Hiring employees in Portugal

Portugal’s labour law is governed by the Portuguese Labour Code (Código do Trabalho), which outlines the rights and obligations of both employers and employees. This law is supplemented by the Portuguese Constitution, which establishes core labour rights, including protection from unfair dismissal, fair wages, and the right to unionize.

In addition to national legislation, Collective Bargaining Agreements (CBAs), also known as Collective Regulation Instruments (IRCTs), play a significant role. These agreements, negotiated between employers and trade unions, may provide terms that exceed the statutory minimum, offering benefits like higher wages or additional leave entitlements.

The Authority for Working Conditions (ACT) is responsible for enforcing compliance with labour laws. Employers must comply with the legal requirements to avoid penalties.

Companies operating or intending to operate in Portugal must thoroughly understand the Labour Code to ensure compliance with local legal requirements. They should also identify any relevant Collective Bargaining Agreements (CBAs) that apply to their industry, as these agreements may impact their obligations and employees’ rights. Employees who believe their labour rights have been violated can report such issues to the Authority for Labour Conditions (ACT), which is empowered to investigate and impose penalties on employers found to be in non-compliance. This highlights the critical need for international companies to prioritize strict adherence to labour laws in their employment practices in Portugal.

Hiring EU/EEA/Swiss Citizens

Employees from the European Union (EU), European Economic Area (EEA), or Switzerland can live and work in Portugal without requiring a residence permit or visa. However, if they intend to stay for more than three months, they must obtain a Residence Certificate from the local city hall.

Hiring non-EU Citizens

Hiring non-EU citizens is a more complex process. These employees typically require a work visa and a work permit. A job offer from a Portuguese employer is generally required to apply for a work visa. The process involves sponsorship by the employer, and various visa options exist depending on the nature of the job (e.g., job seeker, skilled workers, highly qualified professionals, digital nomads).

The Agency for Integration, Migration, and Asylum (AIMA) handles immigration procedures, replacing the Portuguese Immigration and Borders Service (SEF).

The prospective employee should apply for a Residence Visa for work (type D visa) at a Portuguese consulate in their home country. To support this, the employer needs to provide a job offer or employment contract.

The visa application is reviewed by the immigration authorities (now AIMA) and, if approved, the consulate issues a residence visa typically valid for 4 months, allowing the individual to travel to Portugal. After entry, the employee must obtain a Residence Permit card to legally reside and work longer-term.

In addition to a traditional job visa, Portugal offers specific visa categories that facilitate hiring foreign talent, including the Tech Visa, the Highly Qualified Visa, and the Digital Nomad Visa.

Employment Contracts

Employment contracts in Portugal can be either written or verbal. Certain types of contracts, such as those with non-EU workers, temporary contracts, remote work agreements, part-time contracts, fixed-term contracts, contracts with multiple employers, and management contracts, must be formalized in writing. Contracts should detail essential terms, including the nature of the work, salary, working hours, and termination conditions.

In some instances, the drafting of legal contracts by non-qualified agents may be considered unauthorized legal practice. To ensure full compliance with the Portuguese Labour Code and other applicable legislation, it is advisable that employment contracts are drafted with appropriate legal expertise, thereby safeguarding the company’s adherence to labour regulations.

There are various types of contracts:

• Open-ended contracts (“contrato sem termo”), the most common, are indefinite and permanent.
• Fixed-term contracts (“contrato a termo certo”) are for specific projects or to replace absent employees, with a maximum duration of two years and renewable up to two or three times. This type of contract is highly restricted.
• Part-time contracts (“contrato a tempo parcial”) must be in writing and involve a reduced work schedule.
• Short-term contracts (“contrato de muito curta duração”) are used for seasonal or temporary work, lasting no more than 35 days per term or 70 working days per year, and may not always require a written agreement.

Remote work agreements based on mutual agreement between the employer and employee, allowing for either certain days of telework or full remote work. Typical employment characteristics, including the employer’s direction, still apply.

