1 Legal framework
1.1 Are there statutory sources of labour and employment law?
Several laws and regulations govern labour and employment relationships. The primary sources are:
- international law, most notably EU law;
- local sources of law, such as the Constitution and the Labour Code;
- collective agreements;
- individual agreements; and
- established custom not contrary to the principle of good faith.
EU law has significantly influenced Portuguese labour law, as transposed by the Labour Code approved in 2009 and recently amended by Law 1/2022.
Parenthood protection is governed by Decree-Law 91/2009; occupational accidents and sickness are governed by Law 98/2009; and occupational health and safety matters are governed by Law 102/2009. In addition, specific statutes and regulations govern particular types of employment (eg, sports work or domestic service).
In general, the Portuguese legal framework promotes employee job stability and covers most issues, such as:
- place of work;
- working hours;
- remuneration and extra pay;
- paid vacation; and
- parental leave.
Employers should be aware that Portuguese labour and employment laws and regulations favour the employee in most respects.
1.2 Is there a contractual system that operates in parallel, or in addition to, the statutory sources?
As a rule of thumb, employment agreements are freely negotiated by the employer and employee within the legal framework set out in the Labour Code.
Collective bargaining agreements are also established in Portuguese law and may cover certain professions, activities and sectors. They often set individual and detailed provisions that may deviate slightly from the general legal framework set out in the Labour Code, as long as those provisions are considered more advantageous for the employee. Collective agreements are concluded between the employer (or an employers' association) and the trade unions, as the employee's representatives.
The Labour Code states that each collective agreement binds the contractors (the employer or an employers' association on one hand and the trade union on the other) and the union employees affiliated with that union.
This principle of affiliation states that a worker (or association) wishing to enter into a specific collective agreement must be affiliated with the same union that made that agreement.
However, it is not uncommon for the government to issue an extension ordinance for a specific collective bargaining agreement, rendering it applicable across a determined sector and profession – even for parties that did not initially sign it.
1.3 Are employment contracts commonly used at all levels? If so, what types of contracts are used and how are they created? Must they be in writing must they include specific information? Are implied clauses allowed?
The Labour Code establishes several employment contract types. A common trait of Portuguese labour law is the promotion of job stability. Therefore, temporary employment contracts are legally treated as an exception and the term itself must be justified.
Employment agreements need not be in writing unless otherwise established in the law.
However, the law establishes several cases in which employment agreements or parts thereof must be put in writing. For practical reasons, most companies will use a written document.
As an example, a written employment agreement is required in the following cases:
- the hiring of a foreign employee (exceptions apply);
- employment by several employers;
- a promissory contract of employment;
- a fixed-term employment agreement;
- a part-time employment agreement;
- an intermittent employment agreement;
- a service commission agreement;
- a teleworking agreement;
- a temporary employment contract; and
- an employment agreement for an indefinite period for temporary transfer.
The Labour Code establishes two main types of contracts: fixed-term contracts and open-ended (without a term) contracts. This distinction is important because the ease of severability of the employment agreement differs substantially in fixed-term contracts as compared to open-ended contracts.
Fixed-term contracts are deemed exceptional by the law. They may be employed only when certain legal criteria are met – that is, where there is proper justification for specifying a term. Failure to conveniently justify the use of a fixed-term contract may result in its characterisation as an open-ended contract.
Contracts with a fixed term can have:
- a defined term (eg, six months); or
- an undefined term.
A fixed-term employment contract may only be concluded to satisfy temporary needs, objectively defined by the employer and only for the period strictly necessary to meet those needs.
Both open and fixed-term contracts may have a probation period during which the parties may terminate the agreement at their sole discretion.
The duration of the probation period may also depend on the type of contract, as follows:
- 30 days for a fixed-term or undefined-term employment contract conducted for six months or more or expected to last more than six months; and
- 15 days for a fixed-term or undefined-term employment contract conducted for less than six months or expected to last less than six months.
The probation periods for open-ended contracts will be longer and may vary depending on the responsibility and technicality of the activity being developed by the employee:
- The general probation period for workers with no type of specific qualification or significant degree of responsibility is 90 days.
- Employees seeking their first job and in long-term unemployment or employees holding positions of significant technical complexity (or a significant degree of responsibility) requiring particular qualifications have a 180-day probation period.
- For management positions, the probation period is 240 days
2 Employment rights and representations
2.1 What, if any, are the rights to parental leave, at either a national or local level?
Family and parental rights are enshrined in the Constitution. Therefore, motherhood and fatherhood constitute eminent social values, and both parents have the right to special protection during pregnancy and following childbirth.
