Portugal's subsídio de férias and subsídio de Natal: the 14-payment year and how each payment is taxed

A Portuguese employee on €1,500 a month is paid €21,000 a year, not €18,000. The difference is the subsídio de férias (holiday subsidy) and the subsídio de Natal (Christmas subsidy), often called the 14th and 13th month salaries: two extra payments, each worth a month's pay, that the Labour Code (Código do Trabalho) requires for every employee. A budget built as in Germany or the UK, monthly salary times twelve, is two payments short. Each subsidy has its own rules on timing, base, proration and withholding.

When the subsídio de férias and subsídio de Natal are due

The Christmas subsidy, one month's pay, must be paid by 15 December each year (Código do Trabalho, Art. 263(1)). The holiday subsidy must be paid before the employee's holiday period starts, and in proportion to each block when the holidays are split, unless the employer and employee agree otherwise in writing (Art. 264(3)).

A breach of either article is a very serious administrative offence (contraordenação muito grave), the top category of labour fines (Arts. 263(3) and 264(4)).

What goes into each subsidy

For the Christmas subsidy, Art. 262 sets the default base: base pay (retribuição base) plus seniority increments (diuturnidades), unless the law, a collective agreement or the contract says otherwise. Overtime and one-off bonuses are excluded by default.

The holiday subsidy is wider: Art. 264(2) adds to base pay the elements that compensate for the specific way the work is done, such as a regular shift or night-work supplement. A worker paid a regular night-work supplement therefore receives a larger holiday subsidy than Christmas subsidy.

The meal allowance is generally in neither base, because Art. 260(2) excludes it from remuneration. Collective agreements often widen these defaults, so the agreement covering the client's sector is the first document to check.

Proration for joiners, leavers and long absences

The Christmas subsidy is proportional to time worked in the calendar year in three situations: the year the employee is hired, the year the contract ends, and any year in which the contract is suspended for a reason concerning the employee (Art. 263(2)). Suspension means an absence of more than one month that is not the employee's fault, such as a long illness (Art. 296(1)).

• Joiner: an employee hired on 1 September on €1,500 a month receives a Christmas subsidy of €1,500 × 4 ÷ 12 = €500 by 15 December.

The holiday subsidy depends on the holiday entitlement. In the hiring year the employee earns two working days of holiday per month of contract, up to 20 days (Art. 239(1)), and the subsidy is paid in proportion to those days. After that, the full 22-day entitlement vests each 1 January (Arts. 237(1) and 238(1)).

On termination the employee is owed holiday pay and holiday subsidy for vested holidays not yet taken and, in proportion to service, for the year of leaving (Art. 245(1)), plus the proportional Christmas subsidy.

• Leaver: a long-serving employee on €1,500 leaves on 30 June, with none of the holidays that vested on 1 January taken and that year's holiday subsidy unpaid. The final pay adds €1,500 holiday pay and €1,500 holiday subsidy for the vested holidays, €750 of each for six months of service in the leaving year, and a €750 Christmas subsidy: €5,250 on top of the June salary.

When a long sick leave reduces a subsidy, the employee can claim the shortfall from Segurança Social (the social security system) as a compensatory benefit (prestação compensatória), applying within six months from 1 January of the following year.

Duodécimos: paying the subsidies in twelfths

Duodécimos (twelfths) means splitting a subsidy into twelve equal parts and paying one with each monthly salary. On €1,500 a month, fully paid in twelfths, the payslip shows €1,500 salary plus €125 of each subsidy every month, and no lump sums (the last Christmas instalment still has to be paid by 15 December).

From 2013 to 2017, a temporary regime required private-sector employers to pay half of each subsidy in twelfths unless the employee opted out within five days; fixed-term and temporary-agency contracts needed a written agreement. Lei 11/2013 created the regime, and each State Budget renewed it for one more year, for 2017 through Lei 42/2016, Art. 274. The 2018 State Budget (Lei 114/2017) contains no equivalent article. The regime has not returned, so the default is now payment in full by each deadline.

