Hire in Portugal

Under Portuguese labor law, indefinite employment is the general rule. Fixed and unfixed-term employment contracts constitute exceptions to this rule, even if this type of contract is widely used in Portugal.

Unless otherwise specified by the parties, employment contracts are deemed open-ended. If there is no written contract, the employment is deemed permanent.

Trial periods for permanent employees are 90 days, and 180 days for high complexity, trust or responsibility roles. The trial period is 240 days for management, directorate and equivalent responsibility roles. As a rule of thumb, the average probation period is 90 days.

Fixed and unfixed term temporary contracts are subject to shorter probation periods:

• 15 days if agreed for an expected or fixed duration shorter than six months
• 30 days for durations equal to or longer than six months

The termination of a labor agreement by either of the parties during the probation period does not require any grounds of justification and no indemnification is due. For termination of the contract by the employer, no prior notice is required within the first 60 days. Where the probation period has lasted for more than 60 or 120 days, respectively, the employer is required to give a seven or 15-day prior notice.

Longer probation periods are not allowed, even if agreed upon. However, it is possible to fully exclude probation periods or agree on a shorter probation period.

Maximum daily and weekly working hours are eight hours per day and 40 hours per week. An exemption regime may be agreed upon by the parties if the employee has a managerial position or a job of trust or usually performs their work outside the company’s premises. In these cases, the aforementioned limits shall not apply. Typically, employees who fall under the exemption regime are entitled to receive an exemption bonus.

Overtime is allowed for dealing with an extraordinary increase in workload, to prevent serious damage or if due to force majeure. Such overtime is subject to maximum limits:

• Two hours when performed on a normal working day
• When overtime is performed on a rest day or on a public holiday, the maximum allowed is equivalent to the daily normal working period
• The total allowed hours is 150 (medium-sized and large-sized companies) or 175 (small-sized companies) per year

Overtime must be compensated with additional payment, with an increase of hourly rates:

• Overtime work on normal working days earns a 25% increase for the first hour and then a 37.5% increase for additional hours
• Overtime on a rest day or a holiday is compensated at the normal hourly rate plus 50%
• Overtime on a normal rest day (typically, Sunday) also entitles the employee to additional time off that is equivalent to one day of work

Overtime work exceeding 100 yearly hours must be compensated as follows (increase of hourly rates):

• Work on normal working days: 50% increase for the first hour and 75% for additional hours
• Work on rest days or holidays: 100% increase for each hour

CBAs may require more beneficial treatment for employees in regards to overtime.

The employer has an obligation to permanently ensure employee health and safety conditions at work. To comply with these duties, the employer must follow a set of general principles aimed at preventing work accidents and professional illnesses. Generally, the employer must put in place and ensure:

• Technical work accident preventive measures
• Employee training, information and consultation on workplace safety
• Internal or external health and safety services

There are also health examinations prior to commencing employment and at regular intervals is mandatory for the employee to fulfill.

Statutory: Employees in Portugal are entitled to receive a holiday bonus (called 13th month pay), which includes their basic pay and other payments representing consideration for the specific means of carrying out the work. This payment is equal to one-month salary and is payable before the holiday leave period. This is usually paid in June.

Additionally, employees are entitled to a Christmas bonus that is equal to one month’s pay. This must be paid by December 15 each year. This is often called a 14th month bonus.

Contractual / Discretionary: It is common to also reward employees in Portugal through contractual or discretionary bonuses. The employer is free to define the scope and regime of the bonus plans or schemes through which bonuses are paid out to its employees. There are no specific restrictions or guidelines on what types of bonuses can be awarded, provided they are not discriminatory.

An employer can, under certain circumstances, terminate a contract with ‘just cause.’ The concept of just cause includes disciplinary dismissal and other forms of dismissal, provided they are justified according to the law.

The Labor Code of Portugal enables the following types of dismissal:

• dismissal based on unlawful behavior of the employee
• redundancies or dismissals that result from the elimination of jobs
• dismissal for failure to adapt to the work, where the employee is found to be incapable of adapting to the job and, because of the way in which the employee works, it is not possible to maintain the working relationship

Collective dismissal rules will be triggered if the dismissal involves at least two employees (in a company with up to 49 employees) or five employees (in a company with 50 or more employees) within a three month period.

When an employment agreement ends, the employer must provide the employee with a certificate of employment indicating the dates of commencement and termination and the post or posts occupied. Other documents for official purposes are required, including Social Security.

If the notice period is not honored, a payment in lieu of the notice is required. Garden leave is possible when agreed upon by both parties.

Unfair dismissal: The employee may challenge the lawfulness of their dismissal before the labor courts. In a case of unfair dismissal, irrespective of the cause, the employee is entitled to receive:

• Payment of back wages (starting from the dismissal through the date of the court decision)
• At the employee’s discretion, either reinstatement or payment of severance compensation (which varies 15 days to 45 days of base salary per year of service)

Protected employees: Employee representatives and pregnant or nursing employees are entitled to special protection rights regarding termination of their employment.

