nowing how to calculate your salary is essential for you to receive a fair and appropriate compensation for the role in question and to know how much you will actually get. In addition, it is also very useful for you to be able to discuss your salary and come out winning.
Here are eight aspects you should consider when you get a salary offer and, above all, how you can optimise your salary in order to earn more. Spoiler alert: we even give you a couple of case studies at the end of this article! Considering the amount of money you can save, we guarantee this is worth reading all the way to the end.
1. Monthly or annual salary
Before starting any salary discussion, it is essential that you clarify whether you are talking about monthly or annual amounts. It is important that all parties are on the same page to avoid possible misunderstandings or confusion.
2. Gross salary vs net salary
It is also crucial to get this point right. The gross base salary is the one provided for in the employment contract; the net salary is what you actually get after the Personal Income Tax (PIT) and Social Security (SS) deductions.
Sometimes, the job offer and/or the employment contract predict some perks that may be exempt from PIT, SS, or both:
- Childcare vouchers and/or education for your children
- Transport card
- Etc.
3. How many payments a year?
In Portugal, the tradition tends to be 14 payments per year, which correspond to 12 monthly salaries plus a supplement for holidays and Christmas. This means that if you are negotiating the gross annual salary, you should divide that amount by 14 to find out how much you can earn at the end of the month.
However, there are already many companies that choose to pay in twelfths, that is, they pay a salary per month, with the holiday and Christmas amounts being paid throughout the year, in 12ths.
Also keep in mind that if you are calculating the salary for a company outside Portugal, you may find companies that pay only 12 times a year.
4. Extra vacation days
You can expect to get your holiday allowance in June and the Christmas allowance in November. The amount to be received must correspond to the amount of a monthly base salary.
According to the Portuguese law, you are entitled to 22 vacation days per year (2 for each month of the year); however, extra vacation days are often negotiated. There are companies that give the day off to employees on their birthday, or offer extra days off, for example.
5. PIT amount
The amount of Personal Income Tax you need to pay is what most influences the calculation of the available net monthly salary. Depending on your level, the percentage of the PIT payable varies, as indicated in art. 99.º-F of the Portuguese Personal Income Tax Code (CIRS). Essentially two factors need to be taken into account:
- Family situation: Are you married or do you live in a de facto union? Does the other person have an income (in this case, your situation corresponds to the option "Casado 2 Titulares", which means "Married - 2 Holders")? Do you have children or other dependents? If so, how many? Do any of the dependents present any disabilities?
- Place of residence: Equally important, for a salary in Portugal, is the place where you live, indicating whether you are living in the mainland, Madeira or the Azores.
Please note that the levels are subject to review. Therefore, you should consult the Portal das Finanças (Portuguese tax office's online portal) to find out the percentage that corresponds to your situation and that will effectively be deducted from you.
6. Social Security amount
Regardless of whether you are self-employed (freelancer) or work for a company, you always have to pay Social Security.
In case you are employed by someone, the percentage of Social Security you have to pay is 11%.
7. The state budget
It is also very important to monitor the political situation in the country. Every year the Government discusses - and approves - a budget and, with that, new discounts, deductions, fees and payments can arise.
That said, keeping track of the approved budget is essential for you to understand the impact it will have on your available net monthly salary!
8. Complementary benefits
In what comes to benefits, it's important you are aware that there are certain kinds of compensation that are deductible and others that are not. For example, performance bonuses should be accounted for. However, other compensations, such as meal allowance, should not.
Therefore, discussing this type of flexible benefits with your employer can be a good way to compose your salary, without having to deduct and pay more fees. And this is precisely Coverflex's proposal to employees. Even more, because companies also benefit from the exemptions, so everyone ends up on the winning side of this system.
We have to agree with you: there is really a lot to consider. Here are some simple examples so you can understand the importance of calculating the salary and realise the difference this can make. For the two simulations below, we used Coverflex's net salary calculator, and assumed that there is the same level of savings when it comes to exemption from PIT and SS.
Anna and Steve are designers at the same company - and both earn €20,000 gross per year. The company pays in twelfths and allocates €2,400 in benefits to each employee.
Anna is single with no dependents except her dog, Molly. Steve is married and lives with his wife, who works in a bank, and with their two children: Emma, who loves dinosaurs, and little Danny, who has recently started taking his first steps.
For Anna, the company benefits translate into €946 euros saved, and the total that Steve saves is €935. Enticing, isn't it? And it's not just employees who win:
Paula has a chain of restaurants, where 100 employees work and where the average annual benefit amount is €500 per employee. This means that, at the end of the year, Paula is able to help her employees and, thanks to the Social Security exemption, save more than 11 thousand euros!
If you want to do a more detailed simulation, Doctor Finança's net salary simulator was created with employees and companies in mind, and allows both to calculate their benefits and net salary.
We told you it would be worth getting to the end of this article, didn't we?
