Portugal: 2025, Looking Ahead

As we enter 2025, several legislative changes and initiatives are expected to influence employment and labour law in Portugal. Here is an overview of the relevant upcoming developments:

 

A. Remuneration and Benefits

1. Minimum Wage Increase

Effective 1 January 2025, the minimum monthly wage was raised to €870 in mainland Portugal.

In the Autonomous Region of Madeira, it increased to €915, and in the Autonomous Region of the Azores, to €913.50.

Companies covered by Collective Bargaining Agreements (CBAs) may offer higher minimum salaries. The statutory minimum wage increase may also influence these agreements as unions often push for salary adjustments to reflect broader wage growth.

2. Average Salary

To promote economic growth and wage valorisation, the government signed a multi-year agreement (2025–2028) with Social Partners in October 2024.

This agreement sets annual targets for average salary increases of 4.5% to 5%, aiming to reach an average salary of € 1,890 by 2028.

To encourage salary growth, the 2025 State Budget introduces tax incentives for employers that increase wages for employees with permanent contracts. These increases will be recognized at 200% of their value for corporate income tax purposes, offering financial benefits to companies that support sustainable wage growth.

In companies governed by CBAs, where salaries are already higher than statutory requirements, unions may push for proportional adjustments to maintain competitive benchmarks.

3. Employment-Related Tax Incentives – 2025 State Budget

The 2025 State Budget (“Budget”) also introduces several targeted measures to incentivize productivity and improve wages or available net income, namely:

• Productivity Bonuses: bonuses up to 6% of the employee’s annual base salary will be tax exempted, provided these payments are voluntary, non-regular, and tied to performance metrics. Eligibility for this exemption requires the implementation of salary increases as specified in the State Budget Law.
• Meal Allowance: The tax-free limit for meal allowances has been updated to €6.50 per day, or €9.10 per day when provided as meal vouchers. Payments exceeding these limits will be subject to taxation.
• Overtime Pay: Withholding tax rates for overtime are reduced by 50%, lightening tax burdens on supplemental earnings.

B. State Incentives for Hiring

The Portuguese government has introduced new employment incentive measures to address labour market challenges and promote job creation. These measures aim to encourage the hiring of specific groups, support skill development, and enhance workforce integration and will be implemented by the Portuguese Employment and Professional Training Institute (“IEFP”).

• “Estágios INICIAR”: Promotes the offering of internships with a maximum duration of 6 months or 12 months (in the case of individuals with disabilities), aimed at unemployed individuals with non-higher qualifications. Companies may benefit from IEFP financial contributions towards internship grants (between 65% and 80%), meal allowances, transport expenses, and work accident insurance.
• “+Emprego”: Promotes the signing of employment contracts with unemployed individuals registered with the IEFP. Participating companies are eligible for financial support. To qualify for this incentive, companies must ensure net job creation and maintain the employment contracts for a minimum of 24 months.
• “+Talento”: Promotes offering internships and signing of employment contracts with young unemployed individuals with higher qualifications. Companies can access financial support, with potential increases in specific cases, such as hiring young people with disabilities or long-term unemployed individuals.

C. Equality and Wellbeing at Work

1. Corporate Sustainability Reporting Directive (CSRD) Implementation

The EU’s Corporate Sustainability Reporting Directive (CSRD) introduces extensive obligations for sustainability reporting, including detailed employment and workforce disclosures. The directive applies to large companies and listed SMEs, requiring them to report on environmental, social, and governance (ESG) practices, including workforce diversity, equal pay measures, and working conditions.

While Portugal has not yet transposed the directive into national law, companies operating in Portugal should prepare to comply starting from the 2025 financial year. Compliance involves establishing mechanisms for data collection, aligning reporting practices with European Sustainability Reporting Standards (ESRS) and ensuring transparency on ESG metrics.

2. Gender Pay Gap Reporting

The Authority for Labour Conditions (ACT) and CITE is set to continue inspecting pay gap compliance, with further control expected in early 2025. These inspections are carried out under Law No. 60/2018, which establishes a framework to promote equal pay for equal work and aims to reduce gender-based pay discrimination.

3. Quotas for People with Disabilities

The Authority for Working Conditions (ACT) began inspections in September 2024 to verify compliance with quotas for hiring persons with disabilities under Law No. 4/2019. Inspections will continue until March 2025, ensuring adherence to quotas and encouraging inclusive hiring practices.

4. Discrimination and Harassment

The 2025 State Budget foresees the development of a national strategy for workplace harassment prevention and support, focusing on awareness campaigns, enhanced mental health resources, and occupational health protections. It is therefore possible that developments occur in this area, reinforcing existing legislation in this regard.

5. Parental Leave

The 2025 State Budget mandates a government study on extending parental leave and addressing gender discrimination in the labour market, with potential developments expected later in the year.

D. Other Macro Developments and Trends

1. Potential Revisions to the “Agenda do Trabalho Digno”

Certain legal amendments introduced under the 2023 “Agenda do Trabalho Digno” Reform, namely the restrictions on outsourcing following dismissals, may face constitutional challenges in 2025. These reforms were designed to strengthen worker protections and prevent contract termination abuses. However, concerns about conflicts with constitutional principles, such as economic freedom and contractual autonomy, may prompt legislative clarifications or judicial interpretations to ensure legal certainty for employers and employees.

2. Authority for Labour Conditions (ACT) Inspections

Following enforcement campaigns in 2024, the ACT is expected to maintain a strong focus on inspections throughout 2025. Priority areas will include addressing gender pay gaps, verifying whether temporary and independent workers are, in fact, engaged under permanent employment contracts, and monitoring compliance with quotas for disabled workers.

3. Redundancies & Layoffs

The government forecasts a modest decline in unemployment supported, among others by new hiring incentives and retraining programs. Despite this, data indicates a significant rise in collective redundancies in 2024, it being expectable that specific industries continue to face structural challenges–e.g., related to economic/market outlook, digitalization, and introduction of technologies and AI—requiring additional intervention.

4. Digital Platforms

Developments regarding work through digital platforms will likely evolve as courts are issuing their first decisions regarding the topic under the legislation enacted under the Agenda do Trabalho Digno Reform.

Key issues include the application of criteria to distinguish between employees and independent contractors and algorithmic transparency and surveillance within digital platforms.

5. Artificial Intelligence

Portuguese employment law already addresses the use of AI, including algorithms, by requiring transparency regarding the parameters, criteria, rules, and instructions underlying such systems. These regulations cover AI-driven decision-making processes related to employment access, job retention, working conditions, profiling, and performance monitoring.

Looking ahead to 2025, discussions and regulations surrounding AI are expected to evolve further—particularly considering the enactment of the EU Artificial Intelligence Act and as the implementation of these systems becomes more widespread, driving greater scrutiny and regulatory focus.

E. Conclusion

Portugal’s employment law framework for 2025 reflects a strong focus on wage growth, equality, and sustainability. Employers should prepare for increased compliance obligations, leverage hiring incentives, and proactively address diversity and inclusion targets. With the labour market evolving, businesses must align policies with these legislative and economic developments to remain competitive and compliant.