An overview of the legal framework when working with a temporary employment agency established in Portugal

Temporary employment agency activities (NACE 78200) are object of strict regulation in Portugal.  Work organizations established outside our country– specifically in the EU and EEA – should be aware that the list of requirements that must be met in order to legally engage in this activity in Portugal is long and complex.

How to know if the Portuguese temporary employment/work agency is certified?

One very simple and immediate way to discover if the Portuguese temporary employment/work agency is certified is by examining the name. If the name does not contain either the expression “Trabalho Temporário” or “Empresa de Trabalho Temporário” it is certainly not a genuine or legal employment agency.

However, some companies may contain one of these expressions in their names and still not be legally entitled to partake in temporary employment agency activities. This is because many temporary work agencies (TWAs) have had their licenses revoked or temporarily suspended for a wide variety of reasons – usually because they have ceased to meet the conditions and requirements as determined by law. Fortunately, there is a simple way to discover with certainty if a temporary work agency (TWA) possesses an active license to engage in these activities.

In Portugal, Temporary employment (or work) agency activities are regulated by the IEFP, I.P. (Institute of Employment and Vocational Training – Public Institute).

It is the IEFP, I.P., that has the responsibility of verifying on a yearly basis that TWAs meet the legal requirements and remain compliant and, of course, it is this Public Institute that issues, suspends or withdraws licenses without which it is not possible to legally engage in temporary employment (or work) agency activities.

The IEFP, I.P. also publishes and manages the registry of temporary work agencies. Unfortunately, there are 6 different regional registries and not one that is nation-wide and where it is possible to find all TWAs incorporated in Portugal. For example, if a TWA has its head office in Porto, it will NOT appear in the registry of the area of Lisbon. So, the first thing any USER of manpower (domestic or foreign) that wishes to consult Portugal´s Registry of TWAs should know is where the head office of the TWA is located, otherwise finding the TWA in the Registry can be quite challenging indeed.

The National Registry of TWAs (in reality, there is no “National” Registry, but rather 6 separate and distinct regional registries) you can verify the information here.

National Registry of ETT:

Consult the Temporary Work Companies licensed by region: 

• North;
• Center; 
• Lisbon and Tagus Valley;
• Alentejo;
• Algarve;
• Autonomous Region of Madeira;

Unlicensed or equivalent to unlicensed companies:

• With expired license;
• With suspended license; 
• With license suspended for non-compliance;
• With license terminated;
• With license revoked;

The website is only available in Portuguese, but fortunately, most browsers allow for translation to other languages by clicking on the right button of the mouse. 

Unfortunately, the IEFP, I.P. does quite a poor job in keeping these Registries up to date, therefore the information found on it cannot be fully trusted or considered bona fide. However, no need to despair. There is an infallible way to learn if a TWA is licensed and in good standing. Further on we will explain how this can be achieved.

What is required to obtain a mandatory license to operate a TWA?

We will not make reference to all the tiny details, but focus rather on the fundamental or key requirements:

• A formal tenancy contract for the use of a licensed commercial office space with at least 2 divisions – a general or public area and a private area for interviews and other activities
• Adequate organizational structure composed of, at least, a full-time technical director with proven experience in HRM or a higher-level degree in HRM or related field of expertise, full time receptionist or clerk and an accountant (which can be either directly employed or contracted externally by the TWA)
• The management team and all shareholders (regardless of whether or not they have been assigned roles) must provide Criminal record certificates and declarations attesting that they personally have no debts to Social Security or the Tax Authority.
• The most demanding requirement (certainly financially) is the establishment of a hefty surety/bond or guarantee set up to ensure that responsibilities are met—namely that salaries, taxes and social security contributions will be paid in case the TWA fails to meet its legal obligations.

The surety/bond or guarantee can be established in the form of an insurance bond, but in the large majority of cases, most aspiring TWAs prefer to simply deposit the amount of the bond or guarantee directly in the IEFP, I.P.´s  institutional bank account hosted at Portugal´s only public bank institution – Caixa Geral de Depósitos (CGD) – not only because no interest or bank fees need to be paid, but also because currently insurance agencies are extremely reluctant to provide this coverage. 

