Insights

PORTUGAL’S NEW LABOUR LAW: WHAT TO WATCH OUT FOR AND ACTION TO TAKE

01/10/2019

As from 1 October 2019, changes to Portugal’s Labour Law come into force, among others, clamping down on the duration and use of fixed term contracts

Seen as a move towards making companies contract workers on a permanent basis, in reality it may have the opposite effect. The changes introduced could create greater worker rotation within companies rather than boost permanent hiring, given restrictions on the duration and use of fixed-term contracts.

A social security surcharge on companies using temporary and fixed-term contracts could also have wider implications for companies’ internal employment policies, as well as those with hiring restrictions

To note, the new regime will apply to contracts concluded before 1 October 2019 except for in relation to admissibility, duration and renewal.

 Important changes are as follows:

  • The maximum duration of fixed-term contracts drops from three years to two (with a limit of three renewals) and for uncertain term contracts from six years to four. This will impact the way companies do business as unless a fixed-term contract worker is employed on a permanent basis at the end of the contract. This is not something that companies will see as a positive especially those with any hiring restrictions in place. We strongly advise that companies revise their hiring policies and their forward business planning timelines.
  • There is a notable change in relation to social security obligations as of 1 January 2021. Any company that makes excessive use of fixed-term contracts can be hit with an additional annual social security charge of up to 2%, applied to the total of the company’s permanent contracts basic renumeration. To note, this does not include short-term contracts or fixed-term contracts for replacing employees on parental or sick leave. We advise companies revise their contracts and working practices as soon as possible to ensure they fall within the rules.
  •  Fixed-term contract for the launch of a new activity of uncertain duration or of a start-up with less than 250 employees can only be used within a two-year period from that event. Also, you can no longer justify hiring on a fixed-term contract first-time jobseeker or long-term unemployed, and, if hired on a permanent-contract basis, the trial period extends from 90 to 180 days.

 Additional changes include: 

  1. ‘Individual bank hours’ have been eliminated, however any already in place will remain in force for one year from 1 October 2019.
  2. Access to unemployment benefit entitlement is available after 120 days minimum period of contributions (previously 180 days);
  3. An increase in length for short-term contracts from 15 to 35 days, with a maximum of 70 days annually per employer;
  4. Continuous training entitlement for workers increases to 40 hours per year (previously 35 hours); and,
  5. A collective agreement can be used to remove the rules stipulating how overtime is paid, but only when the agreement provides more favourable conditions to the workers.

 For further clarification on any of the issues above or to find out how your company could be affected and any action that needs to be taken, please do get in touch.

 

Please note, your browser is out of date.
For a good browsing experience we recommend using the latest version of Chrome, Firefox, Safari, Opera or Internet Explorer.