The Portuguese labour market, like most other EU markets, remains relatively rigid when compared with benchmark countries.

In 2009, a new Labour Code was approved that simplified labour legislation and paved the way for significant reforms. In the second decade of the century, reforms were introduced that reduced the compensation due for collective dismissal for new employees, which ranges from 30 to 14 days of basic and daily pay for each year of seniority.

Other aspects of the legislation have been revised since the adoption of a new Labour Code in 2009, which adopted more employer-friendly legislation as regards the organisation of its workforce. As an example, working schedules and the transfer of the workplace may now be managed in a more flexible way.

The 2009 Labour Code has been subject to changes improving labour standards, particularly as regards the work organisation. Working hours can be changed with a certain degree of flexibility by the employer without increasing labour costs. The Labour Code allows the employer to unilaterally change the workplace (geographical mobility) as well as the functions exercised by the employee (functional mobility).

In April 2023 an amendment to the Labour Code was approved covering a wide number of matters, including, among others, the employment status of digital platforms employees, parental leave, fixed-term employment contracts, teleworking, the outsourcing of services and collective bargaining rules.

According to data provided by Eurostat, in January 2024, the unemployment rate (seasonally adjusted) estimated for Portugal was 6.5 per cent, remaining constant in relation to the percentage recorded in the previous month (6.5 per cent). For the Eurozone, Eurostat estimates that the unemployment rate in January 2024 stood at 6.4 per cent, down 0.1 p.p. on the previous month (6.5 per cent) and down 0.2 p.p. year-on-year (6.6 per cent). Portugal is the fifth European Union (EU) member state with the highest percentage of workers working long hours (9.0 per cent), with the average in Europe being 7.1 per cent in 2023.

The average level of qualification of Portuguese employees with a bachelor's degree, master's degree or doctorate degree has been increasing.

Hiring in Portugal is subject to the mandatory rules and statutory limits set out in the law on several matters, such as remuneration, working hours, vacation rights or duration of contracts.

The contract duration, working hours, remuneration, leave entitlement, absences, and termination of contracts are the most important matters to be agreed upon by the parties, albeit subject to mandatory rules set out in the Portuguese Labour Code.

In general, employment contracts do not need to be written. The law only requires a written document for some specific types of contracts, such as fixed-term contracts, temporary contracts, part-time contracts, secondment contracts and contracts with foreign employees.

The employer has the duty to inform employees of the relevant aspects of the employment relationship, including, among others:

• Place of work;
• Employee’s job position;
• Brief description of employee’s tasks;
• Effective date of the employment contract;
• Prior termination notice; and
• Collective bargaining agreements, if any.

The information on the employee’s identification, place of work, frequency and form of payment and the start of the activity must be provided in writing by the employer and delivered to the employee by the seventh day following the contract execution. The remaining information may be communicated to the employee within one month from the start of the contract execution.

The terms of the employment relationship are also subject to collective bargaining agreements, when applicable, and to the practices between the parties.

Since 1 January 2024, the minimum monthly wage in Portugal is €820. Salaries must be paid on a regular and permanent basis and may be fixed, variable or mixed, including fixed and variable components, which may be linked to productivity, commission based on sales or other objective and determinable factors.

In addition to the monthly salary, employees are entitled to receive a Christmas bonus equal to one month of remuneration payable until 15 December of each year and a holiday bonus equal to one month of remuneration payable before the holiday period.

The maximum regular working period is eight hours per day and 40 hours per week. Employees are entitled to a minimum rest period of eleven consecutive hours between two successive daily work periods, as well as to one day of rest per week.

An additional weekly rest (in all or in certain weeks of the year) may also be given other than the rest day required by law.

Employers and trade unions may agree to increase the work schedule up to 12 hours per day and 60 per week, provided the work schedule is reduced in other periods so that at the end of a reference period up to 12 months, the average working hours is equal to 8 hours per day and 40 hours per week.

Employees are entitled to 22 business days of paid holiday per year. Employees are also entitled to 13 national public holidays. Under the collective bargaining agreements, employers may be obliged to grant two optional public holidays.

The maximum regular working period is forty hours per week, eight hours per day.

