Portugal Payroll: Europe's booming talent hotspot

If your workforce is lucky enough to have employees based in Portugal, you're likely aware of the country's rich pool of highly skilled, multilingual talent. However, truly understanding your team in Portugal requires more than just recognizing their skills. It's crucial to grasp the unique regulations governing onboarding and Portugal payroll processes for these employees to feel inclusive—and thrive. 

Portugal ranks eighth in the world for its English language skills, and the early talent pipeline is burgeoning – with 24% more students (446k) enrolled in Portuguese universities and polytechnics in 2022-2023 than in 2015-2016. Plus, the government is intent on incentivizing graduating talent to stay. In December 2023, the Portuguese government passed an ordinance that grants a salary bonus to graduates living in the country with a bachelor’s or master’s degree. 

Portugal has become a renowned location for shared service centers (SSCs). Increasingly, however, the lower value-add SCCs that were characteristic of facilities in the early 2000s have, in large-part, been replaced by technology, HR, finance and accounting service centers. And the fDi figures speak volumes: the average number of greenfield business services projects between 2021 and 2023 was twice that recorded in the previous three-year period, according to fDi markets. 

The country is also a hotbed for start-ups, notably so in Lisbon, with the combined value of those with headquarters in the city rising 26-fold between 2016-2022, from €818m to €21.4bn. And, post-pandemic and post-Brexit, the country has also become an attractive southern European location for those able to work on a fully remote basis. 

Regardless of company scale and organizational need, critical to their successful entry and growth in Portugal is the ability to identify and establish the appropriate trading entity, interact with the relevant authorities, source, onboard and compliantly pay talent – all of which requires local knowledge, expertise, and established relationships.  

“And this is where Portugal payroll differs from many of the other large European countries”, notes Rodrigo Figueiredo, General Manager for Safeguard Global in Portugal, “as most entities looking to establish a presence here – regardless of their size – do not have in-country HR expertise to rely upon to guide them.” 

This is understandable with those establishing small-scale requirements, which can take the form of a company trying the Portuguese market to see whether they want to scale up and/or organizations capitalizing on remote working potential. “These include a growing number of companies who are hiring for talent, not locality”, Rodrigo notes, “and those with a strategic requirement to pay small numbers of mid-senior level key personnel who wish to reside in the country.” 

“The pandemic cemented remote working as a permanent business model - and it evidenced notable benefits from both companies and individuals alike,” observes João Abreu, Sales Manager. “Notably, many international companies started to question why they were hiring from a limited domestic talent pool when there was better talent elsewhere, often at 50% to 60% of the cost. And for individuals, it presented a new way of life. It was also notable that when Brexit happened, many people wanted to leave the UK and find a new home elsewhere in Europe – somewhere where they could have comparable salary levels and benefits while living without the new UK requirements and subsequent EU restrictions. Portugal not only offers a great standard of living, but international workers can also benefit from a flat 20% income tax, regardless of earnings.”  

In many of these smaller scale and entry requirements, Safeguard Global is often required to support entities to establish a Foreign Non-Resident Entity (FNRE / NRE) and subsequently liaise with the relevant Portuguese authorities, onboard and pay workers.  

At the other end of the scale, among the growing number of multinational companies scaling within Portugal – notably from the U.S., elsewhere in Europe and, increasingly from APAC - the absence of local HR presence is also a common pain point. While they may already have or will establish an in-country talent acquisition function, most will align with a European or global HR and payrolling infrastructure located elsewhere. “In these instances,” Rodrigo points out, “we are heavily relied upon to provide the HR expertise required to establish a more substantive local presence – to advise on what is feasible in Portugal, what is common practice, tax optimization considerations, etc., and crucially, to enable them to scale. And scaling often additionally entails integrating Portugal into an international payroll solution, of which we have untold experience.” 

“Additionally, however, to service enterprise company requirements, you must have a global mindset, a deep understanding of how multinationals operate and a focus on faultless delivery,” João notes. “Crucially, we need to align with the processes, policies, protocols and standards that the company has established globally. Our use of a ticketing system for payroll queries – one which mirrors the system by which the SSCs operate - is not only operationally efficient, but it also enables the measurement of SLAs and KPIs with ease. Every question and response are logged, with timeframes to provide follow up by, and the system provides clients with a status dashboard on every pending query. And technological proficiency – notably as they relate to communication, data exchange, data protection and security - is critical. This is why Safeguard Global has been investing so heavily in its technology and continues to do so.”   

Rodrigo also believes that no other company offers such a comprehensive HR & payroll solution in Portugal – one which he believes is very difficult to achieve. “Having the global footprint that provides the knowledge and expertise to align with the requirements of multinationals, while offering local HR expertise and an in-country finger on the pulse for start-ups, market-testers and multinational organizations alike, is a capability that has taken Safeguard Global many years to craft. Wherever you are on the journey”, Rodrigo concludes, “whether you require global payroll for 1-20 or thousands of your personnel, we have a solution that taps into our deep global expertise and local knowledge. And as you evolve and your needs change, our flexible support evolves with you.”