July 5th, 2023 at 4:50:57 PM
Scaling tech team in Portugal: what you need to know
Recently we have been noticing a lot of interest in Portugal. Not only it won multiple awards as one of the best travel destinations and attracted dozens of nomads to move there for a longer period of time, but also many tech companies started considering Portugal as a new market to expand their hiring.
Bee’s Knees have been working on the Portuguese market for over 4 years and we have some knowledge to share. In this article we gather some facts about Portugal that hopefully will help you to assess if this is a good place for you to hire new team members.
Population
First things first: to estimate the hiring success one needs to know the volume of the market. As of 2021, Portugal has a population of 10,3 million people. While it doesn’t make it a very big country, it has a potential for relocation. Citizens of Portuguese former colonies like Brazil, Angola, Cape Verde and others are often interested in moving to Portugal, sharing the same language and assimilating easily.
However, one has to keep in mind that obtaining a residency in Portugal is a lengthy process for non-EU residents. Below are some useful links on relocation procedures:
Language
One of the main attractions of Portugal is that most of the people speak English fluently, as opposed to other southern european countries. You can definitely rely on hiring engineers who will be able to communicate with the rest of the distributed team without any language barriers.
Besides, most Portuguese speak or at least understand Spanish very well due to similarity between the languages and often interactions with the neighboring country.
Taxes
Taxes in Portugal aren't an easy topic. First of all, they are calculated individually, taking into account the amount of dependents of the employee. Thus, to say in advance how much taxes one will pay without a detailed calculation is difficult.
Secondly, the taxes are quite high, and the net to gross salary ratio is big, as you can see below:
Employer tax: 26,5%
Employee tax: 14,5 - 48% income tax + 11% social security
Thus, a salary of EUR 5000 gross will result in approximately EUR 2768 net.
The good news is that a lot of foreigners and also Portuguese who haven’t been paying taxes in Portugal for the past 5 years, can apply for a non-habitual residence tax (NHR). Under certain conditions, the NHR status allows for a tax rate on income of 20%.
The companies are also looking for ways to financially motivate employees outside of paying the salary and thus avoiding taxes. For example, it’s common for employees in Portugal to receive a monthly lunch allowance or meal card. The allowance is paid as per the number of working days and ranges between EUR 4,77 - 7,63 per day.
Another payment specifics is that the Portuguese receive 14 salaries per year: 12 salaries + 1 Christmas and 1 summer bonus. So make sure you’re talking about gross annual salary with potential employees to avoid confusion.
Market for tech
Biggest markets for hiring are of course Lisbon and Porto, the latter has in general stronger universities and in some cases it’s easier to find strong developers there for this reason. Other cities with good universities are Braga, Aveiro, and Coimbra.
In general Portuguese have very strong opinions about their cities (take a famous rivalry between Porto and Lisbon), thus your best bet would be to assemble a remote team in Portugal to be able to pick the best talent regardless of the location.
When sourcing we’ve noticed that Portugal has one of the highest reply rates in Europe. In general the candidates are very polite and keen to keep in touch even if they’re not interested in new opportunities at the moment.
The country has quite a few unicorns: Farfetch, OutSystems, Talkdesk, Feedzai, Remote, Sword Health, Anchorage Digital. There are also famous Portuguese product companies that aren’t unicorns yet (Uniplaces, Unbabel, Codacy) as well as the offices of international companies (Pipedrive, Uber, Revolut, Mercedes-Benz.io and tb.lx).
It’s worth mentioning that Portugal has introduced a Startup visa for startups with potential turnover more than EUR 325 000 / year.
And some more numbers and facts:
Trial period: 3 months (but can be up to 240 days for some roles)
Notice period: 1 month
Vacation: 22 days
Sick leave: covers up to 55-75% of the salary
In conclusion, we can say that the Portuguese market is definitely a good place to expand your tech team and attract qualified and diverse talent.
Don’t hesitate to get in touch with us if you have more questions - we would be happy to help!