The national minimum wage in Portugal is a central topic in economic and social debate, with direct repercussions for workers and businesses. For 2027, expectations point to an increase from €920 to €970, according to the Tripartite Agreement on Wage Appreciation 2025-2028, signed in October 2024. However, the scenario is not yet finalised, with the Government admitting the possibility of exceeding the agreed amount, and the Prime Minister not ruling out the target of €1,000. Employers' confederations, in turn, advocate for maintaining the €970 figure, warning of the impacts on competitiveness and labour costs and payroll processing. The final decision will be formalised through a decree-law by December 2026, following the presentation of the State Budget for 2027 in October of the same year, with entry into force on 1 January 2027. This article delves into the scenarios, impacts, and necessary preparations for this wage adjustment.

By Hugo Ribeiro, Certified Accountant OCC nº 64356 · HVR Business Consulting · August 2026

The National Minimum Wage: Trajectory and Expectations for 2027

The National Minimum Wage (SMN), officially designated as the Guaranteed Minimum Monthly Remuneration (RMMG), is a fundamental pillar of social and economic policy in Portugal. Its evolution has been subject to social concertation, aiming to improve the living conditions of lower-income workers and promote social cohesion. For the period 2025-2028, a tripartite agreement was established outlining the growth trajectory of the SMN, providing some predictability to the labour market and businesses.

The Social Concertation Agreement and Projected Values

The social concertation agreement, concluded in October 2024 between the Government, employers' confederations, and trade union structures, established a roadmap for the appreciation of the minimum wage. This agreement aims to ensure sustained evolution, taking into account inflation, economic growth, and business competitiveness. The following table summarises the agreed values:

YearAgreed ValueStatus2025€870Fulfilled2026€920In force2027€970Projected — decision in OE20272028€1,020Projected

As projected, 2027 points to an SMN of €970. However, public debate and statements from Government members, including the Prime Minister, have introduced the possibility of a higher value, with the hypothesis of €1,000 already in 2027 being floated. This openness to a higher value reflects, on the one hand, the political ambition to strengthen purchasing power and, on the other, pressure from some trade unions advocating for more robust increases.

The Position of Social Partners and Economists' Warnings

Employers' confederations have expressed their preference for strict adherence to the established agreement, arguing that deviating from €970 could compromise the sustainability of businesses, especially small and medium-sized enterprises (SMEs), which represent the majority of the Portuguese business fabric. Their arguments focus on the need for predictability and the capacity of businesses to absorb costs, many of which are still grappling with post-pandemic economic challenges and inflationary pressure.

Economists have warned of the phenomenon of "wage compression," which occurs when the SMN grows at a significantly faster rate than average and skilled wages. This compression can disincentivise career progression, qualification, and generate demotivation among workers earning slightly above the minimum wage, seeing their wage differential decrease. Maintaining fair wage differentials is crucial for valuing merit and experience.

Until the publication of the decree-law formalising the SMN value for 2027, the value of €970 is the only one with formal support and should be considered as the basis for initial business planning.

Impact on Workers' Net Salary: Scenarios for 2027

The increase in the minimum wage has a direct and immediate impact on workers' disposable income. It is essential to analyse not only the gross value but also the net value that effectively reaches the worker's pocket, considering mandatory Social Security contributions and Income Tax (IRS) withholding at source.

Calculation of Net Salary with €970

Under current taxation and contribution rules, a worker earning the minimum wage in Portugal benefits from a specific regime that, in most cases, exempts them from IRS withholding at source. The main deduction is for Social Security contributions.

According to the Code of Contributory Regimes of the Social Security System, approved by Decree-Law No. 110/2009, of 16 September, the contribution rate for employed workers to Social Security is 11% of the gross remuneration.

• Projected gross monthly salary: €970.00
• Social Security contribution (11%): €970.00 × 0.11 = €106.70
• IRS withholding at source: €0.00 (assuming that the exemption rules for the SMN are maintained, which has been common practice). The IRS withholding tables for 2027 will only be published in December 2026.
• Estimated net salary: €970.00 - €106.70 = €863.30/month

Considering payment over 14 months (12 months of basic salary + holiday allowance + Christmas bonus), the estimated annual net income would be €12,086.20 (€863.30 × 14 months).

It is important to note that, historically, the minimum wage has benefited from an exemption from IRS withholding at source, a fiscal policy measure to ensure that the disposable income of these workers is not further penalised. However, this exemption depends on the annual approval of the IRS withholding tables, which are published at the end of the year preceding their application.

For a detailed comparison, consult our article on the minimum wage 2026: €920 gross = €818.80 net.

Practical Example: SMN 2026 vs. SMN 2027 Comparison (€970 scenario)

Let's analyse the real increase in the net income of a worker earning the SMN.

