Introduction
Portugal’s employment legal system is governed by a combination of labour laws and EU directives.
The Portuguese Labour Code is the principal piece of legislation that regulates employment relationships, setting out the rights and obligations of both employers and employees and covering all the central aspects of employment, including contracts, wages, working hours, dismissals, and employee rights.
In addition, collective regulation instruments, such as Collective Bargaining Agreements (CBAs) may apply to specific sectors, industries or job positions.
Legal framework
The legal framework of employment law in Portugal is based on several key laws and regulations that outline the rights and obligations of both employers and employees. The most relevant legal diplomas and employment regulation instruments include:
- Constitution of the Portuguese Republic: the Portuguese Constitution establishes fundamental labour rights, including the right to work, freedom of association, collective bargaining, non-discrimination in employment, and protection against unlawful dismissal.
- Portuguese Labour Code (Código do Trabalho): The Labour Code (Law no. 7/2009, as amended) is the primary piece of legislation below the Constitution regulating employment relationships in Portugal. It covers a wide range of topics such as: employment contracts, working hours, overtime, and rest periods, termination procedures, including just cause for dismissal, parental rights, anti-discrimination measures and equal treatment provisions and health and safety obligations.
- Social Security Code (Código dos Regimes Contributivos do Sistema Previdencial de Segurança Social): This law regulates Portugal’s social security system, which provides benefits such as unemployment compensation, pensions, and family benefits. Both employers and employees are required to contribute to the system.
- Law on Occupational Health and Safety (Law n.º 102/2009): This regulation determines that employers ensure safe and healthy working conditions, conduct regular health checks, and implement preventive measures to protect employees from accidents and occupational diseases.
- General Data Protection Regulation (GDPR): As an EU regulation, the GDPR applies to the collection and processing of employees’ personal data in Portugal, ensuring privacy and requiring legitimate purposes and proper consent for data usage.
- Law on Equality in Labour and Employment (Law no. 28/2019): This diploma reinforces equal pay for equal work, prohibiting gender-based wage discrimination and requiring employers to promote gender equality in the workplace.
- Collective Bargaining Agreements (Contratos Coletivos de Trabalho): These agreements are negotiated between employers and trade unions, regulating salary, working hours, holiday entitlements, and other employment conditions beyond the minimum standards of general regime set forth in the Labour Code’s.
- Law Governing Temporary Employment Agencies (Law no. 19/2007): This law sets forth the temporary employment agencies’ regime, ensuring that agency workers receive equal treatment in comparison with direct employees, in terms of wages and working conditions.
- Employment Promotion Programs (Programas de Promoção de Emprego): These programs, regulated in separate legislation, provide incentives to employers to hire long-term unemployed individuals, youth, or people with disabilities.
New Developments
In 2023, Portugal saw significant amendments to its employment laws through the implementation of the “Decent Work Agenda,” which resulted in significant changes to the Labour Code and other legislative changes aimed at increasing employee protection and transparency in labour relations. Key developments that impact employers include:
- Fixed-Term Contracts: The compensation due after the termination of a fixed-term contract has increased to 24 days of monthly remuneration per year of service.
- Temporary Employment Contracts: The maximum number of renewals for temporary work was reduced from six to four and the Authority for the Working Conditions (ACT) was given more power to convert temporary contracts into permanent ones.
- Probation Periods: New rules were introduced regarding probation periods. If employers fail to provide written details on the duration of the probation, it will be assumed that there is no probation period. Furthermore, probation periods were shortened or eliminated for individuals who have completed professional traineeships or previous fixed-term employment contracts.
- Outsourcing Restrictions: Outsourcing is now prohibited for 12 months after a collective dismissal or a termination due to termination of job position. This rule intends to prevent employers from replacing dismissed employees through third-party service providers
- AI and Algorithms: Employers are required to disclose the use of artificial intelligence (AI) and algorithms, ensuring transparency in recruitment processes.
- Digital Platforms: The Labour Code now includes a specific provision regarding presumption of employment contract within the context of digital platforms whereby an employment relationship between digital platform companies and service providers is assumed to exist if certain employment conditions are met.
- Overtime Pay: Compensation for overtime work has increased, with additional pay required after employees exceed 120 hours of overtime work per year.
In addition to the above mentioned specific legal changes in Portugal’s employment law, broader trends are influencing the labour market and workplace dynamics:
- Remote and Hybrid Work: following the global shift toward remote work during the pandemic, Portugal now has a more extensive legal framework governing remote and hybrid work arrangements. Employers must enter formal agreements with remote employees covering specifics such as working hours, equipment, and expense reimbursement. The Right to Disconnect was also introduced in the Labour Code which prohibits employers from contacting employees outside working hours.
- Work-Life Balance and Flexibility: following a global trend, a focus on work-life balance is emerging. Employers are encouraged to adopt policies that allow for flexible working hours, especially for employees with family responsibilities. For instance, Portuguese law offers special rights for employees with children under 12 or disabled dependents, including the ability to request flexible working hours or remote work arrangements. Furthermore, parents are entitled to parental leave, which can be shared between both parents, and additional leave for breastfeeding and childcare. Employees can also reduce their working hours or take unpaid leave to care for a sick child or dependent.
- Equal Pay and Wage Transparency: Portugal has introduced specific measures to ensure pay equity and transparency. Employers must provide transparent information regarding pay structures and ensure equal pay for work of equal value. For example, under Portuguese law, companies with more than 250 employees are required to submit annual reports on salary data, which must include a breakdown by gender to identify and address wage disparities. Additionally, there are specific provisions aimed at closing the gender pay gap, such as requiring employers to justify differences in pay between male and female workers performing equivalent roles. This is aligned with broader EU directives with the purpose of closing gender pay gaps and improving salary transparency across industries.
- Sustainability and Corporate Social Responsibility (CSR): another growing trend is the emphasis on sustainability and CSR, which is increasingly tied to Environmental, Social, and Governance (ESG) criteria. Employers are expected to actively promote fair labour standards, diversity, and inclusion within the workplace. Social factors include ensuring fair wages, fostering safe working environments, and upholding workers’ rights, including those of vulnerable groups.