The employee is free to resign, subject only to certain prior notice periods as follows.

For permanent employees:

• 30 days for contracts which have been on force for up to two years;
• 60 days for contracts which have been on force for more than two years;

For fixed (or unfixed) term (temporary) employment agreements:

• 15 days for contracts, which agreed (or expected) duration is less than six months;
• 30 days for contracts, which agreed (or expected) duration is equal to (or longer than) six months

• Fair dismissal based on objective grounds (redundancy) or dismissal due to the employee’s unsuitability for the job: 14 days’ salary per year of service, up to 12 months’ base salary. The severance is partially (50%) paid by a fund (FCT) administered by Social Security, to which the employer must make contributions.
• Fair disciplinary dismissal: no severance is required

Higher severance payments may be agreed and are typically offered as a way to avoid litigation.

Post-termination restraints aimed to protect the employer’s legitimate business interests can be enforced, provided the restricted activity may cause a potential loss to the employer. These types of obligations can be included in the initial employment contract:

• An undertaking on non-competing and/or non-solicitation by the employee
• The scope of the obligation (activity and geography).
• The period of the limitation (the legal maximum is two years, or three years in cases of jobs of trust or jobs with access to information of particular relevance)
• The amount to be paid to the employee during the period of the limitation: the law does not provide any criteria, but usually this amount varies between 50% and 80% of the last monthly remuneration

In cases where these legal requirements are not fulfilled, the employee shall not be validly bound to the restraint.

Non-competes: Permissible under the above-mentioned rules.

Customer non-solicits: Permissible under the above-mentioned rules.

Employee non-solicits: Permissible under the above-mentioned rules.

In 2019, the European Court of Justice stated companies must establish a system to record the working time of their employees. Thus, employers are obliged to implement an objective, reliable and accessible system that enables the recording of the daily workday performed by each employee.

Employee representative bodies are permissible, but not mandatory. The employees of a company may take the initiative to establish the following representative bodies:

• Works council: members are appointed by the employees and their purpose is to represent the interests of the company’s employees. In practice, work councils typically only exist in major companies.
• Union delegates: elected by the employees affiliated with a specific union; there can be more than one union with representatives in a company.
• Security and health representatives: These representatives supervise issues related to security and health in the workplace; they are not common in Portugal.
• European Works Council (EWC)

Trade unions are prevalent in certain sectors. Industry-level collective bargaining agreements are common practice in almost all industrial sectors (such as automobile, chemical, transportation, automobile parts production, pharmaceutical, civil construction, metallurgy, etc.).

The employees’ representatives are entitled to time off to exercise their duties with payment, which is subject to time limits). Representatives may convene general meetings of employees to take place outside or inside the working schedule. In the latter case, this can occur for a maximum of 15 hours per year.

Fixed-term contracts are only allowed if necessary, to provide for temporary staffing needs or for employment policies, such as to promote the hiring of certain categories of employees (first-time jobseekers and long-term unemployed) and the start-up of new enterprises or companies.

For fixed-term contracts that are part-time, they are only renewable a maximum of four times and up to four years. After four years, the employer is obliged to hire the employee permanently.

Regular fixed-term contracts can only be renewed twice, and the total duration cannot exceed two years.

In the event of the expiration of a fixed-term contract, the employee is entitled to compensation corresponding to 24 days of basic remuneration and seniority allowances for each full year of service.

Portugal has 14 salary payment periods, which include the two additional bonuses. Salaries/wages are usually paid by bank transfer. The employer is responsible for transferring the amounts withheld to the social security and tax authorities.

Irrespective of the form of payment, the employee is entitled to a payslip that shows the remuneration (gross pay, lunch allowance, etc.) and deductions (personal income tax, social security contribution to be made by the employee and any other contributions the employee has authorized to be withheld, such as union dues).

The employer presents the employee with a statement in January of the year after the money was earned. Employees need this statement for submitting their annual tax return to the tax authorities.

According to the Portuguese Law, as a general rule, employees are entitled to receive a minimum 22 working days of holiday per calendar year. This right becomes due to the employee on January 1 and relates to work performed in the previous year. CBAs may also establish a longer holiday period, which is typically 25 days.

In the calendar year of admission, the employee is entitled to two working days of holidays for each month of the duration of the contract, up to a maximum of 20 working days. These days may be taken after six full months of execution of the contract. They may be taken earlier when agreed upon by the employer and the employee.

In the year following the admission, the employee is entitled to two working days of holiday for each month of the duration of the contract up to 22 working days. During these two years, the vacation period reflects the working time of each calendar year and not the previous year.

