Labour costs in Portugal rose 5.4% in second quarter, topping most of Europe
Portugal's hourly labour costs increased 5.4% in the second quarter, significantly outpacing the eurozone average of 3.1% and placing the country among the highest increases in Europe.
The Eurostat data released this week reveals that while the eurozone and wider European Union saw labour cost growth slow to between 3.1% and 3.2% between April and June, Portugal’s surge was driven by wage increases of 5.4% and non-wage costs climbing 5.2%. This places Portugal well above countries like Luxembourg and Romania (both 1.8%), France and Italy (2.1%), and Malta (2.6%) — the lowest in the bloc.
What drove the increase
Two key factors contributed to the rise. The average cost per worker increased 4.9% across all economic activities, according to national statistics. At the same time, hours effectively worked fell 0.4% per employee — a decline recorded in every sector, with services seeing the largest drop at 0.6%.
The construction sector bore the brunt, with labour costs rising 6.7%, the highest of any industry, followed by services at 5.7% and industry at 5.1%. Within construction, costs per worker jumped 6.5%. The sector continues to face a critical shortage of between 50,000 and 100,000 qualified workers, forcing companies to bid aggressively for talent.
Where Portugal stands in Europe
Portugal’s 5.4% increase is not an average figure — it’s among the highest in Europe. While Bulgaria (9.9%), Lithuania (9.6%), and Croatia (8.9%) saw even steeper rises, Portugal sits firmly in the upper tier. Countries with the lowest increases — Luxembourg, Romania, France, Italy, and Malta — saw growth under 2.6%, highlighting how Portugal’s wage pressures far exceed those of its Western European peers.
Bulgaria and Lithuania’s spikes stem from double-digit minimum wage hikes (12.6% and 11.1%, respectively). Portugal’s minimum wage, now set at 920 euros per month, rose 5.75% from 870 euros in 2025, as part of a multi-year agreement between government and social partners in October 2024.
What workers actually received
The average gross monthly salary reached 1,835 euros in the second quarter, a nominal increase of 5.1% year-on-year. After adjusting for inflation — which hit 3.3% by June — real wages still grew 1.8%, offering modest relief. But with inflation accelerating again in August 2026, many workers are wondering how long this gain will last.
The Bank of Portugal projects full-year remuneration growth of 4.0–4.1%, but with demand outstripping supply in key sectors, upward pressure on salaries is likely to persist.
Why this matters for job seekers and residents
If you’re negotiating a salary in Portugal right now, you’re in a strong position — especially in sectors with acute labour shortages:
• Construction: Salaries are rising fastest, with employers offering premiums to attract skilled workers.
• Tech: Companies compete for talent with packages reaching €180,000 annually for specialized roles.
• Tourism, Healthcare & Retail: Persistent shortages mean employers are raising wages and improving conditions just to fill roles.
• Administrative Services: Recent backdated wage hikes of 6.2% (effective March 2026) signal broader upward pressure.
These trends suggest that for many Portuguese workers, wage growth isn’t just a statistic — it’s real leverage. However, this also translates into higher costs for businesses, which may feed into prices for goods and services, putting continued pressure on household budgets.
Policy changes on the horizon
New EU directives are reshaping the landscape. The Directive on Adequate Minimum Wages requires member states with legal minimums to tie them to productivity and purchasing power, helping ensure increases are sustainable. Meanwhile, the Salary Transparency Directive, fully effective by June 2026, will force employers to publish salary ranges in job ads and disclose gender pay gaps — a move that could reduce arbitrary disparities and strengthen worker bargaining power.
At the national level, reforms to the labour code are underway. Discussions focus on working time, fixed-term contracts, and collective bargaining rules. Additionally, an interim adjustment in September 2026 raised minimum rates for uncovered administrative workers by 6.2%, retroactive to March 1 — another sign the government is responding to labour market pressures.
Sectoral pressures continue
Technology firms, expanding 15% in 2025 with job growth of 25%, are locked in a bidding war for talent. Meanwhile, tourism and healthcare — pillars of the Portuguese economy — struggle to retain workers, many of whom are lured by better conditions elsewhere in Europe. Wholesale, retail, and administrative services also face recruitment challenges in 2026, underscoring a national trend: if you’re willing to work, you now have more power to negotiate than ever before.