Parental leave is granted to parents after the birth of a child. During this period, the parents are entitled to financial support (parental allowance), which is intended to replace the lack of pay for the duration of their absence from work.
Any form of discrimination based on the exercise of maternity and paternity rights is forbidden.
2.2 How long does it last and what benefits are given during this time?
Parental leave can last between 120 and 180 consecutive days, depending on how the parents decide to take advantage of it.
The Labour Code establishes four different types of parental leave:
- initial parental leave;
- exclusive initial parental leave of the mother;
- initial parental leave to be granted to the father (due to the mother's impairment or death); and
- exclusive parental leave of the father.
As a rule, both parents are entitled to initial parental leave of 120 or 150 consecutive days, which may be taken in a shared manner. If the parents decide to share their leave, they are entitled to an extra 30 days.
However, they can enjoy this benefit only if they enjoy these 30 days consecutively or divided into two 15-day periods (which must be taken consecutively). In the case of multiple births, there is an additional 30 days of leave for each child in addition to the first newborn.
Additional leave days may be added if hospitalisation is required after the child's delivery for up to 30 days.
The mother will have an optional 30 days before the baby's delivery and must take 42 mandatory leave days. The mother's exclusive 42-day compulsory parental leave is part of the initial parental leave period.
Portuguese law also provides for exclusive and mandatory parental leave for the father, under which the father has 20 days of parental leave.
Social Security must fully or partially pay the employee while he or she is on parental leave. The amount to be paid is based on the duration of the leave and indexed to the employee's salary.
2.3 Are trade unions recognised and what rights do they have?
Yes, trade unions are constitutionally recognised and are regulated in the Labour Code. They are grounded in the freedom of association principle, under which citizens have the right to form associations freely and without needing authorisation.
Trade unions and employers' associations have the right to:
- conclude collective agreements;
- provide financial and social services to their members;
- participate in the drafting of employment legislation;
- commence legal and administrative proceedings to defend the interests of their members;
- partner with other organisations of workers or employers at a national or international level; and
- have a say in corporate restructuring processes.
2.4 How are data protection rules applied in the workforce and how does this affect employees' privacy rights?
The Constitution establishes the right to privacy. This means that the employer and the employee must respect each other's personality rights.
This right to privacy covers access to and disclosure of the parties' intimate and personal sphere regarding:
- affective and sexual life;
- health; and
- political and religious beliefs.
Therefore, both parties have the right to privacy regarding communications, correspondence, images and voice.
According to the EU General Data Protection Regulation (2016/679) and the Data Protection Law (58/2019), every individual has the right to personal data protection and fair data processing based on consent.
Regarding employee data, employers may collect, process and use particular data categories to meet obligations and rights under employment, social security and social protection laws or collective agreements.
The Data Protection Law provides that consent given by employees does not constitute a legitimate legal basis for processing their data if the processing results in a legal or economic advantage for the employee, unless otherwise allowed by law.
There are also provisions on the possibility of undertaking medical tests and exams. The employer may not require a job applicant or an employee to perform or submit to medical tests, unless:
- these tests are intended to protect the employee or third parties; or
- the specific requirements of the activity warrant this.
In this case, the doctor responsible for the test can only disclose to the employer whether the employee is fit to carry out his or her duties.
2.5 Are contingent worker arrangements specifically regulated?
Temporary jobs are usually agreed using fixed-term contracts or defined-term contracts. The rule is that all employment agreements should generally be open-ended contracts. Fixed defined-term and undefined-term contracts are contingent on the fulfilment of specific requirements. Please see question 1.2 for more information.
It is common for employers to circumvent legal restrictions regarding fixed-term contracts by resorting to service agreements and independent contractor agreements. However, the Portuguese courts have long established that, even if the parties call a contract a 'service agreement' or an 'independent contractor agreement', the court will have the right to retroactively requalify the arrangement as an open-ended work agreement if, in substance, it is an employment agreement.
Therefore, employers must tread carefully when using fixed terms and independent service agreements, because of the risk of requalification by the court.
3 Employment benefits
3.1 Is there a national minimum wage that must be adhered to?
The minimum wage is determined annually by decree law. Currently, the minimum monthly salary is €705.
3.2 Is there an entitlement to payment for overtime?
The normal work period is eight hours per day and 40 hours per week. However, by agreement, the employer and employee can extend the normal work period to two hours per day, not exceeding 50 hours per week (general rule).
All work performed outside the scheduled hours qualifies as overtime and may be performed only when there are reasons for this – for example, where:
- there has been an abnormal and unexpected increase in activity; or
- it is deemed essential to prevent or repair severe damage to the employer.
