**Companies that violate the rules for reporting employees to Social Security will be penalized with three months of contributions**

Companies that fail to report the hiring of employees to Social Security (SS) will now be penalized with at least three months of contributions, according to an amendment to the Contributory Framework Code of the Social Security Welfare System, published in the Official Gazette this Tuesday. The scheme will become mandatory from 2027, with voluntary and transitional participation between January 1 and December 31, 2026.

“In the event of non-compliance or failure to comply with the reporting obligation, it is presumed that the employee began providing work to the defaulting employer on the first day of the third month prior to the verification of non-compliance. In other words, employers who failed to report the hiring of employees will now be penalized with at least three months of contributions,” explains Pedro Antunes, a labor law specialist lawyer at CCA Law Firm, speaking to ECO.

The government decree-law amending the Contributory Framework Code of the Social Security Welfare System also aims to automate communications between companies and Social Security, thereby eliminating the need to submit the monthly remuneration declaration. “Indeed, hiring communications remain mandatory, but will now be carried out through the Interoperability Services Platform (PSi), integrated into HR and payroll management software,” says Pedro Antunes. “With the exception of employers with fewer than 10 employees, who may continue to use Social Security Direct,” adds Eduardo Castro Marques, founding partner of Dower Law Firm.

In return, however, there are new obligations, namely the communication of the “admission of employees to Social Security Direct before the start of the employment contract, eliminating the possibility of making the communication within the twenty-four hours following the start of activity,” and the “delivery to the employee of proof of the communication of the employment relationship, unless the employee has access to the restricted area of Social Security Direct,” clarifies Castro Marques.

Regarding declarative obligations, the employer must communicate “the employee’s Social Security identification number (NISS); the type of employment contract; the permanent remuneration; and other elements necessary for classifying the employee, namely whether the work will be performed on-site, in a hybrid format, or remotely, which had already been occurring in recent Social Security hiring communications in practice, albeit without the legal backing that it now has,” continues Pedro Antunes.

But the major novelty, according to Pedro Antunes, is “the end of the Monthly Remuneration Declaration (DMR) for Social Security, which will be replaced by an automated process with automatic calculation of contributions by Social Security.” “Companies will only need to confirm or correct amounts, with exceptions (e.g., allowances, bonuses, relevant absences) that are not already in the system,” emphasizes the labor law expert.

On the other hand, the new system will require companies to report, “by the 10th day of the following month, the termination, suspension, or amendment of the employment contract, as well as changes to the amount of permanent remuneration, through Social Security Direct or via the Interoperability Services Platform,” adds Susana Afonso, Partner in Labor Law & Pension Funds at CMS Portugal. This regime will also allow companies to “correct or supplement declared elements within the two months following the month of the declaration or up to four months, upon a duly justified request,” the same specialist adds.

According to the preamble of the respective decree-law, these changes aim to “promote the creation of measures to optimize and simplify communications between contributing entities and the Social Security system, with the objective of reducing administrative and contextual costs.”

“This objective is pursued, in this context, by improving the underlying information systems used to communicate the information necessary for identifying and determining workers’ remuneration. These are essential and decisive for defining beneficiaries’ entitlement to benefits under the system and for calculating contributions. Not only from the perspective of improving information management itself, but also for preventing contributory fraud and evasion, namely through strengthening control mechanisms and more effective processing of the financial information that feeds the system,” states the same diploma signed by the Prime Minister, Luís Montenegro, and the Minister of Labour, Maria do Rosário Palma Ramalho.

The transition to the new regime is voluntary between January 1 and December 31, 2026, but becomes mandatory from 2027. “Those who do not transition will not be able to continue using the old model (Monthly Remuneration Declaration), and the penalties provided for in the Contributory Framework Code may also apply, which may include significant fines,” highlights Pedro Antunes. More importantly, he adds, there is “the risk of blockage in the processing of contributions, delays in tax and labor regularization, with possible loss of access to benefits or compliance certifications, such as the usual and important declaration of ‘no debts’ to Social Security.”