Twelfths remain lawful in 2026 by agreement. For the holiday subsidy, Art. 264(3) expressly allows a different schedule agreed in writing. For the Christmas subsidy the Code sets only the 15 December deadline; the law firm CMS reads monthly instalments as permitted if the full amount is paid by that date. Agreements can cover all or part of each subsidy, and a collective agreement with a fixed payment date overrides a less favourable individual agreement.

How IRS withholding and TSU apply to each subsidy

Each subsidy is withheld on its own. Withholding of IRS (the Portuguese personal income tax), called retenção na fonte, is calculated on each subsidy separately, never by adding the subsidy to that month's salary (Código do IRS, Art. 99-C(5)). The employer applies the withholding table in force on the payment date to the subsidy alone, as if it were a monthly salary. So far in 2026 that means the tables in Despacho 233-A/2026 (a government order), and each payment in a subsidy month has its own effective rate (n.º 10). The result is rounded down to the euro (Art. 99-E).

Twelfths use the rate of the full subsidy. Each instalment is withheld at its proportional share of the tax on the whole subsidy (Art. 99-C(6)). The Ordem dos Contabilistas Certificados (the chartered accountants' professional body) advises applying the full subsidy's effective rate to each twelfth.

Social security contributions (TSU, taxa social única) apply in full. The Christmas and holiday subsidies are part of the contribution base (Código Contributivo, Art. 46(2)(h)), so the 11% employee contribution and the 23.75% employer contribution (Art. 53) apply to each subsidy, lump sum or twelfths, with no ceiling.

Worked example: €1,500 a month across 14 payments

Take a single employee with no dependants, resident on the mainland and outside IRS Jovem (the partial IRS exemption for young workers), on €1,500 gross a month, with both subsidies paid in full. In the 2026 tables (Despacho 233-A/2026), the Table I row for monthly pay up to €1,819 has a 24.10% marginal rate and a €193.33 deduction (parcela a abater).

November 2026 is an exception. On 9 October 2026 Parliament approved the law authorising the Government to cut the IRS rates of the first six brackets with effect from 1 January 2026 (Proposta de Lei 108/XVII/2). Despacho 12523-A/2026, published on 14 October, halves the withholding computed under Despacho 233-A/2026 on employment income paid on the mainland in November, including a Christmas subsidy paid that month. Monthly pay above €20,221 is excluded, and the current tables apply again from December. This example pays the Christmas subsidy in December, under Despacho 233-A/2026; one paid in November is still withheld on its own, then halved.

Each of the 14 payments is calculated the same way:

• IRS: €1,500 × 24.10% = €361.50, minus €193.33 = €168.17, rounded down to €168
• Employee TSU: €1,500 × 11% = €165
• Net: €1,500 − €168 − €165 = €1,167
• Employer TSU: €1,500 × 23.75% = €356.25

Across the year:

• Gross pay: €1,500 × 14 = €21,000
• Employer TSU: €356.25 × 14 = €4,987.50
• Annual cost to the employer: €21,000 + €4,987.50 = €25,987.50

Budgeting on twelve payments gives €1,856.25 × 12 = €22,275, understating the cost by €3,712.50 per employee (before the meal allowance, work-accident insurance and other costs).

With full twelfths, the employee's monthly gross becomes €1,750. In any month other than November 2026, IRS on the salary is still €168. IRS on each €125 twelfth is one twelfth of the full-subsidy calculation: €125 × 24.10% = €30.125, minus €193.33 ÷ 12 = €16.11, which is €14.01, rounded down to €14. Monthly IRS is €168 + €14 + €14 = €196. Withholding on the combined €1,750 instead would give €1,750 × 24.10% − €193.33 = €228.42, or €228: €32 a month over-withheld, €384 a year that the employee recovers only on the annual tax return.

Summary

Portuguese employees are paid 14 times a year. The subsídio de Natal is due by 15 December, on base pay plus seniority increments by default; the subsídio de férias is due before the holidays and also includes supplements tied to how the work is done. Both are prorated in the years of hiring and leaving, and the Christmas subsidy also for long suspensions. Duodécimos need a written agreement. Each subsidy is withheld for IRS on its own and is subject to the full 34.75% TSU.

Flux applies the current tables and withholds each subsidy separately on every pay run, so a firm running Portuguese payroll for its clients reviews the result rather than calculating each subsidy by hand.