Overtime is limited to:
- 150 or 175 hours per year, depending on the business size; and
- two hours per working day.
Collective bargaining agreements may extend the annual limit to 200 hours.
The employee is entitled to overtime compensation as follows:
- For the first hour of overtime, overtime compensation amounts to an additional 25% of pay;
- For the following hours, overtime compensation amounts to an additional 37.5% of pay; and
- During weekends and holidays, overtime compensation amounts to an additional 30% of pay.
Flexible working time models – such as adaptability, banking hours, concentrated schedules and exemptions from the working schedule regime – introduce changes to working schedules. Therefore, such work time clauses must be considered when determining overtime compensation.
3.3 Is there an entitlement to annual leave? If so, what is the minimum that employees are entitled to receive?
Yes. All employees are entitled to paid vacation leave for 22 working days. The general rule is that employees are entitled to two days of vacation per full month of work. In the year of admission, an employee cannot take any vacation until he or she has completed six months of work.
Employees cannot waive the right to vacations and their enjoyment cannot be replaced. The employer and the employee should agree on vacation scheduling. However, if an agreement is not reached, the employer will have the right to define the vacation schedule of the employee.
3.4 Is there a requirement to provide sick leave? If so, what is the minimum that employees are entitled to receive?
Under Portuguese law, employees have the right to paid sick leave.
Social Security pays for sick leave, provided that certain conditions are met – for example, the incapacity to work must be certified by a doctor. In addition, incapacity must be proven by a certified doctor's statement explaining the inability to work. An employee must have worked for six months and have worked at least 12 days in the last six months to collect sick leave pay. Sick leave pay is assessed based on the employee's salary during the previous six months.
3.5 Is there a statutory retirement age? If so, what is it?
In Portugal, the statutory retirement age is currently 66 years and seven months. There is no mandatory retirement age. Individuals can work after retirement.
Early retirement is possible under certain conditions (eg, for arduous or hazardous jobs).
4 Discrimination and harassment
4.1 What actions are classified as unlawfully discriminatory?
The European Charter of Fundamental Rights and the Portuguese Constitution establish the principle of equality, according to which citizens have the same social dignity and are equal before the law.
The same principle also prohibits favouritism or disadvantage based on:
- territory of origin;
- political or ideological beliefs;
- economic status;
- social condition; or
- sexual orientation.
The Labour Code reinforces and consolidates this same principle and enforces:
- the right to equal opportunity both in access to employment and at work;
- the prohibition of discrimination based on origin or social status; and
- the prohibition of discrimination based on:
- genetic heritage;
- reduced work capacity;
- chronic illness; or
- trade union membership.
It expressly prohibits the various forms of direct and indirect discrimination, and does not exclude from discrimination a mere order or instruction which has the purpose of disadvantaging someone due to a discriminatory factor. In addition, retaliatory actions against employees due to the rejection of a discriminatory act are illegal.
The right to equal access both to employment and at work concerns:
- selection criteria and hiring conditions;
- access to all types of professional training;
- promotion opportunities at all hierarchical levels;
- criteria for dismissal of workers; and
- membership of trade unions.
The employer must disclose the employee's rights and duties concerning equality and non-discrimination.
4.2 Are there specified groups or classifications entitled to protection?
Yes. Certain employees are entitled to special protection in labour matters, including:
- employees with chronic illnesses or disabilities; and
- pregnant, postpartum and breastfeeding women.
4.3 What protections are employed against discrimination in the workforce?
In addition to the general constitutional and labour principles of equality and non-discrimination rights (see questions 4.1 and 4.2), which shape the employment relationship, companies tend to adopt codes of conduct and internal policies to prevent discrimination.
In matters relating to pregnant, postpartum and breastfeeding employees, prior opinions may be required from the Commission for Equality in Labour and Employment (CITE) to control and ensure compliance with legal requirements and ensure non-discrimination.
A quota obligation for disabled people has also been introduced in medium and large companies. Portuguese law provides that at least 1% of the workforce must include disabled workers. This percentage is 2% for large companies.
The new rule entered into force in 2019 and there is an ongoing five-year adaptation period.
4.4 How is a discrimination claim processed?
Any act of discrimination must be reported internally to the hierarchical superior of the person committing the act of discrimination.
The works council or trade union, the Authority for Working Conditions or CITE may also be notified of the claim if the matter is not remedied internally.
Legal action may be taken without a pre-court settlement or reconciliation between the parties. The employee must provide evidence of the facts of the discrimination.
