In Portugal, to have a NISS and contribute to social security it is mandatory not only for individuals but also corporations; however, this concept may be new to many foreign companies that are setting up in Portugal. In this article, we will how the social security works in corporation and what are you responsibilities with the system if you choose to hire employees. We will also take a look at what happens if you choose not to participate in the social security system as an employer, and how employees are affected by this choice too.
What is social security?
Social security is a system that aims to ensure citizens basic rights and equal opportunities and it promotes well-being and social cohesion for all Portuguese and foreign citizens. It is funded by contributions from employers and employees. It is also important to note that Social Security covers both workers and employers.
Who needs it?
Social security for businesses in Portugal is mandatory and applies to all employees, even if their salary is below the social security’s threshold. This means that companies with more than five employees need to be aware of the social security requirements in Portugal. Companies that are small businesses with less than five employees don’t have to register or pay social security. The types of benefits offered by Portuguese Social Security are health care coverage, old age pension (when you reach retirement), disability insurance (protection against accidents at work or illness), maternity leave, widows’ pension (for those who had a spouse) and survivor’s pension (for those who lost a spouse).
How it’s taxed
A contribution rate is applied to gross remuneration payable based on the employee’s activity (assessment basis) in order to determine the contributions due. Social Support Index (IAS) values are applied to conventional tax bases and a contribution rate is applied. It is also the employer’s responsibility to pay employee contributions.
How to register for it
For social security purposes, employers in Portugal have rights and obligations and so when you form a company you’re required to register with this body. When a company registers with Social Security, they will automatically receive a 11-digit Social Security Identification Number (Número de Identificação de Segurança Social, NISS). If you have not yet applied to NISS, please make an appointment with our team to set up a free consultation of up to 20 minutes to get you started.
Conclusion and tips
If the employer wishes to terminate and suspend the contract, it should inform the SIS Social Security office via an online portal by the 10th of the following month, completing and submitting form No. RV 1009-DGSS. You can request the form from Social Security’s website or submit it on paper to a Social Security office.
Changes to the form of the employment contract should also be notified by the 10th of the following month.
An employment contract may be terminated on the following grounds in accordance with Portuguese legislation:
dismissal due to faults attributable to the worker
dismissal due to redundancy
dismissal due to unsuitability
termination by the worker
complaint by the worker
Employment may terminate either due to the end of the contract, the inability of the employee to work, the retirement of the employee due to old age or disability, or due to other reasons that can be found in the contract.
There are more tips than just those listed above, schedule a consultation with our team to understand more.
How RHJ Accountants can help
We recognise more than ever that individuals and businesses from the UK and other countries may be globally mobile. We aim to make you aware of the tax-efficient opportunities, available tax relief and structure finances for life at home and abroad.
Our international team of specialists operate from offices in the UK and Portugal. We work together synergistically to provide tax efficient solutions to our clients to help them grow their business whilst keeping tax liabilities to a minimum.
Get in touch with us today to find out more, or to make use of our services.