Labour and employment law in Portugal

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.

Key Points

• Employment Contracts: The general rule as regards the hiring of employees in Portugal is that employment contracts must be made for an indefinite period. The possibility of hiring employees under term employment contracts is, in principle, limited to situations of a temporary need of the employer, as provided and specified in the applicable rules, and the duration is limited to that of the need in question (with a maximum of 2 years for fixed-term contracts and 4 years for contracts of unspecified duration).
• Collective Regulation Instruments: such as Collective Bargaining agreements (CBAs) play a significant role in Portugal, often setting terms beyond the minimum legal standards, including higher minimum wages, additional benefits or specific rules on working hours, holidays, and other employment conditions. These agreements can apply to specific sectors, regions or job positions and provide tailored conditions for employees and employers.
• Termination: Employment in Portugal is not strictly at-will. Notably the termination of open-ended employment contracts is limited to certain cases expressly set out in Portuguese legislation (such as collective dismissal procedures, termination of a job position, or dismissal with just cause following a disciplinary procedure) and compensation for termination (when due) must follow specific rules.
• Minimum Wage/Payments: There is a national minimum wage—currently (2026)—in the amount of EUR 920. Employees are entitled to 14 monthly payments per year, including holiday remuneration, holiday bonus and Christmas bonus. Collective Regulation Instruments may, however, foresee higher minimum salaries.
• Social Security: Contributions to the social security entity(s) are mandatory in Portugal and are shared between employers and employees (as a rule 23.75% and 11%, respectively). The system provides coverage for various benefits, including retirement pensions, unemployment insurance, sickness benefits, and family allowances.
• Workman Compensation Insurance: It is mandatory that employers have a workman compensation insurance policy (seguro de acidentes de trabalho) that covers their employees, in order to compensate for any damages that may arise from work accidents or occupational diseases.
• Working Hours: The maximum legal working hours periods are: 8 hours per day; and 40 hours per week. However, flexible work arrangements, including exemption from working hours and part-time work, may be agreed upon by the parties.
• Holidays/Paid Leave: Generally, employees are entitled to a minimum of 22 working days of holiday per calendar year. Nonetheless, special rules apply in certain situations, such as: (i) during the first year of employment, (ii) if the contract is suspended, (iii) for contracts with a duration of less than six months, (iv) for contracts lasting under 12 months or terminating in the year following the employee’s admission and (v) upon termination of employment.

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 important 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 no. 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.
• 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 Programmes (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

Portugal’s employment and labour law landscape in 2026 is expected to be shaped by a combination of legislative reform, enhanced enforcement and increasing alignment with EU-driven regulatory frameworks. Key developments that impact employers include:

• Labour Law Reform: In July 2025, the Portuguese Government presented a draft labour law reform proposal aimed at broadly revising the Labour Code. The proposal represents, to a significant extent, a reversal of several measures adopted during the previous governments, while also introducing new measures intended to modernise labour relations and increase labour market flexibility. Key measures focus on working time organisation, term contracts, collective bargaining, outsourcing and the dismissal regime. The reform has generated significant social and political controversy, and negotiations between the Government and social partners are ongoing. The Government has publicly expressed its commitment to approving a revised Labour Code during 2026.
• Pay Transparency Directive: At the EU level, Directive (EU) 2023/970 on pay transparency must be transposed by Member States by 7 June 2026. Although Portugal has not yet adopted the transposing legislation, the new framework is expected to build upon and expand the existing national regime under Law no. 60/2018. Once transposed, the directive will introduce enhanced pay transparency obligations, including transparency prior to recruitment, reinforced employee rights to pay information, mandatory gender pay gap reporting for larger employers and strengthened enforcement mechanisms.
• Corporate Sustainability Reporting Directive (CSRD): The EU’s CSRD establishes 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 by establishing data collection mechanisms and aligning reporting practices with European Sustainability Reporting Standards (ESRS).
• Authority for Labour Conditions (ACT) Inspections: Following enforcement campaigns in 2024 and 2025, the ACT is expected to maintain a strong focus on inspections throughout 2026. 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.
• Redundancies and Layoffs: Despite a modest decline in unemployment forecasted for 2026, data indicates a rise in collective redundancies and layoffs in 2025 (the highest number since 2020). It is expected that specific industries will continue to face structural challenges related to economic outlook, digitalisation and the introduction of technologies and AI, potentially requiring additional workforce restructuring measures.
• 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. Looking ahead to 2026, discussions and regulations surrounding AI are expected to evolve further, particularly considering the enactment of the EU Artificial Intelligence Act and the growing implementation of AI-driven systems in the workplace, which will require greater scrutiny and regulatory focus.