Overtime in Portugal: Limits, Pay Rates and Fines

It is Friday, 6.30pm, and one of your employees has stayed two extra hours to finish a project. Do you know how much more you have to pay them? Do you know whether you have to record those hours somewhere? And if the ACT turns up on Monday, can you prove everything is in order?

Most Portuguese SMEs use overtime. Few know exactly what the law says about it. And those that do often do not have their records up to date.

This guide covers all of it: the limits, the pay uplifts, the mandatory record, and the fines for non-compliance.

What counts as supplementary work

Article 226 of the Portuguese Labour Code defines supplementary work as work performed outside the working schedule. What counts is the person’s schedule, not the limits in Article 203 (8 hours a day and 40 a week). A part-time worker scheduled from 9am to 1pm who stays until 3pm has worked two hours of supplementary work, even without reaching 8 hours. And under arrangements such as flexible averaging or an hours bank, working more than 8 hours in a day may not be supplementary work.

But not everything that happens outside the schedule counts. Article 226(3) excludes, among others, work by someone exempt from fixed hours on a normal working day (unless the exemption has an agreed limit and it is exceeded), the 15-minute tolerance, training outside the schedule of up to 2 hours a day, and work to make up for a holiday closure under Article 242(2)(b).

When you can require overtime

The law is restrictive. Article 227 states that you can only require supplementary work where the company has to deal with an occasional and temporary increase in workload that does not justify hiring someone, or in cases of force majeure or where it is indispensable to prevent or repair serious harm to the company or its viability.

Read that carefully: occasional and temporary. Overtime is not there to cover chronic understaffing. If you have employees doing overtime every week, the problem will not be solved with more hours. It will be solved with more people.

The limits you have to respect

Article 228 sets clear limits, and they vary with company size.

If you run a micro or small company, your employees can work a maximum of 175 overtime hours per year. For a medium or large company, the limit drops to 150 hours a year. Part-time workers have a limit of 80 hours a year, or the pro rata equivalent of full time if higher. A collective agreement can raise the annual limits to up to 200 hours.

On a daily basis, the maximum is 2 additional hours on normal working days. On rest days or public holidays, the limit corresponds to the normal daily working period.

How much you have to pay for overtime

Article 268 of the Labour Code sets out the uplifts. There are two bands, before and after 100 hours a year.

Up to 100 overtime hours a year, on working days, you pay an extra 25% for the first hour and 37.5% for subsequent hours. On weekly rest days or public holidays, the uplift is 50% per hour.

Beyond 100 hours a year, the rates rise: 50% for the first hour and 75% for subsequent hours on working days. On rest days or public holidays, the uplift becomes 100%.

Here is a concrete example. An employee earning €1,200 a month has an hourly rate of around €6.92 under the statutory formula: (1,200 × 12) ÷ (52 × 40). If they work 2 overtime hours on a working day, within the first 100 hours of the year, the additional cost is €1.73 for the first hour and €2.60 for the second. Sounds small? Multiply it by 10 employees, three times a week, over a year.

The right to compensatory rest

As well as payment, Article 229 guarantees compensatory rest in two situations.

If the overtime prevents the daily rest period of 11 hours between shifts, the worker is entitled to paid compensatory rest equal to the hours missed, to be taken on one of the following three working days.

If the supplementary work is performed on a mandatory weekly rest day, the worker is entitled to a full day of paid compensatory rest, again on one of the following three working days.

Paying for overtime does not remove the compensatory rest obligation. They are separate obligations.

Recording overtime is mandatory

Here is the point many SMEs overlook, and it is where the ACT catches most people.

Article 231 requires the employer to keep an overtime record in which the start time is entered before the overtime begins and the end time straight after it finishes, with an express statement of the reason and of any compensatory rest taken. If the worker does not make the entry themselves, they must countersign it immediately afterwards. The 15-day period applies only to overtime performed outside the company: the worker countersigns the record on return or sends it countersigned, and the company must have it within 15 days.

Without a record, you cannot prove you respected the limits. You cannot calculate the payments correctly. And if an employee brings a complaint, you have no defence.

Overtime and income tax

Overtime is employment income and subject to Portuguese income tax (IRS). Since 1 January 2025, withholding on supplementary work is at half rate: 50% of the withholding rate that applies to the monthly pay in the month the hours are paid, from the very first hour (Article 99-C of the IRS Code). This is only withholding: the final tax is settled in the annual return. Check with your accountant how to apply it.

Common mistakes to avoid

Not keeping records is the most frequent. The company pays the overtime on the payslip but keeps no formal record with the reason and the worker’s validation. If the ACT asks for documentation, there is none. Time clock software keeps the real start and end of every day, the basis for working out overtime.

Exceeding limits without noticing is the second. Without a monitoring system, it is easy for an employee to pass 175 hours a year without anyone realising.

Using overtime as routine also raises problems. If you have employees doing overtime every month, you are using an exceptional mechanism as standard practice.

Not paying the correct uplift happens when companies pay a flat rate per overtime hour, without distinguishing between the bands or between working days and rest days.

Ignoring compensatory rest is another common error. Paying is not enough. The rest is a separate entitlement.

Frequently asked questions

Conclusion

Supplementary work has clear rules: annual and daily limits, mandatory uplifts, compensatory rest, and a mandatory record of every hour worked.

If you manage this with spreadsheets or on the “the employee tells me and I write it down” system, you are taking an unnecessary risk. It only takes one ACT inspection to turn an oversight into a fine of thousands of euros.

Does your company have overtime records in order for every employee?