Subsidio de Natal Portugal
Work

Christmas Allowance in Portugal: Everything you need to know

20 de November, 2024

For many people, the month of December tends to involve higher spending than other months of the year. The festive season brings with it some additional expenses, such as presents for family and friends, Christmas Eve and Christmas Day meals, the usual group dinners and then New Year’s Eve.

The Christmas allowance is, in this context, a valuable aid for individuals and families to have more time off their budgets during this period.

But how does the Christmas bonus work in practice in Portugal? Come and find out with us.

What is the Christmas allowance?

The Christmas allowance, also known as the 13th month, is a right of workers in Portugal that is provided for in Código do Trabalho. It consists of a monetary sum paid by the employer to the employee, equal in value to one month’s pay (article 263 of Código do Trabalho).

This allowance turns out to be an extra salary, which is paid before Christmas and which has the precise purpose of helping workers meet the expenses associated with the Christmas season.

Who is entitled to the Christmas allowance?

They are entitled to the Christmas allowance:

  • Employees (people with employment contracts in both the public and private sectors);
  • Directors and managers of legal persons, if this right is proven and the other conditions laid down by law are met;
  • Pensioners;
  • Workers on parental leave;
  • Workers on sick leave.

Instead, they are not entitled to the Christmas allowance:

  • Self-employed workers;
  • Beneficiaries of voluntary social insurance;
  • Beneficiaries whose long-term sick leave has led to the award of occupational sickness benefit.

How is the Christmas allowance calculated?

The calculation of the Christmas allowance varies according to the number of days actually worked during the year.

If the employee has worked for the entire calendar year, the amount of Christmas allowance to be received is equivalent to one month’s pay. In other words, the Christmas allowance is equal to 100% of the gross monthly salary.

If, on the other hand, the worker has not completed a year’s work, Article 263 of Código do Trabalho states that the amount of the Christmas allowance must be “proportional to the length of service in the calendar year”. This happens:

  • In the year the employee was hired;
  • In the year of termination of employment;
  • In the event of suspension of the employment contract due to a fact concerning the employee.

In these cases, the allowance is calculated as follows: (basic pay / 365 days) x number of days worked.

It is important to note that, in any case, the meal allowance does not form part of the basic salary to be taken into account when calculating the Christmas allowance.

When do you get your Christmas allowance?

The Christmas allowance must be paid by December 15th of each year or, in the case of public sector workers, in November of each year.

The payment terms are as follows:

  • For private sector workers and Social Security pensioners: until December 15th;
  • For public sector workers and state pensioners: November.

How can the Christmas allowance be paid?

Normally, the Christmas allowance is paid in full before the Christmas season. However, in the private sector, some companies choose to split the payment of the allowance into twelfths. This means that the amount of the allowance is divided by the 12 months of the year and paid monthly together with the salary.

For the allowance to be paid in twelfths, there must be an express agreement between the company and the employee.

Payment of Christmas allowance in the event of illness or parental leave

Both in the event of illness and parental leave, the Social Security system provides for the payment of Christmas allowance compensation (as well as vacation pay and other similar payments).

These benefits are intended to compensate, in this case, for the Christmas allowance that the worker did not receive, in whole or in part, because they were unable to work for 30 or more consecutive days.

In cases of illness, compensation benefits are granted provided that:

  • The worker is not entitled to or has not received the Christmas bonus because they have been ill and are receiving sick pay;
  • The duration of the illness is sufficient to lead to the suspension of the employment contract;
  • The employer has not paid or has a duty to pay the Christmas allowance to the employee (in accordance with the provisions of Código do Trabalho or a collective bargaining agreement).

In the case of parental leave, the employer must pay the Christmas allowance. However, the payment of this allowance may be reduced, in proportion to the period of parental leave, and may be compensated through the award of compensatory benefits, provided that:

  • The employee has taken parental leave and received the respective parental allowance, and is not entitled to or has not received the Christmas allowance;
  • The absence from work was for 30 or more consecutive days during the year in which the Christmas allowance was due;
  • The employer has not paid or has a duty to pay the allowance to the employee (in accordance with the provisions of Código do Trabalho or collective bargaining agreement).

Payment of Christmas allowance to part-time workers

Código do Trabalho does not provide for any exception or special regime for part-time workers.

As such, part-time workers are entitled to receive Christmas allowance in the same way as full-time workers. That is, 100% of their gross monthly salary if they have worked the full calendar year or the amount proportional to the months worked if they have not worked the full calendar year.

Taxation of the Christmas allowance

The Christmas allowance is subject to IRS taxes (according to the tables in force) and Social Security contributions.

In the case of IRS withholding tax, the tax is levied autonomously. In other words, to calculate the tax to be withheld, only the gross amount of the allowance is taken into account and not the cumulative amount of the allowance with the basic monthly salary. This prevents a possible increase in the IRS bracket.

The same happens when the Christmas allowance is paid in installments, and the proportional part of this tax must be withheld at source from each payment.

Back