Employees are entitled to a minimum rest period of eleven consecutive hours between two successive daily work periods, as well as to one day of rest per week. An additional half or full day of rest (in all or in certain weeks of the year) may also be given in addition to the rest day required by law.
Insofar as the statutory rules above are not contravened, collective bargaining agreements may provide alternative working time regimes.

Work exceeding the limits above is deemed overtime. Overtime gives the employee the right to additional pay and, in certain circumstances, to an additional rest period. Employees’ overtime is subject to certain limits imposed by the Portuguese Labour Code.

Employees are entitled to a minimum monthly salary set by law each year. Collective bargaining agreements may also determine a minimum remuneration for different jobs and professions, which can never be less than the minimum monthly remuneration set by the Portuguese Government.

The remuneration must be paid on a regular and permanent basis and may be fixed, variable or mixed (comprising fixed and variable components).

In each year, employees are entitled to receive twelve monthly remunerations. In addition, employees are also entitled to receive:

• A Christmas bonus equal to one-month remuneration payable until 15 December of each year; and
• A holiday bonus equal to one-month remuneration payable before the holiday period.

The amount of both Christmas and holiday bonuses is proportional to the time of service rendered by the employee in that calendar year (i) in the year of hiring of the employee, (ii) in the year of termination of the contract of employment and (iii) in the event of suspension of the contract of employment, unless the suspension is due and determined by employer’s reasons.

Teleworking is the provision of work under the legal subordination of the employee to an employer at a location not determined by the employer, using new information and communication technologies.

The teleworking scheme must be the subject of a mandatory written agreement between the parties and may be included in the initial contract or be separated from it.

The agreement must include, in particular, the identification of the parties, the frequency and method of personal contact, the working hours, the place where the employee will usually work and the employee's salary, and the additional and complementary benefits must be specified. The change of place of work set out in the agreement can be altered by written agreement.

The employment contract and the applicable collective labour regulation instrument must establish the amount of compensation due for additional expenses when the agreement for teleworking is concluded.
The teleworking agreement may be established for either a fixed or an indefinite duration.

In the first case, the duration cannot exceed six months and is automatically renewed for equal periods unless one of the parties declares in writing that they do not wish to renew up to 15 days before the deadline; in the second situation (permanent contracts), either party can do so by giving 60 days written notice.

In any situation (agreement for a fixed or indefinite duration), during the first 30 days of performance, either party may terminate the agreement.

Once the teleworking period has come to an end, within the scope of an employment contract for an indefinite duration, or whose term has not yet been reached, the employee returns to work in person, without prejudice to their category, seniority and any other rights recognised for in-person employees with identical duties and working hours.

The employer must be responsible for the equipment and systems needed to carry out teleworking. The written agreement must state how this duty is to be fulfilled if the employer provides it directly to the employee or if the employee acquires it.

The payment of all additional expenses, proven by the employee, that result from the acquisition of a computer or other equipment or systems necessary to carry out the work, including the additional costs of energy and communications, as well as the maintenance of such equipment and systems, must be fully paid or reimbursed by the employer.

Regarding the formula for calculating expenses, only the need to make a "comparison based on the employee's expenses in the same month in the last year prior to the application of this agreement" is mentioned.

In the event of a transfer of business, all of the employer’s rights and obligations under the employment contracts are automatically transferred to the new employer. During the two years following the transfer, the former employer will remain liable, jointly and severally with the new employer, for all the obligations that became due before the date of the transfer of business. The transfer of an undertaking cannot itself be a reason for the dismissal of employees.

The termination of employment contracts can only happen under the terms and conditions set forth in the Labour Code, and dismissals without just cause are prohibited. Employment contracts may only be terminated in the following cases:

• Expiration of term contracts;
• Unilateral termination during the probationary period;
• Collective dismissal;
• Redundancy;
• Dismissal for ineptitude; and
• Dismissal due to a fact attributable to the employee.

Employers and employees are also free to terminate the employment contract by mutual agreement at any time.

EXPIRATION OF TERM CONTRACTS

The employment contracts expire when it expires, upon prior notice to the employee, which must be sent:

• In fixed-term contracts, by the employer or the employee, 15 or eight days before the contract expires, respectively;
• In unfixed-term contracts, seven, 30 or 60 days before the contract expires, as the contract lasted for up to six months, from six months to two years or for a longer period.

Upon the termination of the employment contract, the employee is entitled to receive the outstanding credits, if any, and the compensation.

