A thriving destination for tourists and expats alike, Lisbon's labor market is the best it has been in years, with a low unemployment percentage and plenty of offers in key areas. However, while the relatively tame cost of living and great quality of life attract more and more expats looking for sunshine and great food, the Portuguese economy is famous for running on low wages, making it increasingly difficult for the average Portuguese worker to afford to live in the capital.
The labor market in Lisbon
Although unemployment rates are slightly higher than the national average (7,2% in 2022), there are plenty of job offers in Lisbon. This comes as no surprise, as Portugal tends to focus most of its people and economic activity in the big cities (such as Porto and Lisbon), where pretty much all the major companies and public institutes set base. Plus, Lisbon also boasts a highly qualified workforce compared to the rest of the country.
However, as more tourists and expats make their way into the city, the cost of living has become almost unbearable for most people, driving locals further and further away from the downtown area. Although it may surprise some people, considering the Portuguese economy is statistically doing well, ranking among the fastest-growing in the EU in 2023, the truth is that most businesses run on criminally low wages, especially within the tourist sector. Currently, the average wage in Lisbon stands at around 1,450€ gross, while the minimum wage is 760€. When compared to the city's average rent prices, which show that the new leasing contracts signed in the first quarter of 2023 reached an average of 1,480€/month (to an astronomical 2,500€ for a 1BD in the downtown area), it becomes clear how difficult it is to survive on a single monthly paycheck when working for a local company in Lisbon. And even when sharing expenses, there's still not a lot of wiggle room.
As for taxes, you'll be paying a flat 11% of your paycheck towards your future public retirement fund (Segurança Social), while the remaining taxes (IRS) will depend on how much you make. Portugal boasts a progressive tax system, which means the more you make, the higher the bracket that will establish how much in taxes you'll be paying every month. Unlike the US, when under contract with a company, you don't need to do your own taxes, as your employer will be responsible for automatically deducting your taxes from your wage and handing the amount to the government. Needless to say, and in order to abide by the law, everything must be mentioned in your pay slip. Currently, IRS percentages can range from 0% (if you earn the minimum wage) to 41% (if you make over 20k/month), with plenty of other brackets in between.
As for freelance workers, they will need to register their activities at their nearest Finance Department, or online through the Financial Department Platform and issue invoices called Recibo-Verde (green receipt). Freelancers earning less than 13,500€/year are usually exempt from paying VAT, and do not need to pay the IRS on a monthly basis to the government (though they'll have to do their taxes every year between May and July and pay any taxes owed to the state). They also need to pay the pension fund contribution every month, according to the amount they made throughout the previous trimester. Regarding freelance work, we strongly advise consulting with a Portuguese accountant or tax advisor since there are many nuances that will impact how much you'll pay in taxes, including the nature of your activity and how much you make, to the dates you issue your invoices and your deductible work expenses.
As a final note, it is also worth mentioning that the brand-new digital nomad visa used to include access to the RNH Status, which provides tremendous tax benefits for digital nomads establishing themselves (and their businesses) in the city for a period of 10 years. If your line of work falls within one of the designated categories, you can enjoy a flat 20% tax on your income, a percentage that Portuguese workers (or foreign workers without the digital nomad visa) reach when earning over 1,961€/month. That being said, if you make more than that amount, you'd be saving on taxes by adhering to the visa. Be that as it may, and according to recent news, the government is getting ready to scrap the RNH scheme in 2024. Once again, it is always best to consult with an accountant for further details.
Popular industries in Lisbon
Tourism
Lisbon is one of the hottest tourist destinations in Europe, and of course, tourism is a key sector of the city's economy. Work is available in hotels and hostels, or a series of guide companies – different languages are a bonus, especially Russian and Mandarin. However, as mentioned above, tourism is probably the most precarious industry in the city, consistently running on low wages and with companies often requiring unpaid extra time (which is illegal).
Public sector
The public sector makes up about 15% of the total Portuguese workforce. This includes public accountants, social security workers, education and health. However, it is locally famous for being quite hard to crack in unless you have the right connections. Once inside the public system, it is not uncommon to find entire families working in the sector, as there is always someone who knows someone. Nevertheless, as a foreigner with no connections, your chances of getting in are nearly impossible.
Tech
Lisbon is growing up to be considered the Silicon Valley of Europe. With a thriving tech ecosystem – such as the recently open Hub Criativo Beato – and incubators like StartUp Lisboa, digital nomads and entrepreneurs from all over the world are coming to the city to take advantage of the scene (and the tax exemptions provided by the new digital nomad visa). There are several government incentives in the area as well, and it promises to grow more and more. Copywriters, social media analysts, software developers and other IT types could easily find a job, even if they don't speak Portuguese (though English is required).
Services
In a city dominated by tourism, services are another key area of employment. Restaurants, cafés and shops are particularly welcoming of expats and can be a lovely way to start building a community in your new country.
Availability of jobs and competition in Lisbon
With most locals (especially the younger generations) being able to speak pretty good English, the competition can be very tough on expats. The labor market is not particularly saturated – as we've discussed in detail above – but the lack of Portuguese fluency can be crucial in whether or not expats will be successful. Full English-speaking jobs are usually found in the tech area or as a TEFL teacher. Furthermore, and unless you're working in tech or have your own business, chances are you won't be enjoying a particularly good standard of living in case you're earning a Portuguese wage. Finally, knowing a third language, like Spanish, French or German, can be a pretty valuable asset.
Working hours in Lisbon and legal details
When looking for job opportunities in Lisbon, there are a couple of important legal information you must know in order to be protected. From a legal standpoint, full-time workers have a 40-hour week schedule, which means that if you work more time, you should be paid more (although that is rarely the case). On top of the regular eight-hour working days, employees usually have a 1-hour break for lunch or dinner. Working between midnight and 7 a.m. also means one should receive compensation for night hours, so be sure to talk to a lawyer if you notice a company trying to pay less than what you are owed.
Furthermore, local full-time workers are entitled to 14 paychecks per year, one for each month, plus two supplementary wages (called Holiday Allowance and Christmas Allowance). When working in the city, you should get at least 22 days of vacation (the legal minimum), although companies are free to offer you more paid time off work, depending on their policy.
We do our best to provide accurate and up to date information. However, if you have noticed any inaccuracies in this article, please let us know in the comments section below.
