Hiring independent contractors in Portugal: Everything you need to know

Learn all about hiring Portuguese contractors.

A contractor working remotely on her laptop in Portugal

Companies looking to hire abroad have more options than ever. With the rise of remote work and other varied working arrangements, finding and hiring the right professionals for your company’s needs has never been more convenient. In particular, more and more companies are hiring remote independent contractors to fill specific needs and complement their full-time workforce. 

Portugal is one of the top countries where hiring companies can find skilled, qualified individuals eager to work as independent contractors. However, hiring internationally—even when it’s for independent contractor roles instead of full-time employees—can be challenging if you’re unfamiliar with the process. Let’s explore what you need to know before you start engaging independent contractors in Portugal.

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Understanding the working environment in Portugal

The standards and customs surrounding work in Portugal may differ significantly from those in your home country. Before hiring workers in Portugal, consider these details:

  • Currency: The country’s currency is the euro, so companies outside the Eurozone will need to account for exchange rates.
  • Employer taxes: Employer taxes are 26.5% of the gross salary for full-time employees.
  • Business hours: Typical business hours start at 9 am and end at 6 pm.
  • Additional pay: Portugal has required 13th- and 14th-month salaries for employees, but this doesn’t apply to independent contractors.
  • Language: Portuguese is the only official language in the country. Around a quarter to a third of the population speaks English. 

If you’re interested in hiring professionals in Portugal, take some time to familiarize yourself with the legal requirements and work culture in the country to avoid any misunderstandings or missteps. 

Benefits of hiring a remote independent contractor in Portugal

Why should you consider engaging a remote independent contractor in Portugal? There are many benefits to hiring independent contractors in Europe as well as Portugal specifically.

Access to talented individuals

Portugal has skilled talent in a variety of fields, such as information technology, business, finance, and engineering. If you can’t find the talent you need locally, that’s a sign to hire an international independent contractor. Opening up your workforce to include remote contractors in Portugal allows you to use their unique skills to your company’s advantage. 

Lower hiring costs

Typically, the costs associated with engaging an independent contractor in Portugal are much lower than an employee. Employers are not responsible for employer taxes on the compensation they pay to contractors in Portugal, which can lead to considerable cost savings. 

Reduced administrative burden

In addition to the cost savings, there’s also the benefit of having fewer administrative requirements. Because contractors aren’t considered “legally subordinate” to their employers, companies don’t need to file as many forms for them or follow as many labor regulations. 

Competitive labor costs

Among European countries, Portugal boasts competitive labor costs, including the rates independent contractors charge for their services. Working with independent contractors in Portugal allows companies to gain some traction in Europe without overpaying for labor, which is one reason to hire a contractor in another country

Emphasis on remote work

Since the COVID-19 pandemic, Portugal has become a “rising star” in remote work, with many people choosing this arrangement. It shouldn’t be challenging to find contractors in Portugal willing to work remotely for foreign companies. What’s more, they’ll be familiar with the tools and technologies needed to work effectively in a remote environment.

Challenges of hiring Portuguese contractors

Though the process for engaging remote contractors is more straightforward than that for employees, there are still some obstacles you may have to contend with. Be aware of these potential challenges and risks of hiring independent contractors in Portugal:

  • Language barriers with workers who don’t speak your language fluently
  • Time zone differences (11 hours behind Sydney, Australia, and 4–5 hours ahead of New York, for example)
  • More complicated payment process for international contractors compared to paying domestic employees
  • Less control over the worker’s output
  • Risk of employee misclassification

Remote independent contractors vs. employees in Portugal

Whenever you engage an independent contractor, particularly in a foreign country, it’s essential to understand how local labor laws classify employees and contractors. Misclassifying your workers can have serious consequences, even if you did so accidentally. Here are some of the questions Portuguese law uses to determine whether a worker is an employee or an independent contractor:

  • Is the person an integrated part of the employer’s company?
  • Does the employer dictate how and when they complete their work?
  • Does the employer decide where they must complete their work?
  • Does the person use tools and equipment provided by the employer?
  • Are the contractor’s payments regular and in fixed amounts?

Answering yes to two or more of these questions suggests that the person is an employee, not an independent contractor. If you classify an employee as an independent contractor, your company may have to pay significant fines, back taxes, employment benefits, and wages. Before onboarding a new contractor in Portugal, make sure they fit the criteria for a contractor, not an employee, under Portuguese law. 

Hiring international contractors in Portugal

There are several ways to hire professionals in foreign countries, whether employees or independent contractors. The most formal and time-consuming option is to set up an official entity in that country to hire people directly. This process can take months and requires a significant investment of time and money on the part of the hiring company.

In many cases, a better alternative is to work with an employer of record (EOR) in Portugal. An employer of record is a specialized third-party company that acts as the formal employer of your company’s foreign workers. Using an EOR can help companies circumvent many of the hassles of hiring internationally while remaining compliant with local labor laws. 

Confidently hire Portuguese contractors with Oyster

Working with Portuguese independent contractors allows companies to benefit from the unique talent in the country’s workforce while reducing employment costs and administrative work. Luckily, hiring remote workers in Portugal is easier than ever, especially with the help of a comprehensive global employment platform like Oyster. 

Oyster’s global contractor management platform makes it easy to hire, onboard, and manage global contractors from over 180 countries, including Portugal. Expand your team seamlessly with independent contractors from Portugal, while we take care of contracts, compliance, payroll, and more. Learn more about how Oyster can help you compliantly hire and pay international contractors.

About Oyster

Oyster is a global employment platform designed to enable visionary HR leaders to find, engage, pay, manage, develop, and take care of a thriving distributed workforce. Oyster lets growing companies give valued international team members the experience they deserve, without the usual headaches and expense.

Oyster enables hiring anywhere in the world—with reliable, compliant payroll, and great local benefits and perks.

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