4.5 What remedies are available?
In addition to ending the discriminatory situation, the employer may be required to compensate the employee for damages and may be subject to fines.
4.6 What protections and remedies are available against harassment, bullying and retaliation/victimisation?
Harassment, bullying and retaliatory behaviour must be reported to the employer, the Authority for Work Conditions or the judicial courts, where applicable.
Harassment is sanctioned according under the Labour Code as a grave offence and constitutes grounds for a disciplinary infraction. It is also a crime under the Penal Code.
The Labour Code protects victims and witnesses by barring disciplinary action from being filed against them while the case is being discussed in court.
5 Dismissals and terminations
5.1 Must a valid reason be given to lawfully terminate an employment contract?
The Constitution guarantees workers job security and forbids dismissals without just cause and/or for political or ideological reasons. This principle has been transposed into the Labour Code.
Three kinds of dismissals are regulated and allowed by the Labour Code:
- dismissal based on unlawful conduct of the employee;
- dismissal due to redundancies or termination of job categories by the employer; and
- dismissal for failure to adapt.
Dismissal based on unlawful conduct is based on the concept of just cause. It implies that it is impossible to continue the employment relationship due to the seriousness of the employee's misconduct. The definition of just cause involves both subjective and objective aspects.
Subjective just cause constitutes dismissal on the employer's initiative based on the employee's misconduct where, due to the seriousness of the employee's actions and their related consequences, it is deemed impossible to continue the labour relationship. This type of dismissal requires a disciplinary process.
Dismissal is the harshest punishment that a worker can face following disciplinary proceedings. Other penalties – such as the loss of vacation days, fines, registered warnings or suspensions – can be applied.
Objective just cause relates to the employer's market or structural or technological grounds. Dismissals include:
- those due to:
- the redundancy of a job post; or
- the employee's failure to adapt or unsuitability; and
- collective dismissals.
If just cause is granted, an employee is not entitled to notice or compensation when he or she is dismissed following disciplinary proceedings. However, the worker will be entitled to credits (pro-rated vacation pay or Christmas allowance) payable upon termination, regardless of the reason.
In addition to dismissal for just cause, the Labour Code provides for other methods of terminating employment. For example, fixed-term contracts can expire at the end of the foreseen term.
An employee is entitled to terminate his or her employment at any time without compensation, and may terminate the employment by revocation (based on the employer's breach of duty) or by termination with prior notice.
5.2 Is a minimum notice period required?
As stated in question 5.1, the minimum notice period applies only to termination by the employee.
The employee may terminate an open-ended employment contract by issuing the employer with prior notice of 30 or 60 calendar days, depending on whether the contract has been ongoing for more or less than two years.
A minimum notice period of 30 or 15 days is required for fixed or unfixed-term employment contracts, depending on whether the duration of the contract is six months or less. Failure to comply with the notice period does not preclude termination of the employment contract but may result in a duty to compensate the employer.
Further notice periods relate to different methods of termination, such as the expiry of a fixed-term or unfixed-term employment contract.
To prevent the renewal of a fixed-term contract, at least 15 days' notice is required for the employer and seven days' notice for the employee.
For unfixed-term contracts, at least seven, 30 or 60 days' notice must be given by the employer, depending on the duration of the contract – up to six months, up to two years or exceeding two years, respectively.
5.3 What rights do employees have when arguing unfair dismissal?
If the dismissal is considered unfair, the employer must:
- compensate the employee for all damages caused, pecuniary and non-pecuniary; and/or
- reinstate the worker under the same conditions.
The employee can challenge the dismissal in court within 60 days or six months in the case of a collective dismissal. If the court finds the dismissal to be unlawful, the employee is entitled to compensation for salary and benefits lost while the lawsuit was pending.
The employee can also be reinstated. However, the employee may opt for compensation instead of reinstatement. The court will then settle a payment of between 15 and 45 days' wages and seniority for each full year or fraction of seniority.
The Portuguese legal system protects the employee's position as if the employee had never been terminated. Therefore, the employee is entitled to receive wages and salaries from dismissal until a court decision becomes final and unappealable. Unemployment benefits, compensation earned upon the termination of the employment and the payment of 30 days' wages, if the employee did not appeal within this period, will be deducted from such settlement.
5.4 What rights, if any, are there to statutory severance pay?
Upon termination of employment, the employee must receive all outstanding payments due at the termination date, including:
- monthly wages;
- accrued and non-taken leave days;
- proportional leave corresponding to the year of termination;
- 13th and 14th-month allowances; and
- non-provided hours of professional training.
