Employment Law in Portugal

As employer/employee you need to know employment law in Portugal: minimum wage, market average and local purchasing power are key factors.
Article Last Updated: 08 Oct, 2023 under Employment Law: Dismissals & Disputes

The Portuguese employment law model is very similar to most European countries: there are 40 hours per week segmented into 5 days of 8 hours work, with some exceptions provided by the Portuguese Labour Code (CT). 

As in most countries, there is a minimum wage in the country, which guarantees workers the minimum to live on. As an employer and employee, it is important to understand better how the minimum wage, the average and the purchasing power in Portugal is. 

The minimum wage in Portugal in 2021 is 665€, the value was readjusted on 1st January 2021. If compared to the other countries of the European Union, this is an intermediate value, it is far from the top countries such as Luxembourg and Ireland, which exceed 1,700€.

1. Employment Law in Portugal: Residency and Working

The first steps to be able to work in Portugal is to obtain the NIF (tax identification number) and NISS (social security identification number). Obtaining a work visa in Portugal is extremely difficult. In order to favour nationals and residents in Portugal, one of the requirements for a work visa to be granted is that there is no citizen in Portugal with identical qualifications to occupy the position. 

This imposition makes it virtually impossible to obtain a work visa. But this does not mean that it is not possible to obtain residence and work legally in Portugal. In legal terms, a foreigner entering Portugal with a tourist visa cannot work, but in reality this is usually the case. 

It is possible to enter Portugal with a tourist visa and then conclude a work contract, and with this contract you can obtain residence in Portugal. According to the Labour Code of the Portuguese Republic, article 11, an employment contract is an agreement in which "a natural person undertakes, for remuneration, to provide his activity to another person or persons, within the scope of organisation and under their authority". 

In Portugal, the written wording of employment contracts is not mandatory, although it is recommended so that the parties are aware of the terms of the employment relationship. Employment Law in Portugal determines the main types of employment contract provided for in the Labour Code are:

  • Fixed-term employment contract
  • Permanent contract
  • For an uncertain term
  • Very short term employment contract
  • Temporary work
  • Part-time employment contract
  • Provision of services

2. Fixed-term employment contract

This type of employment contract is probably the one that has undergone the most changes with the new guidelines. The fixed-term contract, or resolutive term contract, has a defined term and should only be used to meet temporary needs of the company such as a specific project, or to replace another employee who is absent. According to Article 140 of the Labour Code, the fixed-term employment contract should be used in the following situations:

  • Replacement of a worker who is absent or temporarily unable to work.
  • Replacement of an employee on leave without pay.
  • Exceptional increase of the company's activity.
  • Seasonal activity.
  • Execution of a project with a pre-defined deadline.
  • Hiring of someone who has been unemployed for a very long period of time.
  • Among other situations covered by legislation, which should be consulted.

The fixed term contract has a maximum duration of two years, with a limit of three renewals, and the total duration of the renewals cannot exceed the initial period of the contract. Furthermore, this type of contract may only be less than six months in the case of a seasonal or other very specific activity in terms of time. 

If the contract is subject to more than 3 successive renewals, it is converted into an open-ended contract. The same happens if the term does not comply with the terms of the law, it is null and void and the contract is converted into an employment contract of indefinite duration.

3. Employment contracts for an indefinite period of time

A few years ago, this was the type of contract that everyone wanted to have. And, in fact, there are still many who seek it, for safety reasons. If the company gives you an open-ended contract, it means that you are permanently employed, that you are part of the company's staff as granted by employment law in Portugal. 

The open-ended contract has no fixed term and represents a sign of trust on the part of the company towards the employee. It may arise after earlier employment via a fixed-term contract, when the duration of the previous one or the number of renewals is exceeded, as mentioned above.

4. Employment contract for an uncertain term

Similarly to the fixed-term contract, the employment contract for an uncertain term is intended to meet specific and temporary needs of a company. The difference is that the term is uncertain, i.e. there is no definite end date when the contract is signed. 

The duration will always depend on the specific case in question, that is, on the time required for a certain task to be concluded. When it is not possible to know in advance what the duration of the company's needs will be, this type of contract is chosen. 

However, this type of contract currently has a maximum duration of four years, contrary to the previous six, allowed before the new legislation. At the end of the contract, the employee is entitled to receive compensation.

5. Very short term employment contracts

This is the shortest type of contract, and it is used in very specific situations, such as seasonal agricultural activity or when a tourist event takes place, for example. It is not compulsory to have a written contract, however, the company is always obliged to communicate its realisation to Social Security through an electronic form that can be found in the Social Security Direct Portal. 

The very short-term employment contract cannot exceed 35 days and, although it is possible to conclude other contracts between the same employee and the same company, the total duration of these contracts cannot exceed 70 days of work in the calendar year. In the event of failure to comply with the previous point, the contract is automatically extended to a period of six months.

6. Temporary work contracts

In this regime, a contract is signed between the employer and a temp agency, which carries out a certain service for a client. Large companies use this type of agency to manage recruitment and selection and, in most cases, the first contracts are made with the temp agency and not with the final client. 

So, in practice, the agency that handled your recruitment will be your employer, and it will be this one that assumes the responsibilities of your contract: payment, insurance in case of work accident and all the other rights foreseen in the draft contract. 

Regarding the situations in which it is used, the temporary work contract follows the same rules as the contracts for a fixed or uncertain term, and, therefore, it is necessary to have temporary needs defined in order to be able to sign it. This contract may be used in other situations, such as the following:

  • Intermittent need for labour due to activity variation during days or parts of the day.
  • Temporary project inserted in the installation or restructuring of a company.
  • Vacancy of a job position when a recruitment process is underway to fill it.

As for the duration, this type of contract can take the form of a fixed-term or undetermined contract and, therefore, the duration will be that allowed for each of these cases. 

The only reason why it has a different name is that it is concluded with a temp agency and not directly with the company for which the activity will be carried-out. In practice, temporary workers have the same rights as the other workers in the company, i.e. they receive the same amount of meal subsidies and have access to canteens, meeting rooms or other social facilities.

7. Part-time Contracts

There is also the possibility of having a part-time or half-time contract. If the standard working week is 40 hours, in this part-time contract, the number of working hours is lower than this standard. It is a contract that is required to be in writing and the working days are agreed between the employee and the employer.

8. Contracts of service

The contract for the provision of services is made between an independent worker and a company. According to Decree-Law No. 47344 of the Civil Code, it is that “in which one of the parties undertakes to provide the other with a certain result of his intellectual or manual work, with or without remuneration". 

Companies resort to this type of contract as a way of avoiding the costs inherent in hiring a new employee, such as Social Security, for example. Here, contrary to previous contracts, the relationship is one of equality, in other words, neither the company nor the employee is above the other. Basically, one of the parties undertakes to remunerate the other for the service provided, whether intellectual or manual. 

This type of contract is widely used by independent workers with their own business and who perform services for different clients. In these cases, it is the workers - or service providers - who have the obligation to pay the taxes.

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