Specific provisions exist for employees under fixed-term contracts:

1. Employees who have been working under contract for less than one year, but more than six months, are granted two working days of leave for each month of their employment, up to 20 days.
2. If the calendar year ends before an employee has worked six months, the accrued leave may be used before the following June 30. However, a maximum of 30 working days may be applied in a single year.
3. Contracts less than six months give employees the right to two days of paid leave for every full month stipulated in the contract.

The scheduling of annual leave is decided by agreement between employer and employee. Annual leave is usually taken in full as an uninterrupted period. However, it can also be broken up into time periods of no less than 10 days.

Carry Over Rules

• In the event the calendar year ends and the days of holidays to which the employee is entitled have not been taken, they may be taken further until April 30 of the following year. In the same calendar year, an employee may not take more than 30 working days of holidays.
• If the year of admission ends and the days to which the employee is entitled have not been taken, the holidays can be taken until June 30 of the following year.

• Employees are entitled to time off from work due to illness or injury, which is paid by the state social security protection scheme. The employee must meet all eligibility requirements. In some cases, CBAs provide specific rules covering employee illness or injury.
• Social security protection schemes offer sick pay to employees who are absent from work as a result of an illness or injury. An employee may receive sick pay for a total of 1,095 days. Sick payments are calculated based on the employee’s remuneration reference for social security purposes; it varies between 55% and 75%, depending on the period of illness.
• Employees must communicate an absence due to sickness as soon as possible. The employer may request medical documentation confirming the sickness within 15 days from the time the employee communicates the absence to the employer.
• The employer must continue to pay the salary during the first three days of absence, after which payment of the sickness allowance falls to Social Security.
• Employees can self-report sick leave through the National Health Services website or app, up to twice a year. This only applies to short-term sick leave, up to 3 working days.

Training leave: The employer may grant a worker, at their request, an unpaid leave period so they can attend a training course administered by an educational or vocational training institution.

Employees who have been employed and made contributions to the social security system for at least six months are entitled to between 120 and 180 days of paid maternity leave.

Maternity leave

Mothers may take up to 30 days’ voluntary leave before the birth, and 42 days (6 weeks) of compulsory leave after the birth. These two periods form part of the initial parental leave, which can last up to a total of 120 or 150 days.

Paternity leave

Fathers are entitled to 28 days’ leave, taken consecutively or non-consecutively, with at least 7 of these after the baby’s birth. The first 7 days must be taken consecutively and immediately after the birth. The remaining 21 days must be taken within 6 weeks (42 days) of the birth. Fathers are also entitled to a further 7 working days of voluntary leave, taken consecutively or non-consecutively, taken at the same time as the mother.

Shared parental leave

• If the parents opt to share the initial parental leave, and each parent individually takes one period of 30 consecutive days (not at the same time), or two separate periods of 15 consecutive days after the mother’s compulsory leave of 6 weeks, an additional 30 days will be added to the initial 120 or 150-day period.
• The 30 additional days may be taken individually by only one of the parents, or both parents may take 15 days at the same time, with a further 15 days for the mother or father only.
• If the duration of the leave is 120 + 30 days, the parental allowance covered by social security will correspond to 100% of the reference income.
• If the leave lasts 150 + 30 days, the parental allowance paid by social security will correspond to 83% of the reference income. The initial parental allowance will be increased from 83% to 90% of income where the father takes 60 days’ paternity leave.
• If the parents opt for initial parental leave of more than 120 days, i.e. if they decide to take 150 or 180 days, they can, after the first 120 days, combine the remaining days of leave with part-time work. The additional 30 days will always be the final period of the leave, whether it is taken only by one parent or shared by both.

Extended parental leave

Initial parental leave may be extended by up to 3 months for the father and for the mother. Extended parental leave must be taken immediately after the initial parental leave.

In such cases, social security will cover an allowance equal to 25% of the reference income. If parental responsibilities are shared during the leave, the allowance will increase from 25% to 40%.

Adoption leave

If the child is under the age of 15, working adoptive parents are entitled to leave for 120 or 150 consecutive days.

If more than one child is being adopted, the leave period is increased by an additional 30 days for each subsequent adoption. The leave starts from the moment the adoption process is formalised.

The number of days an employee is entitled to for bereavement leave in Portugal depends on the degree of kinship. As per Article 251 of the Portuguese Labor Code, the entitlement is as follows:

• 20 calendar days: For the loss of a child, stepchild, or spouse (including de facto union or common-law partner).
• 5 calendar days: For the loss of parents (including stepparents and parents-in-law).
• 2 calendar days: For the loss of grandparents, great-grandparents, grandchildren, great-grandchildren, and siblings (including those of a common-law partner).

In Portugal, there are 13 public holidays in a calendar year. Public holidays are not included in statutory holiday entitlement.