement from the prior year may be used until June 30th of the following year.

If an employer requires an employee to work on a public holiday, the employee must receive overtime.  Overtime for work on public holidays is 50% of the employee's normal hourly wages on top of their regular wages, and employees are entitled to a rest day in addition to receiving overtime pay. The rest day must be taken on one of the following three working days after the holiday.

Nighttime photo of Dom Luis I Bridge and the Monastery of Serra do Pilar in Porto

Portuguese tax authority 💰

The tax authority in Portugal is  known as Autoridade Tributária e Aduaneira, AT, or Tax and Customs Authority. The window for submitting tax returns for the previous year's taxable income is April 1 to June 30. The Portuguese tax year runs from January 1 to December 31.

Corporate tax requirements 🏢

If you're a Portuguese company, you must pay a corporate tax. The amount you pay depends on your company's worldwide profits, and if a company profits more than €10,000 a year, they must register for Value-Added Tax, or VAT. If two or more business owners create a limited company, they must pay corporate tax.

In addition to the corporate tax, the company must pay an additional fee to their local municipality.

Social security contributions

If a company hires full-time employees, they must make social security contributions at a rate of 11%, while the employee must pay 23.75% of their income in social security contributions. Portuguese social security covers statutory benefits such as parental leave, pensions, and unemployment benefits.

Corporate tax fines

For corporate taxes, late filings may result in fines between 30% and 100% of the tax due, capped at €45,000. Late filings accrue interest at a daily rate of 4% on the tax due and may result in charges of up to €45,000 if the late payment is due to negligence. The corporation will have to pay €165,000 if they are deliberately not paying.

Self-employment tax requirements 💸

Those who are self-employed are not exempt from paying taxes on their income. Here are some of the tax requirements for contractors.

Self-employed workers pay income tax

Self-employment income is considered personal earnings, or taxable income; therefore self-employed workers must pay tax on it. This tax is known as personal income tax, and as in many European countries, the higher a contractor's income, the more the contractor pays in income taxes. The tax regime for non-residents is a flat rate of 25% on their income earned in Portugal, whereas a tax resident in Portugal pays income tax on worldwide income. A worker is considered a tax resident in Portugal if they spend more than 183 days in Portugal in a calendar year.

Tax rates are based on a sliding scale, from 14.5% (on annual income up to €7,112) to 48% (for annual income that is €80,823 and up).  There are double taxation treaties in Portugal that prevent residents from paying foreign sources income tax, provided that the resident is being taxed in that foreign country.

Contractors may want to file as a limited company, as the taxes from their personal assets and debts may be separated from the contractor, or shareholders. Another benefit is that all their business expenses can be deducted from their annual profits.

Social security contributions

The general rate of contributions for self-employed workers in Portugal is 21.4% their income, but they may be exempt from these contributions in certain circumstances.

Photo of colorful tiles on a building in Lisbon

Finding the right independent contractor 👩‍💻

So how will you find the right talent? Global job board sites usually have a local version in Portugal, and Indeed is a great place to get started. Other popular job posting sites in Portugal include Adecco, Net-Emprogos, and Bons Empregos. There are some job posting sites that may be particularly popular in a specific city or region: If you're looking to hire in Lisbon, for instance, you can post your job opening on Jobs in Lisbon.

Role description 📝

When posting a job opening, you should include a detailed description of the job's duties and information about your company. You will attract more independent contractors if they know details like the job's salary or compensation, and the type of service you need.

The language spoken in Portugal is Portuguese, so you will need a way to translate your job posting from English, unless you're looking solely for English speakers. TransPerfect is one translation company that can ensure that you are communicating the job description proficiently.

Interviews👥

Most interviews are conducted virtually these days, which is convenient if you're trying to hire internationally. Portugal is in two time zones, which can make scheduling tricky if you're not familiar with the region. The two time zones are Azores Time and Western European Time. Thankfully, Azores Time is only one hour behind Western European Time, so not a big difference. If you're calling from the west coast in the US, you are seven hours behind Azores Time, or eight hours behind Western European Time. Eastern Time in the US will be slightly more convenient for interviews: Azores Time is only four hours ahead and Western European Time is five hours ahead.

Paying independent contractors in Portugal 💸

What are the best payment options for paying workers in Portugal? Here are a few options to consider.

Bank transfers using SWIFT 🏛

The Society for Worldwide Interbank Financial Telecommunications (SWIFT) is a network used by financial institutions around the world, and many companies use it for their international payments. It's a secure transfer and your company incurs little risk of the transfer not reaching your contractor's bank account.

SWIFT payments are routed through multiple banks before they reach the contractor’s bank, and a fee is deducted each time there is a transfer. These bank fees can reduce your contractor's compensation, and payroll costs for your company will likely be higher. Fees are unpredictable, too: even  if a bank has been used as previously to make a transfer, the bank may charge a different fee for each transfer.

Money transfer companies 💳

Remitly, Xoom (owned by PayPal), and Wise (formerly Transferwise), are a few money transfer companies that operate online. These companies, while convenient, have some downsides.

One of the downsides of using these services is that they typically require that payees use their company-issued debit cards to access funds. Each time the card is used, it charges a fee to the payee. Additionally, transfer companies often charge percent-based fees, or they might add markup fees for exchange rates. Their fees may be better than those of banks, but it's still not an ideal system.

Traditional money transfer services 🏦

Companies like MoneyGram and Western Union have locations in Portugal and are easy to find; they even provide online services. Often these services have better markups on currency rates than banks do. The downside is that these companies still often add markup fees for currency exchange, and they charge percent-based fees.

Cryptocurrencies 🤑

Digital currency has become increasingly popular across the globe, but not everyone has a system set up for sending or receiving cryptocurrency. Although cryptocurrency transactions are exempt from VAT in Portugal because they are considered a form of payment, rather than an asset, they may still be subject to exchange rates and potential fees.

Photo of University of Coímbra

Partnering with Pilot, and the benefits of outsourcing payroll 🤝

Without help managing your global team, your company may be at risk of overlooking important labor laws.

Pilot can minimize your company's risk of noncompliance abroad. We serve as an employer of record, a legal entity that can manage your corporate tax obligations. There are other benefits to partnering with us as well: we can handle your company's payroll, benefits, and any other HR needs. We've fully supported hiring both employees and contractors from day one, and we can help you figure out which option is best for you. This way, you can focus on the other vital aspects of running a business.

Pilot's payroll system supports payments in over 240 countries around the world, which allows companies to pay a broad range of international talent. Contractors love getting paid through Pilot because we don't mark up exchange rates for bank transfers, and unlike other wire transfer services, we do not require contractors to use an e-wallet to access their funds.


Interested in learning more about Pilot? Schedule a demo with one of our experts.


⚖️ Legal Disclaimer: The information contained in this site is provided for informational purposes only, and should not be construed as legal advice on any subject matter.


Cover photo of harbor in Porto by Angelique EMONET on Unsplash

Photo of woman crossing a street in Lisbon by Martha Dominguez de Gouveia on Unsplash

Photo of Dom Luis I Bridge and the Monastery of Serra do Pilar, Porto, by Pitua Sutanto on Unsplash

Photo of colorful tiles on a building in Lisbon by Diego García on Unsplash

Photo of University of Coímbra by José Francisco García Cuenca on Unsplash

Caitlin MacDougall
Caitlin MacDougall
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