Why Companies Should Hire in Portugal

Portugal, a member of the EU but sharing a language with Brazil, is a natural place to consider when launching a corporate expansion. It’s an easy way to break into the European market while also keeping the doors open to another expansion to South America down the line. It’s a modern, advanced nation that has all the advanced legal regulations and corporate protection of the EU while still having room to grow in areas such as technology.

It is a gateway to European tech hubs like London, Berlin, and Paris, with less pressure and competition than those cities, allowing companies more time to find their way in the enormous EU market.

What makes Portugal particularly attractive is how much room it has to grow as a tech hub. Portugal has invested dramatically in tech infrastructure over the past two decades, creating one of the best internet infrastructures in the EOCD. The internet infrastructure matches the country’s successful efforts to renew its general infrastructure, which quality roads and bridges. It’s relatively small population of about 10 million people, however, keeps the congestion of the motorways to a minimum, especially in contrast to Europe’s largest cities.

In short, Portugal is a great place to launch an expansion, especially for companies branching out into foreign markets for the first time. It has all the benefits of Europe without the pressure to bring instant results that a company might find in the biggest European cities, with salaries being low compared to London and Paris, bringing higher quality talent for the same cost.

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Best Cities in Portugal for Hiring
The Portuguese capital of Lisbon is not only the largest city in the country, it’s also part of the larger
metropolitan area that ranks as the 10 th largest in Europe. About a quarter of the Portuguese people
live in and around Lisbon, making it the business center for the country. It produces some 45% of
Portugal’s GDP.

The high concentration of business activity in Lisbon makes it particularly attractive to venture capitalists and companies looking to enter the European market. At the same time, the high quality of life, with notably low crime rates, enjoyed by Lisbon’s population makes it an excellent place to find high levels of talent in virtually any field at affordable salaries.

While Lisbon dominates the business landscape in Portugal and is often cited on lists of up-and-coming cities in Europe, it is not the only place attractive for foreign expansion. Portugal’s second largest city, Porto, may be a hidden gem for a business looking for a smaller market to test and refine its offering. It offers a scenic locale on the banks of the River Douro with high tourism, great culture, and a high concentration of English-speakers.

Starting the Expansion: Slow Growth or Full Steam Ahead
There are different ways to handle the early stages of a cross-border expansion, and a great deal depends on the product that will be sold and marketed. Some companies start slow, hiring a single sales representative to the new area to act as an advanced scout. The salesperson can determine how big a team will be necessary. This is true if your product is essentially the same no matter where your sales are.

If you change the product of different regions, you may need to start with a slightly larger team, adding a customer success representative and maybe a marketing person to the mix. From there, you can see if you will need additional sales support, an expanded customer success team, or other key team members.

Other companies believe that their product is a perfect fit for the Portugal market. They know how they plan to market and sell the product, how much support the operation will require after the sale is made and have advanced projections of costs and return on investment. For those companies, there is no advantage to hiring a small number of people at the start and building slowly. They have plans in place to hire a full team and are ready to put the plan into action.

Confident owner of cafe interviewing young specialist

How to Hire in Portugal
Once your company has made the decision of how to approach the new market, the next important question to tackle is exactly how to handle the hiring process. There are two primary options for hiring people abroad. The traditional way to hire employees is by opening an entity in the country, establishing a corporate presence, and handling payroll directly.

That’s a good option for companies that are ready to tackle the market with full force right from the start. They believe it is worthwhile to invest the time and money in a permanent presence in the country. There is a great deal of merit in the idea, since having a formal presence is essential for long-term success. Any company that reaches a critical mass of employees, around 15-20 over the first few years, will eventually find it beneficial to open an entity.

The other approach is to hire people without an entity and put off the costs and bureaucratic process until they are sure that the market will support their product. To do so in legal compliance with the laws of Portugal, it is necessary to hire through an Employer of Record (EoR).

The EoR acts as the official, legal employer for your team in Portugal, but you direct the team day-to-day tasks. The EoR, as the legal employer, assumes legal liability for the employees and handles all the administrative tasks such as payroll, benefits management, and ensuring that all of the tax offices and benefits vendors are paid.

For those who want to take it slow and build up gradually, the EoR option is a good way to start operations on the ground while either testing the market or starting the process of opening an entity. Once the entity is incorporated and all the bureaucratic steps completed, it’s easy to move from EoR to regular payroll.

Things to Know About Hiring in Portugal
Once you have a strategy in place, it’s time to do some research on the Portuguese labor laws and tax codes so that you are always not only compliant but also prepared for any circumstances. For example, it’s important to know that employers pay around 26.5% in payroll taxes in Portugal for each employee as a percentage added to the salaries of the team members.

It’s also important to know the basics about the minimum wage (currently 740.8 EUR per month based on 12 installments per year), the mandatory 13 th and 14 th salary, paid in June and December as mandatory bonuses, and how to handle termination, if necessary, and the amount of notice and severance pay the employer is required to give (18 days of salary for each year the employee was with the company).

There are numerous labor laws in Portugal and the more an employer knows in advance, the fewer surprises – and legal hassles – they are likely to experience.

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