Employers Caught With Undeclared Staff Now Repay Three Months of Contributions, Down From a Year

A quiet change to Portugal's contribution rules, in force since the start of 2026, has sharply reduced what an employer must pay when inspectors catch them using undeclared workers. Where a company once faced a bill for twelve months of back Social Security contributions, it now owes just three — a shift that critics say softens the penalty for one of the labour market's most persistent abuses even as fines against firms climb.

The rule sits inside the Código Contributivo (Contributions Code), which governs payments to the Segurança Social (Social Security). When a worker is found without a registered contract, the law presumes — unless the employer can prove otherwise — that the job began some months earlier, and the company must settle the missing contributions for that period. Until the end of 2025 that look-back window was twelve months. From 1 January 2026 it is three.

A shrinking penalty

The retroactive period has swung widely in recent years. Before 2023 employers repaid six months of contributions; in 2023 the figure was doubled to twelve; and the current government has now cut it to three. The Ministério do Trabalho, Solidariedade e Segurança Social (Ministry of Labour, Solidarity and Social Security) has justified the reduction by pointing to "inúmeros casos concretos" (numerous concrete cases) in which, it argues, the heavier presumption produced unfair results.

Labour groups and opposition parties see it differently. A shorter look-back means a smaller bill for the offending firm — and, crucially, less protection for the worker. Someone whose employer never registered them will now have only three months of that hidden work recognised in their contributory record, rather than a full year. Because entitlements such as the subsídio de desemprego (unemployment benefit) and sickness pay are built on that record, the change can quietly erode the safety net of the very people the rule is meant to shield.

The reduction survived a parliamentary push to reverse it: the Partido Socialista (Socialist Party) tried to restore the twelve-month sanction applied between 2023 and 2025, but the effort failed to command a majority, leaving the three-month rule intact. The opposition did secure one tightening in exchange — from now on, a new hire must be reported to the Segurança Social by the eve of the day the contract begins, closing a window that had let some employers register staff only after an inspection loomed.

Fines still rising

None of this means the state has gone soft on enforcement overall. Separately, penalties handed to companies for undeclared work have been climbing, as the Autoridade para as Condições do Trabalho (ACT — the Authority for Working Conditions) steps up inspections across construction, hospitality and agriculture, the sectors where off-the-books hiring is most common. The paradox of 2026 is a system that fines more firms while asking each caught employer to repay less.

What This Means for Expats

• Insist on being registered before day one: Your employer must declare you to the Segurança Social by the eve of your start date. If you have not received confirmation, ask — an unregistered job leaves you without contributions, cover or a paper trail.
• Check your record: Log in to the Segurança Social Direta portal to confirm your employer is actually paying in. Gaps now are harder to claw back than before.
• Undeclared work cuts both ways: It may look like more cash today, but it can cost you unemployment benefit, sick pay and pension credit tomorrow — and complicate residence renewals that hinge on proof of lawful, contributory employment.

For a labour market that has long struggled with informality, halving-and-halving-again the price of getting caught is a curious signal. Whether lighter back-bills or tougher inspections win out will show up, in time, in the contribution records of Portugal's most vulnerable workers.