Portugal is a beautiful country. With Portugal becoming an increasingly attractive country for foreign citizens to live and work, it is necessary to be aware of the important legal obligations that must be fulfilled regarding labor laws and taxes. One of the best points of reference and main sources of Portuguese labor law regarding the hiring of foreign employees is the Portuguese Labor Code.
All hiring of foreign or stateless employees is subject to the written law and must abide by the information found in article 5 of the Portuguese Labor Code:
- Identification, signatures, and address or headquarters of the parties
- Reference to the work visa or the authorization title of residence or permanence of the worker in Portuguese territory
- Job title and remuneration of the employee
- Location and normal working hours
- Amounts, frequency, and form of payment of the remuneration
- Dates of the conclusion of the contract and the start of the activity
In addition, there must be a copy of the employee´s contract with all the previously mentioned items attached and kept on file for the duration of said contract.
Before the start date of the employee, the company must register the foreign employee’s contract with the Labor Conditions Authority (or the Authority for Working Conditions or ACT). Following the employee’s registration, ACT will provide further instructions via its online platform.
Furthermore, the company must also notify ACT via its online platform in cases of early termination. It is equally important to note that national citizens or any of the following member states are exempt from this extra step in the foreign hiring process: European Union, Iceland, Liechtenstein, Norway, Turkey, Brazil (subject to equal rights status), Cape Verde, Guinea-Bissau, and Sao Tome and Principe.
Another point to note involves employee contributions. The company must register the foreign employee with the social security office by sending the following specific forms and documents:
- Forms Mod RV 1006 and Mod RV 1009 duly completed and signed
- Employment contract signed by both parties
- Document with proof of employee’s NIF (Numero de Indentificacao Fiscal, tax identification number)
- Valid identification document
- Certificate with the register of the Citizen of the European Union (issued document by the municipal area of residence)
Though the employee’s Portuguese Social Security registration must be done 24 hours before their initial start day in Portugal, the social security number is usually received within one month. This is a particularly important step because the same number will be used for registration into the Severance Fund.
Apart from citizens of the above-mentioned member states, the foreign employee who will be working in Portugal needs a residence permit that is issued through the Foreigners and Border Service (SEF). One copy of this authorization must be delivered to the employer to be kept on file, and another must be given to the employee for their records.
In the end, while there are many steps to ensure the proper registration of a foreign employee, it is critical to comply with the local regulations. The consequences of not doing so can be serious, ranging from administrative warnings to fines, and are best avoided.
It is key to work with a trusted provider in Portugal to ensure your organization’s compliance.
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Auxadi provides international expansion services under a single IT platform as a one-stop-shop solution in accounting, tax compliance, and payroll. From its hubs in Chicago and Madrid – with more than 40 years of experience, 250 employees, 10 international offices, its International Desks, and its cloud platform – Auxadi helps more than 1,000 U.S. and European corporations expanding abroad. The International Payroll Department is headed by Kira Rubiano.