TERMINATION OF THE PERMANENT EMPLOYMENT CONTRACT FOR IMPOSSIBILITY

Permanent employment contracts terminate due to the supervening, absolute and definitive impossibility of the employee providing her/his work or of the employer receiving or renewing the employee due to old age or disability.

REVOCATION BY AGREEMENT

The employer and the employee can terminate the employment contract by agreement setting out the terms and conditions of the termination. The revocation does not include any severance compensation.

TERMINATION BY THE EMPLOYEE

The employee can terminate the contract with just cause in the cases specified in the law, in which case she/he will be entitled to receive compensation.

Regardless of the existence of just cause, the employee can terminate the employment contract with prior notice of 30 or 60 days, depending on whether the contract lasted for less than or more than two years, respectively.

COLLECTIVE DISMISSAL

Collective dismissal is possible when the employer intends to dismiss a minimum of two employees (in companies with less than 50 employees) or five employees (in companies with 50 or more employees). A collective dismissal procedure does not necessarily imply the full and permanent closing of a department or a division of a company and may only involve a reduction of the workforce allocated to specific areas.

The collective dismissal must be based on the following grounds:

• Market structure reasons (e.g., the reduction of the company’s business activity arising from a predictable decrease in the demand for goods or services);
• Organization-related and economic reasons (e.g., the existence of economic and/or financial operational deficits, changes to the activity or restructuring of the company’s productive organization); and/or
• Technological reasons.

The collective dismissal procedure must:

• Serve an initial notice of dismissal to the work council, if any, or to each of the employees;
• Appoint an employee committee by the employees within five business days after initial notice is served (optional);
• Set a consultation meeting between the employer and the relevant employees (or the employees’ committee, if any) with the purpose of reaching an agreement on the proposed collective dismissal and to decide whether or not any measures should be applied to minimise the dismissal effects; a representative of the Ministry of Economy and Labour will also attend the consultation meetings; and
• Serve a notice, in writing, to each employee about the final decision of dismissal once the parties reach an agreement or 15 days after the delivery of the initial notice of dismissal.

Upon the termination of the employment, the employee is entitled to receive the outstanding credits and severance compensation.

REDUNDANCY

In case the number of employees is not enough for a collective dismissal, termination due to the extinction of the job post could be an alternative. However, the dismissal must be based on the same justifications legally required for collective dismissal, and it must meet the following requirements:

• The economic, structural or technological reasons for the termination of the employment agreement do not relate to an intentional behaviour of the employee or the employer; and
• The tasks included in the position to be extinct are not being executed by employees hired by the employer under a term employment agreement.

If more than one employee faced the same justification for dismissal, the employer must comply with specific criteria in the following order:

• Lower performance;
• Lower academic and profession qualifications;
• Higher cost to the company for maintaining the employee’s contract;
• Lower experience in the position; and
• Lower seniority in the company.

The dismissal due to the extinction of the job position must follow the following steps:

• The employer must notify, in writing, the relevant employees (and the work council, if applicable) of the dismissal grounds;
• Within 15 days of this communication, the employee or the employee's representative organisation may send the employer its justified opinion on the reasons for the dismissal. ;
• Within five business days from the reception of the termination notice, the employee may request the intervention of the Ministry for Economy and Labour for the purposes of verifying compliance with the statutory requirements; and
• Within five days of the period to challenge the dismissal, the employer may issue a final decision of termination of the employment agreement.

With the termination of the employment, the employee is entitled to receive the outstanding credits and severance compensation.

The reasons for the termination cannot be related to the intentional behaviour of the parties, and the employer cannot hire another employee to perform the same functions as the dismissed employee.

DISMISSAL FOR INEPTITUDE

The employer may terminate the employment contract when the employee is no longer suited to perform the duties assigned to him/her for not being able to adapt to technical changes.

Employment ineptitude may be caused by several reasons, such as:

• Continued reduction of productivity or work quality;
• Repeated breakdowns in the means assigned to the workstation; and
• Risk to the health and safety of the employee, other employees or third parties.

Ineptitude can also occur when an employee assigned to a position of technical complexity or management does not meet the goals previously agreed upon in writing as a result of the way in which the employee performs her/his duties, and it is practically impossible for the employment relationship to persist.

