It provides benefits for health care, sickness, retirement, disability, death and old age, maternity, paternity and adoption. Both employers and employees must register and make contributions. Voluntary registration can also be made by those who aren’t required to register.
An employer must notify the Portuguese social security authorities of the commencement of work of an employee and deduct contributions from his gross salary and make payments to the authorities by the 15th of the following month. All compulsory social security contributions are tax deductible. Social security contributions are payable on the following:
- all remuneration, including payments in cash or kind, e.g. accommodation or food;
- regular bonus payments,
- commission or prizes;
- overtime payments;
- Christmas and holiday bonuses;
- unsociable hours payments (e.g. for shift work);
- regular payments for accommodation;
- danger money;
- remuneration resulting from suspension due to disciplinary action;
- compensation for unfair dismissal or termination of a contract;
- early retirement premiums.
The following kinds of income are exempt from social security contributions:
- travel expenses;
- subsistence allowances;
- payments in lieu of holidays;
- sick pay and pensions;
- payments made during military service;
- payments made towards the education of children (including university education);
- wedding gifts or irregular bonuses which are genuine ex-gratia payments;
- payments made towards medical bills;
- monthly expenses relating to board members or other professionals, the payment of which is required by contract;
- redundancy payments when made to all employees;
- canteen subsidies;
- profit-related pay.
Employees’ contributions are based on their actual monthly income (i.e. there’s no earnings cap), while contributions for the self-employed are calculated on an amount of between 1 and 12 times the minimum national wage, as chosen by the individual.
For company directors, there’s a monthly salary cap equal to 12 times the Portuguese minimum monthly wage (€348.01 in 2002), i.e. 12 x €348.01 = €4,176.12. However, those aged under 55 may choose to pay social security contributions based on their actual gross salary, if it exceeds the above limit.
Social security contributions vary according to your profession and age, and whether you’re an employee or self-employed.
Self-employed individuals may choose to pay contributions under the mandatory regime (25.4 per cent) or under an enlarged regime (32 per cent). The 25.4 per cent rate is for compulsory cover only (retirement, disability, death and old age, maternity, paternity and adoption) while the 32 per cent rate includes compulsory cover plus ‘professional’ sickness, illness subsidies and other family benefits (calculated on the adopted income basis).
These rates apply on a monthly basis on an amount determined by the individual equal to between 1 and 12 times the Portuguese minimum monthly wage (€348.01 in 2002), i.e. 12 x €348.01= €4,176.12.
The self-employed may reduce their contribution base without restriction; however, they may increase their contribution base only by one bracket, once a year, provided they’re under 55 years of age. Contributions are limited to a maximum of six times the minimum monthly wage for those aged 55 or over.
Reciprocal Social Security Agreements
Portugal has reciprocal social security agreements with all EU countries plus Andorra, Argentina, Australia, Brazil, Cabo Verde, Canada, Iceland, Norway, Switzerland, Turkey, Uruguay, the USA and Venezuela. These agreements allow for social security contributions paid in one country to be taken into account under the social security schemes of another country.
Employees from the above countries who are transferred to Portugal for a limited period only and who continue to contribute to their home country’s social security scheme, are exempt from paying contributions in Portugal for a period of one year. This exemption may be extended for a further year and in certain circumstances a five-year exemption may be granted. However, once the exemption period has elapsed, employees must pay social security contributions in Portugal.
Employees of international organisations and diplomatic missions are usually exempt from paying social security contributions in Portugal.
The department of social security in Portugal has a free telephone hotline ( linha verde) for information and enquiries operating Monday to Friday from 9am to 7pm (Tel. 800-290 029) and a comprehensive website (in Portuguese only), which includes downloadable documents and forms (www.seg-social.pt).