The amount of the surety/guarantee that a TWA must provide in year “n” is indexed to the statutory minimum wage in Portugal and varies in accordance with the average number of workers on the payroll during the full course of the 12 months of year “n-1”.

Therefore, since the statutory minimum wage in Portugal increases every year, so too will the surety/guarantee increase as well.

The criterium or formula used by the IEFP, I.P. to establish the amount of surety/guarantee that a TWA is obliged to put forward is “a variable number of workers x statutory minimum wage x social security contribution or deduction to be paid per worker (employee´s part + employer´s part)”.

The variable “number of workers” by which statutory minimum wage and social security contribution (employee´s part + employer´s part) are multiplied varies according to the average number of workers the TWA had on its payroll during the full course of the 12 months of year “n-1”.

The following table displays the guarantee/surety to be provided per echelon and may make things more easily understandable for the reader:

It is worth noting that guarantee/surety required by the IEFP, I.P. for issuance or maintenance of the license to engage in temporary employment activities suffered a significant increase in 2023 for all echelons. As an illustration, had there been no increase in the guarantee needed to obtain or remain licensed, in 2024, a TWA operating in Portugal that had employed, on average up to 100 workers in the previous year (2023) would only be required to provide a surety of 110.495,00€. However, with the changes in the rules, that same TWA is now required to put up a hefty 165.742,50€ at the entrance level – an increase of 50%!

We are not aware of any country in the EU or EEA where the compulsory surety/guarantee is even close to as high – in most EU and EEA countries no compulsory guarantee is required or the amount is comparatively insignificant. TWAs have until March 31 of each year to update their guarantee which is usually done by depositing the additional amount in the IEFP, I.P.´s intuitional bank account at the Caixa Geral de Depósitos (CGD) – as previously mentioned Portugal´s only completely State owned and controlled bank. 

Work Supply – Trabalho Temporário Lda currently stands at the 4^th echelon and has currently deposited in the IEFP, I.P.´s bank account exactly 331.485,00€.

If, for example, in 2025, based on the average number of workers employed during the course of the current year (2024) Work Supply – Trabalho Temporário Lda  ends up being placed in a lower echelon we can request and be allowed to withdraw the excess amount and, of course, if we decide to discontinue temporary work agency activities we may and will certainly be given permission to withdraw the full amount.

However, if (a big and important “if”) we, or any other TWA for that matter, has NOT paid all the salaries to workers and/or are indebted to the State – namely, to Social Security and to the Tax Authority – the IEFP, I.P. will only allow withdrawal of whatever is left over after these payments have been taken into consideration – if there is anything left over.

Fortunately, Work Supply – Trabalho Temporário Lda has no intention of slowing down, and since it was established more than 5 years ago, has never, not once, failed to pay salaries and all taxes – in Portugal and abroad (we have paid millions of euros of wage taxes to several Tax authorities within the EU and EEA).

So, we believe it is fair to conclude that the rules and requirements to legally engage in temporary work agency activities in Portugal are, in itself and, particularly when compared to those of other EU and EEA countries, extremely demanding and costly.

Those interested in taking a closer examination of the rules and requirements regarding temporary work agency activities can consult:

Decree-Law No. 260/2009 – Legal regime for the exercise and licensing of private placement and temporary work agencies found here and on several websites. 

Do the rules and requirements for engaging in temporary employment agency activities in Portugal apply to portuguese TWA´S when seconding or leasing workers to clients located outside their home country?

The short answer is YES. If a TWA (Temporary Work Agency) incorporated and with tax residency in Portugal does not fulfil the legal and mandatory requirements to engage in temporary work agency activities in its home country, then it also cannot engage in the same activities outside Portugal regardless of whether or not the same activity is or is not the object of regulation in the third country.

For more information, regarding this subject,you can check our article of rules and requirements for engaging in TAW´s activities when leasing workers abroad. 

If you would like to know more information regarding of the consequences of Illegal Worker Leasing and how to verify the legitimacy of the A1 Certificate, you can find more information here.