This is the third in a seven-part series on the self-employed in Portugal
In 2015, there were over 700,000 sole traders in Portugal. Being your own boss has its advantages. However, you need to pay careful attention since the contributions and tax payments are made by you rather than by a company.
In recent years, the self-employed have gained more and more rights. Nowadays, as occurs with salaried employees, these workers have gained entitlement to protection in many situations, such as parenting, illness or unemployment.
But to be eligible for these social benefits, you need to have your Social Security contributions up to date.
Sole traders are entitled to a parental leave when they have children. This is an amount paid in cash to the parent when they are on leave for child birth and is to replace lost employment income. It may be granted either for 120 or 150 days, depending on parent’s choice.
To be entitled to this benefit, Social Security payments must be up to date until the end of the month preceding maternity/paternity leave. Note that if you have contributions in arrears, the grant will be suspended. The beneficiary regains the right to the grant once the contributory situation has been rectified.
The amount you receive depends on the time framework that parents chose. For example, if the mother decides to stay home with the baby for 120 days, she will receive 100% of the reference pay. If she chooses 150 days, she will receive 80%.
To determine the reference wage, Social Security takes into account all the earnings stated in the first six of the prior eight months. For example, for a mother entering maternity leave in November, she will receive grants based on her average earning from March to August.
▪ Allowance for clinical risk during pregnancy
If a pregnancy is at risk, the sole trader is also entitled to a subsidy for risks during pregnancy – support in situations where there is the existence of clinical risk, for mother or for the baby. To be eligible for this grant, a medical declaration is required, indicating the time considered necessary to avoid the risk. Again, the employee needs to have payments to Social Security up to date. In these cases, the worker receives 100% of the reference wage. If this is too low, the law establishes a minimum of €11.18 per day.
▪ Other support in parenting
Self-employed workers are also entitled to other forms of parental support from Social Security, such as the allowance for termination of pregnancy, the extended parental allowance, allowance for adoption and allowance for care or chronic illness. However, they do not qualify for a subsidy for child and grandchild assistance.
▪ Right to sick pay
Self-employed workers are also entitled to sickness benefits. However, there are some peculiarities. The initial payment of sick pay is subject to a waiting period of 30 days. The maximum period of sick pay is one year.
Note also that in the first month of illness, the self-employed have to pay the respective contributions and when they return, are also required to pay the contributions due by the number of days that worked in the month.
By Dennis Swing
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Dennis Swing Greene is Chairman and International Tax Consultant for euroFINESCO s.a.