• In 2026:
• Gross Salary: €920.00
• Social Security (11%): €101.20
• IRS: €0.00
• Net Salary: €818.80
• In 2027 (€970 scenario):
• Gross Salary: €970.00
• Social Security (11%): €106.70
• IRS: €0.00
• Net Salary: €863.30

Monthly Net Increase: €863.30 - €818.80 = €44.50

This increase, although significant for household budgets, should be analysed in the context of the evolution of the cost of living and inflation. The worker's effective purchasing power depends on the inflation rate recorded in 2027.

The Cost of a Minimum Wage Worker for Businesses in 2027

For businesses, the cost of a worker goes far beyond the gross salary paid. It includes Social Security contributions, occupational accident insurance, meal allowance, and, in some cases, other benefits or charges defined by Collective Labour Agreements (CCT).

Components of the Total Worker Cost

1. Gross Salary: The agreed basic value, which serves as the basis for calculating other charges.
2. Single Social Tax (TSU) payable by the employer: According to Decree-Law No. 110/2009, the standard Social Security contribution rate payable by the employer is 23.75% of the gross remuneration.
3. Occupational Accident Insurance: Mandatory by law, as per Decree-Law No. 98/2009, of 4 September, which regulates the regime for compensation for occupational accidents and professional diseases. The cost varies depending on the economic activity and the associated risk level, calculated on the gross remuneration. For simulation purposes, we can consider an average rate of 1%.
4. Meal Allowance: Although not mandatory by law in most sectors, it is common practice and, in many cases, imposed by CCT. The IRS and Social Security exemption values are updated annually. For 2027, we can assume a value of €6.15/day (in cash) or €10.455/day (on a meal card) — the 2026 limits under Ordinance 51-B/2026/1 and art. 2(3)(b)(2) of the IRS Code — as a reference, although the exact value depends on legal updates.
5. Other Charges: May include benefits such as health insurance, professional training, or others provided for in specific sectoral CCTs.

Calculation of Annual Cost for the Company (€970 Scenario)

Considering a scenario of €970 for the SMN in 2027, the following table details the increase in costs for the company, compared to 2026 (SMN of €920).

Component2026 (€920)2027 (€970)VariationGross Monthly Salary (×14)€920.00€970.00+€50.00Employer TSU (23.75%)€218.50€230.38+€11.88Monthly Cost (Salary + TSU)€1,138.50€1,200.38+€61.88Annual Cost (×14 months)€15,939.00€16,805.32+€866.32 (+5.4%)Occupational Accident Insurance (e.g., 1% of 14 salaries)€128.80€135.80+€7.00Meal Allowance (22 days/month × 11 months × €6.15/day)€1,488.30€1,488.30€0.00Estimated Total Annual Cost (with Meal Allow.)€17,556.10€18,429.42+€873.32

Note: The meal allowance is considered for 11 months, as it is generally not paid during holiday months. The value of €6.15/day (Ordinance 51-B/2026/1) is a reference and may be adjusted according to company policy and future updates to exemption limits.

€1,000 Scenario: A Significant Additional Cost

Should the SMN reach €1,000 in 2027, the impact on business costs would be even more pronounced:

• Gross Monthly Salary: €1,000.00
• Employer TSU (23.75%): €237.50
• Monthly Cost (Salary + TSU): €1,237.50
• Annual Cost (×14 months): €17,325.00
• Occupational Accident Insurance (1% of 14 salaries): €140.00
• Meal Allowance (22 days/month × 11 months × €6.15/day, Ordinance 51-B/2026/1): €1,488.30
• Estimated Total Annual Cost: €18,953.30

In a €1,000 scenario, the annual cost per minimum wage worker would rise to approximately €18,953, representing an increase of €1,397 compared to 2026. This increase in costs can be particularly challenging for labour-intensive sectors, such as catering, cleaning, retail, and agriculture, which often operate with narrow margins.

For a more precise analysis tailored to your reality, use our hiring cost simulator and review the cost of a minimum wage worker in 2026.

Adaptation and Planning Strategies for Businesses

Given the imminent rise in the minimum wage, businesses must adopt a proactive approach to their strategic and financial planning. Anticipation and preparation are crucial to mitigate negative impacts and ensure business sustainability.

1. Budgeting and Financial Scenarios

The first step is to review and update budgets for 2027. It is prudent to work with at least two scenarios:

• Base Scenario: Consider an SMN of €970, as per the tripartite agreement. This should be the starting point for most projections.
• Contingency (or Pessimistic) Scenario: Include the possibility of the SMN reaching €1,000. This scenario allows for assessing the maximum potential impact and preparing contingency measures.

This analysis should cover not only direct wage costs but also indirect costs, such as TSU, insurance, and potentially the impact on the remuneration of other employees earning slightly above the minimum wage who may require adjustments to maintain differentials.

