international employment law firm alliance L&E Global
Portugal

Portugal: Social Dialogue: Agreement on Wage Valorisation and Economic Growth (2025-2028)

On 1 October 2024, the government and social partners finalized an agreement outlining measures for wage valorisation and economic growth from 2025 to 2028. The agreement sets specific targets for wage increases and introduces tax measures to support these increases.

Key Provisions of the Agreement:

  • Guaranteed Minimum Wage and Average Salary Targets: One of the core elements of the agreement is the progressive increase in the Guaranteed Minimum Monthly Wage (RMMG). For 2025, the minimum wage will rise to €870, with annual increments of €50, culminating in €1,020 by 2028.
  • Additionally, the agreement sets goals for overall wage growth, with average salaries expected to rise between 4.5% and 5% annually. The target is to achieve an average salary of €1,890 by 2028, a move aimed at avoiding the flattening of wage scales due to the increase in the minimum wage.
  • Tax Measures to Promote Wage Increases: The agreement introduces several tax incentives to encourage companies to raise wages. A key provision is the 50% increase in deductible costs related to wage increases for corporate tax purposes. Furthermore, performance bonuses and other similar payments will be exempt from personal income tax and social security contributions, up to 6% of the annual base salary, provided companies implement minimum salary increases in the relevant year set in the law.

The agreement also includes a 50% reduction in the withholding tax rate on overtime work.

  • Incentives for Retirement Savings/Plans: The agreement aims to encourage voluntary contributions to complementary retirement savings plans by exempting contributions from social security and personal income tax. This applies to contributions made by both employers and employees.

Next Steps

The measures agreed upon are now set to go through the necessary legislative process before they can be fully implemented.