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Unfortunately, false self-employment (commonly referred to in Portugal as falsos recibos verdes) remains a relatively common issue in the labour market. This illegal practice is detrimental to both workers and employers.

In many cases, businesses resort to false self-employment to reduce employment costs, particularly those associated with Social Security contributions and IRS (Personal Income Tax) withholding obligations.

Although these workers are officially registered as self-employed and issue recibos verdes (green receipts), they often perform their duties under the same conditions as regular employees, without benefiting from the legal protection afforded by an employment contract.

As mentioned above, this unlawful practice is typically used by employers as a way of lowering labour costs by avoiding mandatory Social Security contributions and payroll tax withholding.

The characteristics that may indicate a situation of false self-employment are set out in Article 12 of Law No. 7/2009 of 12 February (Portuguese Labour Code).

These include situations where:

• the worker performs their duties at premises belonging to, or designated by, the company (such as an office, factory, or warehouse); 
• the equipment and work tools used by the worker belong to the company rather than to the worker. 

Below, we explain how to identify false self-employment and what you can do if you believe it is occurring.

Everything You Need to Know About False Self-Employment

The term false self-employment refers to situations where an individual is formally engaged as a self-employed professional but, in reality, works under conditions that legally correspond to an employment relationship.

In practice, the individual is registered with the Portuguese Tax Authority as self-employed and issues recibos verdes, yet works as an integral part of a company and is economically dependent on it.

Common indicators include:

• the worker follows working hours established by the company, including fixed start and finish times; 
• payment is made at regular intervals and in a fixed amount, rather than being linked to individual services provided; 
• the worker performs management or supervisory duties within the company’s organisational structure. 

Under Portuguese law, the existence of just one of these indicators may be sufficient to establish a presumption that the relationship is, in fact, one of employment rather than genuine self-employment.

Legislation Protecting Self-Employed Workers

Law No. 63/2013, which entered into force on 1 September 2013, was introduced specifically to combat false self-employment.

Responsibility for enforcing this legislation lies with the Authority for Working Conditions (Autoridade para as Condições do Trabalho – ACT).

Where there are indications that a worker has been incorrectly classified as self-employed, the ACT has the authority to investigate the situation and seek to regularise the employment relationship.

As a result, the worker does not necessarily have to take an active role throughout the entire process, as the ACT may initiate and conduct the necessary proceedings.

How to Report False Self-Employment

If you believe you are working under a false self-employment arrangement—or if you know someone who is—you may report the situation.

Proceedings may be initiated by the ACT on its own initiative, following a complaint submitted by any individual or organization to the ACT or the Public Prosecutor’s Office. Another possibility is following a referral from the Public Prosecutor’s Office to the ACT. 

If the ACT concludes that there are sufficient indications of false self-employment, it will issue an official notice requiring the employer either to regularize the employment relationship or to present its defense.

The employer is generally given 10 days to respond.

Depending on the outcome of the investigation, the company may be required to enter into a formal employment contract with the worker.

In addition, the employer may face administrative fines ranging from 620 € to 60,000 €, depending on the seriousness of the infringement.

Conclusions

If you are a self-employed professional, it is important to understand your legal rights and ensure that your working arrangements genuinely reflect an independent professional relationship.

Likewise, if you are an employer, you should avoid engaging workers under false self-employment arrangements, as this practice is unlawful and may result in significant legal and financial consequences.