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By Brett Allan King
Hiring freelancers in Portugal may require increased social security payments in 2018 under a broadened definition of “contracting entity.” Decree-Law 2/2018, published Jan. 8, alters both the definition of contracting entity and applicable social security contribution rates as of Jan. 1.
Under the revised rules, a service receiver will be considered a “contracting entity” if it provides more than half the service provider's income. The previous threshold was 80 percent.
“This is a first small step—and an important one—in the attempt to lift the veil on those situations where an independent worker is actually a medium- or long-term company employee who should have a contract,” Nídia Horta, a lawyer at Albino Jacinto & Associados in Lisbon, told Bloomberg Law by telephone Jan. 18.
The law also doubles the rate of social security contributions a contracting entity must make on behalf of workers more than 80 percent economically dependent on it to 10 percent. If a worker receives between 50 percent and 80 percent of income from the contracting entity, the rate is 7 Percent.
The revised regime fits into the government’s greater move on the controversial “green receipts,” which exempt companies from paying holiday and sick leave and from making social security contributions, liabilities the worker generally picks up under these circumstances. Green receipts are often abused to cover up actual employer-employee relationships.
While the government intends the law to improve the social protection of independent workers, Horta has her doubts.
“I think the measure is still more beneficial to companies” given that employers would have to pay much higher social security contributions were the economically dependent workers classified as employees.
To contact the reporter on this story: Brett Allan King in Madrid at email@example.com
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Full text of Decree-Law 2/2018 is available in Portuguese here.
For more information on Portuguese HR law and regulation, see the Portugal primer.
Copyright © 2018 The Bureau of National Affairs, Inc. All Rights Reserved.
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