Employers seldom use ineptitude as a dismissal ground because its requirements are difficult to prove.

Upon termination of the employment, the employee is entitled to a severance compensation, which takes into account the time of the employment.

DISMISSAL DUE TO A BREACH OF CONTRACT ATTRIBUTABLE TO THE EMPLOYEE

The employer may dismiss the employee with “just cause”, following a disciplinary process, in case of breach of her/his legal or contractual duties, without the obligation to pay any compensation.
The employer may terminate the employment with just cause. The following, among others, constitute just cause for dismissal:

• Failure to comply with superior’s orders;
• Infringement of other employees’ rights and guarantees;
• Repeatedly provoking conflicts with company employees;
• Repeated lack of interest in fulfilling the obligations inherent to the position or job;
• Justification of absences with false reasons;
• Unjustified absences (five consecutive or ten intermittent days off); or
• Intentional failure to comply with safety, health and hygiene labour rules.

Dismissal with just cause may only take place after conducting a disciplinary procedure against the employee, which must be initiated within 60 days after the employer becomes aware of the actions that, in her/his view, constitute a breach of the employee’s duties. The proceedings are conducted by a senior person at the company, usually in the human resources department or legal department.

The proceeding starts with a written notice specifying the reasons for the procedure and informing the employee of the employer’s intention to dismiss the employee. After receiving this notice, the employee has ten days to submit her/his defence and request probationary actions (e.g., to inquire witnesses) she/he deems necessary.

Upon completion of the procedure, the employer will receive the report of the inquirer describing the evidence gathered and suggesting the dismissal or another disciplinary sanction, if any. The employer has 30 days to issue a final decision of dismissal, which must be notified to the employee. The employee may challenge the dismissal decision within 60 days and request suspension of the dismissal within five business days after receiving the dismissal decision.

The termination of the contract in any of the mentioned conditions must comply with the required legal formalities to be effective.

The employees dismissed with just cause are not entitled to receive any severance compensation.

The termination of employment contracts by the employer (collective dismissal, redundancy, ineptitude or expiration) entitles the employee to receive unemployment benefits from the Social Security, which do not entail any costs to the employer.

In case of termination by mutual agreement, the employment benefits may be granted to the employee, without any additional costs to the employer, if the following requirements are met:

• The termination of the employment contract is justified by reasons that would allow the termination under a collective dismissal procedure or dismissal due to job extinction; and
• No more than three employees or 25% of the company’s workforce (for companies with up to 250 employees) and no more than 62 employees if the company has more than 250 employees.
• In companies with more than 250 employees, when 62 employment contracts are terminated, or up to 20% of the workforce, with a maximum limit of 80 employees in each three-year period.

If those requirements are not met, the employer will be obligated to reimburse the Social Security for all the amounts paid to the employee as unemployment benefits, but the employee will not lose the right to the employment benefits that she/he received.
If these requirements are not met, the employer will have to reimburse Social Security for all amounts paid to the employee.

To access unemployment benefits, the employee must:

• Reside in Portugal;
• Have had her/his employment terminated;
• Have been unemployed against her/his will;
• Not to be employed. If the employee works part-time or as an independent worker, the employee is entitled to partial unemployment benefits when the remuneration for such work is less than the unemployment benefit;
• Be registered in the Employment Service;
• Have applied for the unemployment benefit within 90 consecutive days from the date of the termination of the employment; and
• Have paid social security contributions for the period of time required by law.

Relevant legislation

Labour Code [Portuguese] [English]

Macedo Vitorino's briefings

"What you need to know to avoid employment issues in Portugal" (2021)

“Guide to Portuguese Employment Law” (2021)

Other reports

Ministry of Labour: «Green Paper on Labour Relations"» (2016) [Portuguese Only]

Important notice

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We are used to working on all aspects employment law. We have acted for employers or employees on several large collective bargainings and industrial actions, as well as in the negociation of individual employment agreements and disputes.

We can assist you on employment law issues in Portugal:

• Negotiating employment agreements on behalf of employers or employees
• Negotiating collective agreements and employment disputes
• Compliance with employment law and social security requirments
• Restructurings and reorganisations

If you have any question or wish us to provide a budget, please contact us to: whyportugal@macedovitorino.com

For more information on our practices and expertise please go to www.macedovitorino.com/en/expertise