Portugal’s Minimum Wage in 2025: Understanding the Increase and Its Implications
The 2025 Increase
In 2025, the Guaranteed Monthly Minimum Remuneration (RMMG) will rise again. The minimum wage will increase to €850, representing approximately a 6% increase (an additional €50 compared to the current €820). This article explains how minimum wage increases are determined and their implications for your financial life.
How Is the Minimum Wage Increase Decided?
The existence of a minimum wage is established in Article 273 of the Labor Code. The government updates it annually after consulting with social partners, employer confederations, and labor unions.
According to the law, updates must be appropriate to income and price policies and consider several factors, including:
- Workers’ needs
- Cost of living increases
- Productivity evolution
In 2023, the mainland minimum wage had already increased to €760, a €55 increase from the previous year. In the Autonomous Region of Madeira, it rose to €785, and in the Azores to €798. However, in 2024, this increment exceeded 7%, the largest increase to date.
Impact of the Minimum Wage Increase
The minimum wage increase affects not only those earning this amount but also serves as a reference point for other situations:
Key Areas of Impact:
- Collective dismissal compensation: The monthly base salary used to calculate compensation cannot exceed 20 minimum wages, while total compensation cannot exceed 240 minimum wages
- Wage Guarantee Fund maximum compensation equals three national minimum wages monthly
- Salary attachment thresholds change with minimum wage increases. The minimum wage amount is considered unattachable, except for alimony
- Adjusted Gross Annual Income (RABC) calculations, used for social benefits, Social Security payments, subsidies, and tax deductions, change according to the minimum wage
Tax and Social Security Deductions
A worker earning minimum wage:
- Pays no income tax (IRS) and is exempt from withholding tax
- May need to pay IRS if their meal allowance exceeds €6 (when paid in cash) or €9.60 (when paid via meal card)
- Doesn’t need to file an income tax return (though they may choose to) if they have no other income
- Must contribute 11% to Social Security
Examples of take-home pay:
- In 2023 (€760): After the €83.60 Social Security contribution, net monthly income was €676.40
- In 2024: Net monthly income is €729.80
Inflation’s Effect on Wages (2023 and 2024)
In 2022, inflation reached record levels for the past three decades, with an annual rate of 7.8%, matching the percentage increase in minimum wage from 2022 to 2023. This price increase effectively nullifies the potential benefits of minimum wage increases for Portuguese citizens. In 2023, for the first time in 10 years, the year-over-year salary value didn’t exceed inflation.
Ten-Year Evolution and Future Projections
The national minimum wage has followed an upward trajectory, as shown in the historical data. The Medium-Term Agreement for Improving Income, Wages, and Competitiveness aims to reach €900 by 2026. Recent optimizations project reaching €1,080 by 2028, with two intermediate stages:
- 2026: €920
- 2027: €970
Historical Progression:
2014: €485 2015: €505 2016: €530 2017: €557 2018: €580 2019: €600 2020: €635 2021: €665 2022: €705 2023: €760 2024: €820
This comprehensive overview demonstrates Portugal’s commitment to progressively increasing the minimum wage while considering economic factors and worker needs. The planned increases through 2028 represent significant steps toward improving workers’ living standards, though these must be considered alongside inflation and cost of living changes.
