How are the 14 Pay Periods managed in Portugal?

In Portugal, employees are entitled to 14 mandatory payments each year. This system includes the standard 12 monthly salaries plus two additional payments, commonly referred to as the "holiday" and "Christmas" bonuses. Understanding how these payments work and how Horizons manages them can help both employees and employers navigate payroll more effectively.

Overview of the 14 Pay Periods

12 Monthly Payments

These are the standard salaries paid out over the year, typically from January to December. Each payment represents the employee's regular base salary before any deductions, such as taxes or social security contributions.

2 Extra Payments

Holiday Bonus (July): This payment is traditionally made in July and is equivalent to one month's salary. It helps employees cover expenses during the summer holiday season.
Christmas Bonus (December): This payment is made in December and is also equivalent to one month's salary, assisting with holiday expenses.

How Horizons Handles the 14 Pay Periods

At Horizons, we aim to simplify payroll by prorating these additional payments throughout the year. Instead of disbursing the holiday and Christmas bonuses as lump sums in July and December, we distribute them evenly across all 12 monthly paychecks. Here’s how it works:

Proration Across 12 Months

The holiday and Christmas bonuses are divided across the 12 monthly salaries. This approach ensures that each month's salary includes a portion of both bonuses, resulting in a consistent income throughout the year.

Regular Base Pay

The gross salary listed in the employment contract is divided into 12 equal installments. Each installment includes a fraction of the holiday and Christmas bonuses, so employees receive a steady and predictable paycheck each month.

Example Calculation

Consider an employee with a gross annual salary of €28,000. Traditionally, this would be divided into 12 monthly payments of €2,000, plus two additional payments of €2,000 each in July and December.

At Horizons, we take the total annual salary of €28,000 and divide it by 14, resulting in a base amount of €2,000 per payment. This amount is then used to calculate the monthly salary, including the prorated holiday and Christmas bonuses. Therefore, the monthly salary would be €2,333.33, encompassing both the base salary and the prorated bonuses.

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Portugal