2. Management of Wage Scales and Compression

The increase in the SMN has a cascading effect on wage scales. Companies currently paying salaries between €950 and €1,050 will experience significant wage compression. To maintain employee motivation and prevent the devaluation of roles requiring higher qualifications or responsibility, it is essential to anticipate wage adjustments that preserve differentials.

The absence of wage differentiation can lead to demotivation, talent loss, and difficulty in attracting new employees for more demanding roles. Human resources management should, from now on, analyse the internal wage structure and plan for increases that go beyond the legal minimum for workers already above that threshold.

3. Analysis of Collective Labour Agreements (CCTs)

Many sectors of activity in Portugal are covered by Collective Labour Agreements (CCTs) that establish specific minimum wages for various professional categories, often above the SMN. The rise in the SMN may trigger the renegotiation of these CCTs, as the values provided therein may fall below or very close to the new SMN.

Companies must actively monitor the negotiations of the CCTs applicable to their sector and anticipate any potential wage increases that may arise. Non-compliance with CCTs can result in fines and labour disputes.

4. Review of Prices and Profit Margins

For labour-intensive sectors, such as catering, cleaning, security, retail, and support services, the rise in labour costs represents a significant challenge to their profit margins. Absorbing these costs entirely may be unsustainable.

It is crucial for businesses to analyse their cost structure and assess the need to adjust the prices of their products or services. This review should be planned in advance, rather than being a last-minute reaction, to allow for effective communication with customers and a smooth transition. Innovation, process optimisation, and the pursuit of greater efficiency can also be complementary strategies to mitigate the impact of costs.

If you need a personalised scenario for your payroll and support in impact analysis, contact us. This is the work we do as an external CFO for dozens of SMEs, helping them navigate these challenges.

Legal and Tax Framework of the Minimum Wage

The National Minimum Wage is governed by a set of laws and regulations that determine its fixation and its fiscal and contributory impacts.

Fixation of the Minimum Wage

The annual fixation of the SMN is the responsibility of the Government, after consultation with social partners within the framework of Social Concertation. It is generally established by decree-law, effective from 1 January each year. The Labour Code, approved by Law No. 7/2009, of 12 February, in its Article 273, establishes the Guaranteed Minimum Monthly Remuneration and the rules for its determination.

Article 273 of the Labour Code: "The guaranteed minimum monthly remuneration (RMMG) is determined annually by specific legislation, after consulting the Permanent Commission for Social Concertation."

Tax Implications (IRS)

Regarding Personal Income Tax (IRS), the taxation of dependent employment income is regulated by the IRS Code (CIRS). Although the SMN is, in practice, frequently exempt from withholding at source, this does not mean that the income is exempt from tax. The exemption from withholding at source merely aims to ensure that the worker receives a larger net amount throughout the year, avoiding having to wait for a refund the following year.

The exemption from withholding at source is usually guaranteed by defining limits in the IRS withholding tables, published annually by order of the Government member responsible for finance. These tables are prepared so that gross annual income up to the SMN value (multiplied by 14 months) falls, in most cases, below the tax exemption limit or the threshold from which withholding begins.

For example, Article 71 of the CIRS, which deals with withholding at source, and the annual orders approving the withholding tables, are the legal instruments that determine this practice.

Contributory Implications (Social Security)

Social Security contributions are governed by the Code of Contributory Regimes of the Social Security System. The contribution rates are as follows:

• Employed worker: 11%
• Employer entity: 23.75%

These rates apply to the worker's gross remuneration, with some exceptions and limits. The SMN value serves as the basis for calculating these contributions, for both the worker and the company.

It is important to note that Article 47 of the Code of Contributory Regimes establishes the contributory base, which corresponds to the totality of remuneration received by virtue of the employment relationship, including the SMN.

Common Mistakes to Avoid in Minimum Wage Management

Managing the minimum wage and its impacts is complex and requires attention to detail. Below, we list some of the most common mistakes that businesses and workers should avoid.

1. Not anticipating the increase in the annual budget: Many companies wait for the official publication of the SMN to adjust their budgets. This reactive approach can lead to unexpected financial imbalances. It is crucial to budget based on probable and contingency scenarios.
2. Ignoring wage compression: Focusing only on the minimum wage adjustment and forgetting about employees earning slightly above it can lead to demotivation, turnover, and difficulties in talent retention. It is essential to review the entire wage structure.
3. Being unaware of CCT clauses: Collective Labour Agreements can establish sectoral minimum wages or professional categories with values higher than the SMN. Not being aware of these obligations can result in non-compliance and fines.
4. Not communicating adjustments to employees: Transparency is fundamental. Workers should be informed about wage adjustments, new net values, and the impact on their conditions. Lack of communication can generate uncertainty and discontent.
5. Not reviewing product/service prices: Especially in labour-intensive sectors, absorbing the entire increase in labour costs can be unsustainable. Failure to adjust prices strategically and in a timely manner can compromise margins and business viability.
6. Confusing exemption from withholding at source with tax exemption: Although the SMN is generally exempt from IRS withholding at source, the annual income remains subject to tax. The withholding exemption is a cash flow measure that does not waive the obligation to file an IRS return the following year.
7. Not considering the impact on occupational accident insurance: The occupational accident insurance premium is calculated based on the wage bill. An increase in the SMN means an increase in the wage bill and, consequently, an increase in the insurance cost, which should be considered in planning.