The Labour Code also provides for the payment of compensation applicable to dismissals on the employer's initiative, with the exception of dismissal for subjective just cause (ie, the employee's misconduct).
Accordingly, the employee will be entitled to 12 days' wages for each full year of employment. Generally, the overall compensation cannot exceed:
- 12 times the employee's salary; or
- 240 times the national minimum wage.
The employer is responsible for paying the compensation in full but can be reimbursed by the Workers' Compensation Guarantee Fund. The employee may also call on the Workers' Compensation Guarantee Fund if it is manifestly impossible for the employer to pay the compensation.
6 Employment tribunals
6.1 How are employment-related complaints dealt with?
In the pre-judicial phase, employment-related complaints can be settled:
- by agreement between the employer and employee; or
- with the intervention of union representatives.
In the judicial phase, the labour courts have jurisdiction over disputes arising from employment contracts or relationships, and rule on issues relating to work hazards and accidents.
Settlement agreements are also common in the Portuguese courts and in dismissal processes, whereby the employer is required to compensate the employee for the termination of employment. Employees and employers may also resort to arbitration and mediation.
Additionally, the Directorate-General of Employment and Labour Relations, the Authority for Working Conditions and the Commission for Equality in Labour and Employment (CITE) may intervene at the behest of either party. For pregnant and breastfeeding employees, several issues require prior consultation with CITE.
6.2 What are the procedures and timeframes for employment-related tribunals actions?
Actions before an employment tribunal begin with a petition presented to the labour court or, in some cases, to the public prosecutor.
After distribution, the opposing party is summoned to reply and a date will be set to attempt conciliation. If the attempt at conciliation fails, the case will proceed to trial. During the trial, both parties must present proof of their claims.
The first-instance ruling may be appealed to the higher courts. Given the backlogs in the judicial system, proceedings are expected to take between two and five years before they are fully settled.
7 Trends and predictions
7.1 How would you describe the current employment landscape and prevailing trends in your jurisdiction? Are any new developments anticipated in the next 12 months, including any proposed legislative reforms?
Various measures are being discussed regarding transversal issues in the labour landscape, such as:
- tackling the abusive use of temporary work schemes;
- addressing the abuse of self-employment schemes; and
- stepping up the fight against undeclared work.
In May 2021, the Constitutional Court declared, with mandatory general force, that a 180-day trial period is unconstitutional, but only:
- where applicable to first-time jobseekers; and
- provided that they had been previously hired on a fixed-term basis by another employer(s).
The Constitutional Court considered that such a trial period, insofar as this specific group of workers is concerned, would violate the principle of equality enshrined in the Constitution, since first-time jobseekers who had previously been hired on a fixed-term basis by the same employer would see their trial period reduced, in contrast to what would happen to workers who had been hired on a fixed-term basis by a different employer. Thus, the Constitutional Court decided that the provision infringes the right to equality. On these grounds, the court declared the rule unconstitutional, with mandatory general force.
A current trend in the Portuguese labour market is to make labour contracts less precarious and guarantee better protection of workers.
Significant importance is also being paid to the study of new forms of work, triggering a broad national debate on innovative working models, including a four-day week in different sectors and even a 35-hour maximum working week.
During the COVID-19 pandemic, many employers implemented remote working. As a result, hybrid working methods are now being implemented and studied. Further regulations are expected if this trend continues.
We also expect more developments relating to disputes arising from the implementation of the EU Whistleblowing Directive, which was transposed by Law 93/2021. The regime requires the establishment of whistleblowing channels for employers with more than 50 employees. These employers must now adopt internal whistleblowing channels that are appropriate and proportionate to their area and scope of activity (resembling the risk management approach), which allow for the filing and processing of complaints, ensuring the completeness, integrity and confidentiality of the entire process.
8 Tips and traps
8.1 What are your top tips for navigating the employment regime and what potential sticking points would you highlight?
Companies that hire Portuguese employees and/or employees in Portugal should carefully review the labour law regulations and immigration, social security and taxation matters.
For instance, a residence permit may be required to hire foreigners or assign them to Portugal. In addition, certain regulated professionals – such as doctors, engineers and lawyers – require the validation of their diplomas and enrolment with the relevant association.
Understanding the differences between contract types is also essential to tailor each contract to the company's needs and business.
Larger companies should further establish a robust compliance structure to address issues and matters involving discrimination disputes, whistleblowing and data protection.
Finally, foreign companies hiring in Portugal should also consider permanent establishment rules for corporate income tax purposes and determine whether hiring in Portugal will expose them to Portuguese taxation.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.