The Cost of Hiring in Portugal: A €70,000 Worked Example

Take the gross annual salary and add about a quarter. Employer social security, the Taxa Social Única or TSU, is 23.75% for a for-profit employer in 2026 and there is no earnings ceiling, so the rate applies to the whole salary however senior the role. Workplace accident insurance and a handful of smaller statutory items sit on top of that.

The figure that surprises people is the number of payments rather than the percentage. Portuguese salaries are paid 14 times a year: twelve monthly payments, a holiday subsidy and a Christmas subsidy. A salary quoted as €5,000 a month is therefore €70,000 a year, and the employer contribution is charged on all 14 instalments. Our guide to the holiday and Christmas subsidies covers how each one is calculated and when it falls due.

Two rates that do not apply here are worth ruling out early. Non-profit employers contribute at 22.3% rather than 23.75%, and members of statutory bodies are on a different rate again. Reduced rates also exist for hiring someone with a disability or someone who has been out of work for a long time.

The employer’s bill has one large component and several small ones. The large one is the TSU. The employer pays 23.75% and withholds a further 11% from the employee, then pays both across to Segurança Social together. The rates and payment rules are published on the government services portal.

What goes into the contribution base matters as much as the rate. Salary, the holiday and Christmas subsidies and commissions all count. A meal allowance is excluded up to the exempt limit, which in 2026 is €6.15 a day in cash or €10.46 a day on a meal card, with anything above the limit brought back into the base.

The smaller items are easy to leave out of a first estimate:

• Workplace accident insurance, compulsory under Lei 98/2009 from an employee’s first day. The premium depends on the insurer, the activity code and the claims record, so treat it as a quote to obtain rather than a rate to assume.
• Occupational health and safety services under Lei 102/2009, including admission and periodic medical examinations.
• At least 40 hours of training a year for each employee under article 131 of the Código do Trabalho.
• Contributions to the FGCT compensation fund, which are suspended to the end of 2026, so nothing is payable this year.

One charge in the Código Contributivo is often quoted at employers and rarely paid: a surcharge of up to 2% on companies with an unusually high share of fixed-term contracts. It is provided for by law but has never been put into operation, because the sector benchmark behind it was never set. Leave it out of a budget and keep an eye on it.

Here is the full arithmetic for a €70,000 salary in 2026. Every assumption is stated, because changing any one of them changes the answer.

• 2026 rules throughout, mainland Portugal, so no Madeira or Azores rates or tables.
• Gross €70,000 a year, paid in 14 equal instalments of €5,000.
• The employee is single, with no dependants, and resident for tax in Portugal.
• No IRS Jovem and no IFICI incentive, both of which would cut the tax bill sharply.
• No meal allowance, no bonus and no benefits in kind in the package.
• General regime contribution rates: 23.75% employer, 11% employee, no ceiling.
• Monthly withholding under Table I of the 2026 tables, which covers a single taxpayer with no dependants.
• Workplace accident insurance excluded from the totals, since the premium is quoted per employer.

On the employer’s side, TSU at 23.75% of €70,000 is €16,625. Total employment cost is therefore about €86,600 a year before accident insurance, with nothing due to the FGCT in 2026. Spread over the 14 instalments, each €5,000 payment carries €1,187.50 of employer contribution.

On the employee’s side, the 11% contribution is €7,700 a year, or €550 per instalment. Monthly withholding uses the Table I row that covers pay up to €5,547 in 2026: 39.69% of the payment less a fixed €531.62, which gives €1,452.88 withheld from each instalment. Net in the hand is €2,997.12 per payment. Tax on the two subsidies is calculated separately from the month’s salary, so the December payslip does not jump into a higher row.

The employee on this example ends the year with about €43,200 net, and gets some of the withholding back. Monthly withholding and the final tax liability are two different calculations in Portugal, and on these figures they do not match.

The annual calculation starts with a specific deduction for employment income, which for 2026 is €4,587.09 or the employee’s compulsory social security contributions if those are higher. Here the contributions are €7,700, so that is the figure deducted. Taxable income is €62,300, which falls in the band running from €46,566 to €86,634 at 44.6% with a fixed €8,441.48 subtracted, giving tax of about €19,344. Assuming at least €250 of general family expenses are claimed against tax due, the bill lands near €19,094, an effective 27.3% of gross. The solidarity surcharge does not bite, because it starts at €80,000 of taxable income.

Withholding across the year came to €20,340, so the employee should expect a refund of roughly €1,250 on assessment, and more if there are health, education or housing receipts to claim. The rule behind the specific deduction sits in article 25 of the personal income tax code.

Several Portuguese entitlements cost money without ever appearing as a line on a payslip, and they belong in a hiring budget.

Paid annual leave is at least 22 working days a year, alongside 13 mandatory public holidays. Holidays that fall at a weekend are not moved to a weekday, and four of them do in 2026. In the year someone joins, leave accrues at two working days per month of contract up to a maximum of 20 days, and can be taken after six full months.

Remote work has its own small cost. Where telework is agreed in writing and the employee uses their own equipment, the employer compensates the extra household costs, and up to €1.00 per full telework day is free of tax and social security, or €1.50 where a collective agreement sets it.

Ending a contract has a price as well. Severance for an objective dismissal runs at 14 days of pay per year of service, capped at 12 months’ pay or 240 times the national minimum wage, which is €220,800 in 2026. Fixed-term contracts that simply expire carry 24 days per year of service instead. None of this is a reason to avoid hiring in Portugal, but a two-year plan that ignores it is incomplete.

For a first hire or a small team, the question is usually whether to incorporate an Lda or to employ through a provider. The employment cost itself, salary plus 23.75% plus insurance, is the same either way. What differs is the overhead around it.

Incorporating is not expensive on paper. Empresa na Hora creates a company on the day for €360, share capital can be as little as €1 per quota, and a bespoke company name adds a name certificate. The running obligations are where the effort goes: a certified accountant is compulsory, the start-of-activity declaration goes to the tax authority, the beneficial owner register has to be filed within 30 days and confirmed each year, a bank account has to be opened, and accident insurance and health and safety services have to be arranged before anyone starts. Accountancy support for a small company running a payroll is commonly quoted at around €150 to €500 a month, which is an indicative market range rather than a fixed scale.

An employer of record replaces all of that with a monthly fee. Employer of Record Portugal employs your hire through its own Portuguese company for a flat fee from €499 per employee per month, on top of the employment cost itself, with no company for you to set up or wind down. Full details are on our pricing page, and the trade-offs are compared in our guide to an employer of record against your own Portuguese company.