Frequently Asked Questions about the Minimum Wage 2027

What will the minimum wage be in 2027?

The social concertation agreement foresees €970. The Government has publicly admitted the possibility of exceeding this value, with the Prime Minister not ruling out €1,000. However, the final value will only be fixed by decree-law at the end of 2026, effective from 1 January 2027. For planning purposes, it is prudent to consider €970 as the base scenario and €1,000 as a contingency scenario.

When is the final decision on the SMN 2027 made?

The final decision is formalised after the presentation of the State Budget Proposal for 2027 (expected for October 2026) and, typically, through a decree-law published in November/December 2026. This process includes consultation with Social Concertation, where social partners (trade unions and employers' confederations) express their positions.

What is the net amount of a €970 salary in 2027?

Under current Social Security contribution rules (11%) and assuming the maintenance of the IRS withholding tax exemption for the minimum wage, a gross salary of €970 would result in an estimated net value of €863.30 per month (€970 - €106.70 for Social Security). The IRS withholding tables for 2027 will be published in December 2026.

How much does a minimum wage worker cost a company in 2027?

Considering an SMN of €970, the monthly cost for the company, including the TSU of 23.75%, would be approximately €1,200.38 (€970 + €230.38 for TSU). Annually, over 14 months, the direct cost would amount to €16,805.32. To this amount are added charges such as occupational accident insurance and meal allowance, raising the estimated total annual cost to around €18,429.42.

Can the minimum wage really reach €1,000 in 2027?

Yes, it is a real possibility, although it is not the agreed value. The Government has shown openness to this hypothesis, while employers' confederations oppose it, advocating for compliance with the agreement that foresees €970. Confirmation will depend on final negotiations and the governmental decision, to be formalised at the end of 2026.

What impact does the SMN increase have on workers earning slightly above the minimum?

The increase in the SMN can lead to "wage compression," i.e., a decrease in the difference between the minimum wage and the salaries of workers with more experience or qualifications. To maintain motivation and differentiation, many companies will also have to adjust the salaries of these employees, which implies careful planning and a greater burden on the payroll.

Conclusion and Final Recommendations

The evolution of the National Minimum Wage for 2027, with a strong probability of being set at €970 or even €1,000, represents a significant milestone for the Portuguese economy. For workers, it translates into an increase in purchasing power, essential to cope with the cost of living. For businesses, it implies an increase in labour costs, requiring careful and strategic management.

It is imperative that businesses, especially SMEs, start preparing for these scenarios now. Proactivity in financial planning, reviewing wage scales, paying attention to Collective Labour Agreements, and assessing the need to adjust prices are crucial steps to ensure the sustainability and competitiveness of businesses. The ability to anticipate and adapt to these changes will be a determining factor for success in 2027.

HVR Business Consulting is prepared to support your company in this adaptation process. With a team of certified accountants and experienced consultants, we can help you to:

• Conduct a detailed impact analysis on your payroll.
• Develop budgetary and financial scenarios for 2027.
• Optimise your cost structure and identify efficiency opportunities.
• Ensure compliance with all legal and tax obligations.

Don't wait for the final decision. Contact us today for a consultation and prepare your company for the challenges and opportunities of 2027.

Related Content and Useful Tools

• Minimum wage 2026: what is the net amount
• Real cost of a minimum wage worker
• Hiring cost simulator
• Meal allowance 2026: limits and rules
• Payroll Processing and Human Resources Management Service

Sources and Legal References

• Labour Code, approved by Law No. 7/2009, of 12 February (Article 273). Available at: Diário da República Eletrónico
• Personal Income Tax Code (CIRS). Available at: Portal das Finanças
• Code of Contributory Regimes of the Social Security System, approved by Decree-Law No. 110/2009, of 16 September (Article 47). Available at: Diário da República Eletrónico
• Regime for Compensation for Occupational Accidents and Professional Diseases, approved by Decree-Law No. 98/2009, of 4 September. Available at: Diário da República Eletrónico
• Tripartite Agreement on Wage Appreciation 2025-2028 (social concertation document of October 2024).
• IRS Withholding Tax Tables (Annual orders from the Secretary of State for Tax Affairs).