Employee benefits Portugal: How flex allowance saves on taxes

When building a team in Portugal, it’s essential to understand how employee benefits work—and how they can be a powerful tool to attract and retain talent. One of the most interesting aspects for employers is the flex allowance system, a tax-efficient way to offer perks that employees use and value.

Whether you’re starting a company in Portugal or expanding your international team, we’ll explain how employee benefits work in the country, what’s legally required, and how companies are going above and beyond to stay competitive.

Employee benefits in Portugal: What it is and how it works

Each country has its own set of mandatory and optional employee benefits. Companies following the respective benefits strategy can hire the best available talent, especially in a remote work world. 

And truth be told, there’s more than just the basic salary.

Offering employees a clear, valuable benefits package is a smart move to save on taxes. In fact, extra-salary benefits help hire and retain the best talent—helping workers reduce their fixed expenses, such as those related to health and well-being, education, and food shopping.

In Portugal, some of the most valued employee benefits are: 

• School voucher

• Meal allowance

• Childcare voucher

• Transport allowance

• Private life insurance

• Private health insurance

• Christmas and vacation subsidies 

• Work from home allowance

• Technical equipment

• Gym pass

• Company car

• Bonuses

• Commissions

Life and health insurance, for instance, are exempt from the single social tax in certain circumstances—and are considered a cost for the company, therefore reducing taxable income.

So, if you’ve already identified your ideal candidates and want to ensure you offer them the best possible working conditions, keep reading. You’re about to discover the answers to all your questions about employee benefits and the flex allowance in Portugal.

Employee benefits in Portugal: All the FAQs answered

When building a team in Portugal, you must remain compliant in every way. This means that you can even start working with freelancers or contractors, but as soon as you need them for a certain period, then it’s time to hire them—to avoid employee misclassification.

Once that’s underway, it’s time to optimize your employment costs. And that has everything to do with employee benefits.

Grab a pen and start taking notes.

Is there a benefits system in Portugal?

Yes, there is. In Portugal, employee benefits are divided into statutory (mandatory) benefits required by law and optional (extra) perks companies can offer.

The basics include social security contributions, paid vacation, public holidays, and bonuses like the 13th and 14th salaries (more on that in a minute). On top of that, many companies choose to provide additional benefits (also known as the flex allowance)—like health insurance, meal allowances, transportation support, and more.

What is the flex allowance in Portugal?

The flex allowance is a portion of an employee's salary that can be used on tax-exempt or tax-reduced expenses. It’s not mandatory, but many modern employers use it to offer more personalized benefits while optimizing costs.

In fact, that’s one of the advice we provide at BRIDGE IN when onboarding new clients. Once you consider the flex allowance, taxes go lower, and your employees appreciate the effort.

Employees can spend their flex allowance on categories such as:

• Meals and groceries

• Public transport passes

• Health and wellness (e.g., gym, therapy)

• Education and training

• Retirement savings

Platforms like Coverflex and sheerME make it easy for companies to manage this system. They offer a single wallet or card that employees can use across eligible categories, choosing how they want to spend their benefits.

If you own a company, know that offering a flex allowance can:

• Improve employee satisfaction

• Optimize salary costs through tax efficiency

• Attract top talent in a competitive (remote) market

What are the 13 and 14 salaries in Portugal? Another employee benefit?

In Portugal, it’s standard for employees to receive 14 salary payments per year instead of 12. These are:

• 13th salary: Paid in the summer (usually June or July) as a vacation subsidy

• 14th salary: Paid in December as a Christmas subsidy

Both are equal to one month’s base salary and are mandatory by law for most employment contracts. However, you’re not obliged to pay them under this scheme, as you can dilute them over the 12 months of the year. When negotiating with candidates, these bonuses are often included in salary packages, so it’s important to plan for them in your payroll budgeting.

What are the statutory benefits in Portugal?

Statutory (or mandatory) employee benefits in Portugal include:

• Social security contributions (paid by both employer and employee)

• Paid vacation: Minimum of 22 working days per year

• Public holidays: Usually around 13 per year

• Sick leave: Covered by Social Security after day 4

• Parental leave: Up to 120 or 150 days shared between parents, partially paid

• The 13th and 14th salaries

Employers must also provide workers with accident insurance and comply with working time and health/safety regulations.

If you’re starting to do the math, use this free calculator to know all the costs of employing in Portugal (in seconds).

How much is the Christmas bonus in Portugal?

The Christmas bonus (14th salary) is equal to one month’s base salary. For example, if someone earns €1,500/month, they’ll receive an additional €1,500 as a Christmas bonus—on top of their regular December salary.

This bonus is required by law, so it should be factored into annual compensation planning.

What is the average salary in Portugal?

As of 2024, the average gross monthly salary in Portugal is around €22,006 per year– around €1,400–€1,500, although this varies by region and sector. In Lisbon and Porto, for example, salaries in tech and international business roles tend to be higher.

It’s also worth noting that the minimum wage in Portugal is €870/month (in 2025), paid 14 times a year.

Why flex allowance matters as an employee benefit

As you set up a company in Portugal or expand your international team, understanding employee benefits is key to staying competitive. Offering a well-structured compensation package that includes the flex allowance is a smart way to optimize costs and give employees more control over their perks.

With tools that simplify benefits management, offering flexible, tax-efficient perks is more accessible than ever—even for small businesses.

Whether you’re hiring locally or relocating employees to Portugal, taking the time to get benefits right will go a long way in building a motivated, loyal team. And we can help you with that.