Portugal’s National Minimum Wage, Ranks among the Top 10 in the European Union!
National Minimum Wage = Guaranteed Monthly Minimum Remuneration (RMMG)
The legally minimum amount that could be paid to employees by employers as compensation for their work.
The government approved the increase of the National Minimum Wage to 820 euros in 2024, as published in Decree-Law No. 107/2023 on November 17. This marks the highest annual increase ever in Portugal’s national minimum wage, a raise of 60 euros, or 7.9%, compared to 2023.
This change resulted from the reinforcement of the Medium-Term Agreement for Income, Wages, and Competitiveness Improvement, signed on October 9, 2022. The agreement prioritizes improving workers’ income and wages, Productivity and competitiveness of companies and the Portuguese economy.
During this year, from 2022 to 2023, after the agreement was signed, improvements were observed, such as the incentive for hiring qualified young individuals through a hiring support program, the enhancement of tax incentives in Corporate Income Tax (IRC) for companies investing and increasing salaries, and the elimination of contributions to the Compensation Fund for Work.
According to data from the National Institute of Statistics (INE), salaries grew above the agreed levels, with the average salary increasing by 7.5% in the first half of 2023.
“This is one of the commitments made in dialogue with social partners, aimed at dignifying work and valuing salaries. We are proud of the results achieved and confident that employment and salaries are our collective engine for development.“
– The Minister of Labor, Solidarity, and Social Security, Ana Mendes Godinho.
The IRS exemption remains in 2024. The government will increase the minimum existence reference value, equivalent to the national minimum wage calculated over 14 months (a total of 11,480 euros). However, the mandatory 11% contribution to Social Security remains.
Thus, the employee who receive the national minimum wage contributes €90.20 to Social Security, resulting in a net monthly income of €729.80.
Meal allowances are also projected to increase by 25.8% in total in 2024.
And what about freelancers?
The minimum wage pertains to the minimum remuneration for employees.
However, for freelancers, there is the “IRS minimum existence,” which, in 2023, was set at 10,640 euros annually (no forecast for 2024 yet).
Impacts
Increase in the minimum wage has effects not only for those receiving this salary but also in other situations where it serves as a reference.
Compensation for collective dismissals
The monthly base salary for calculating compensation cannot exceed 20 minimum wages, and the overall compensation cannot exceed 240 minimum wages.
Effects of inflation on salaries
In 2022, inflation reached record levels, with an annual rate of 7.8%, corresponding to the percentage increase in the minimum wage from 2022 to 2023.
The rise in prices can negate the potential effects of the minimum wage increase on the lives of Portuguese citizens.
Tax increases
Despite being considered a necessary move, the increase in the minimum wage to 820 euros also implies higher expenses for holiday and Christmas bonuses, as well as for Social Security contributions.
Conclusion
This increase has a direct impact on the lives of thousands of workers in Portugal.
Overall, it can boost worker motivation and improve their quality of life, but it also has economic implications, especially for companies, particularly small and medium-sized enterprises that may face additional financial challenges due to increased labour costs, which can put pressure on profit margins.
In summary, the increase in the National Minimum Wage is a necessary measure that promotes the improvement of workers’ living conditions but comes with economic challenges that require a balance between these two factors.
