Introduction 

When expanding internationally or managing remote teams, understanding the differences between labour laws in your countries of operation is vital. Portugal and the United States present two very different regulatory landscapes, and misinterpreting those differences can lead to fines, legal claims, or employee dissatisfaction.

At ThinkGlobal HR, I’ve supported companies hiring in both countries - and I’ve seen the challenges first-hand. While the US model leans toward flexibility for employers, Portugal emphasises employee protection. Neither is necessarily better, but each demands a tailored approach.

Quick Tips

• Portugal requires written contracts for most employment relationships - the US does not.

• Dismissals are more regulated in Portugal - ‘at-will’ employment does not apply.

• Portugal mandates 22 days of paid holiday - far higher than typical US policies.

• In the US, benefits and time off are often driven by company policy, not law.

• Portugal has strict limits on working hours and strong trade union rights.

Contractual Differences: At-Will vs Just Cause 

One of the starkest contrasts between the two systems is how employment ends.

In the US, most states follow ‘at-will’ employment, meaning employers can terminate an employee for any reason (barring discrimination) without notice. While this offers business flexibility, it often creates uncertainty for employees and risk in cross-border relationships.

Portugal, by contrast, requires just cause for dismissal. There are defined processes for redundancy, misconduct, or performance issues. Employers must provide notice, follow disciplinary procedures, and offer severance in most cases. Failure to do so can lead to costly litigation.

For global companies, this means your termination playbook must be country-specific. I once worked with a client who applied their US offboarding approach in Lisbon - only to be met with a labour tribunal claim and a reputational headache. We helped them navigate it, but prevention would have been far cheaper.

Working Time and Time Off: Who Sets the Standard? 

Portugal’s working week is capped at 40 hours, with legal limits on overtime. Employees are entitled to a minimum of 22 days’ paid holiday, plus public holidays - and this is strictly enforced. In contrast, the US has no statutory requirement for paid leave. Vacation policies are typically set by employers, and even public holidays aren’t universally mandated.

This has cultural implications too. In Portugal, taking holiday is a norm and a right. In the US, many employees forgo leave due to workload or workplace culture. If you're managing teams in both countries, you must accommodate this. Equity doesn’t mean uniformity - it means fairness in context.

A recent OECD study noted that Portugal ranks above average in work-life balance, while the US ranks below. When building engagement strategies, these insights should guide how you structure benefits and performance expectations across locations.

Social Security and Benefits: Who Pays What? 

In Portugal, employers contribute around 23.75% of gross salary to social security. This funds healthcare, pensions, and unemployment protection. Benefits like sick pay and parental leave are statutory and centralised. In the US, employers contribute to Social Security and Medicare at a lower rate (6.2% and 1.45% respectively), but many benefits are private - often negotiated individually or via group plans.

This means that ‘benefits parity’ across countries is not straightforward. A US-style package might look generous on paper but fail to meet statutory expectations in Portugal. I worked with a tech firm who lost a candidate in Lisbon after trying to mirror their US benefits model. We helped them redesign the package - not just to comply, but to compete locally.

Real-World Insight 

One client, a scale-up based in New York, wanted to expand operations to Portugal. They planned to replicate their US processes - onboarding via offer letters, flexible dismissals, and minimal paid leave. We stepped in early, built a compliance roadmap, introduced local legal counsel, and restructured their employment practices.

The result? A fully compliant, culturally aligned team in Porto within four months - with high retention and strong local engagement. The key was respecting the legal and social framework, not just translating policies.

Final Thoughts 

Managing people across borders is never about copy and paste. What works in Dallas won’t necessarily work in Lisbon. Labour laws reflect local values, and compliance is more than just avoiding fines - it’s about creating trust and setting your business up for success.

What’s next for your global people strategy? 

Book a free compliance check-in or HR audit with ThinkGlobal HR. Whether you’re planning to hire in Portugal, restructure in the US, or operate in both, we can help you build compliant, scalable employment systems that work for your business and your people.