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 any work performed outside normal working hours. Normal hours, defined in Article 203, cannot exceed 8 hours per day or 40 hours per week.

Anything beyond that limit is supplementary work. Full stop.

But not everything that happens outside normal hours counts. Time made up for company closure during holidays (Article 242) and work within an exemption-from-fixed-hours agreement are not treated as overtime, provided they stay within the agreed limits.

When you can require overtime

The law is restrictive. Article 227 states that you can only require supplementary work in two situations: where there is a temporary and unforeseen increase in workload that does not justify hiring someone new, or in emergencies to prevent or repair serious damage.

Read that carefully: temporary and unforeseen. 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.

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 within 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 within 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 record all supplementary hours worked, including the reason that justified them. The worker must validate this record immediately afterwards or, at the latest, within 15 days.

This applies even when the extra work is performed off-site, whether working remotely, travelling, or at a client’s premises.

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

Supplementary hours are employment income and subject to Portuguese income tax (IRS). But there is one particularity: withholding is applied separately.

Since 2025, the withholding rate applicable to supplementary work is 50% of the normal rate applicable to base salary. The employee takes home more per overtime hour than they would if it were taxed at the full rate.

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 record along with the reason and the worker’s validation.

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?