Probationary Periods

Probationary periods are standard in Portuguese employment law, with duration varying based on the contract type and employee role. During probation, both employer and employee can terminate the contract with minimal notice, although specific requirements apply once the probation period exceeds certain lengths.

Employers must inform the employee in writing about the probationary period’s duration and conditions within 7 days, or the probationary period will be considered non-existent. It is best to include a probationary period clause in the employment contract.

For open-ended contracts, the probation period is typically 90 days, extendable to 180 days for roles requiring technical complexity and responsibility, and up to 240 days for senior positions. For fixed-term contracts, the probation period is 30 days for contracts lasting six months or more, and 15 days for contracts shorter than six months.

Managing the Employment Relationship in Portugal

Working Hours and Overtime

The standard full-time working week in Portugal is 40 hours, with a maximum of 8 hours per day. Overtime is limited to 2 hours per day and 150 to 175 hours annually, depending on company size. Overtime must be compensated at higher pay rates, 125% of the regular hourly wage for the first hour on weekdays, 137.5% for additional hours, and 150% for work on weekends and public holidays. If an employee exceeds 100 overtime hours annually, higher rates may apply.

Employees are entitled to a minimum 11-hour rest period between workdays and a rest break of 1 to 2 hours if working over five consecutive hours, typically taken as a lunch break. Employers must also grant at least one day off per week, generally on Sunday.

Paid Annual Leave and Sick Leave

Employees are entitled to 22 working days of paid annual leave (“paid vacation”) each year. In their first year, employees accrue two days of leave per month, typically up to a maximum of 20 days, with leave available after six months of service. Unused leave generally expires on January 1st but can be taken until April 30th. Cash in lieu of unused leave is usually not permitted, except in specific circumstances.

Sick leave (“baixa médica”) in cases of illness or injury is provided by the Portuguese social security system with the first three days potentially being unpaid. After this period, sick pay is granted based on a percentage of the employee’s salary, for up to 1,095 days.

Parental Leave and Other Types of Leave

Portuguese labour law offers comprehensive parental leave entitlements. Mothers are entitled to up to 30 days of maternity leave before childbirth, with a mandatory 42 days of leave post-childbirth. Fathers are granted 28 days of paternity leave within the first 42 days, with 7 consecutive days taken immediately after birth. Parental leave can be shared between both parents, lasting between 120 and 150 days, with possible extensions. During this period, employees typically receive full salary compensation through the Social Security system.

Additional leave entitlements include marriage leave, bereavement leave, family care leave, and unpaid leave, each subject to specific legal conditions.

Employee Compensation and Benefits

The national minimum wage for 2025 is €870 per month. Employees are also entitled to mandatory Christmas and holiday bonuses, each equivalent to one month’s salary. Additional benefits like meal vouchers and transport allowances may be offered by employers.

Data Privacy

Data protection is a crucial element of Portuguese employment law, with personal data processing governed by the General Data Protection Regulation (GDPR). Employees’ personal data is given strong protection under this framework, ensuring that any data related to an employee’s performance is used only under specific, justified circumstances (e.g. payroll). It cannot be utilized in ways that may negatively impact the employee’s rights or interests.

Non-Compete Clauses

Under Portuguese law, non-compete clauses are enforceable in employment contracts, particularly for employees in higher-level positions with access to sensitive company and industry information. These clauses can extend up to three years after the termination of employment, and employees must be financially compensated for the restriction imposed on their post-employment activities.

Employment Termination in Portugal

Under Portuguese law, the termination of employment is generally only permissible with just cause, with exceptions made during the probationary period or in cases of mutual agreement between the employer and the employee.

Employee Resignation

Employees have the right to voluntarily resign from their position, provided they issue a written notice to the employer. The required notice period depends on the employee’s length of service and the type of employment contract in place. After the probationary period, the resignation notice period typically ranges from 15 to 60 days, depending on the employee’s tenure and type of employment contract.

Employer-Initiated Termination

Employers may terminate an employment contract for various reasons, each of which is subject to specific procedural requirements. The primary grounds for employer-initiated termination include:

Just Cause and Disciplinary Dismissals

Occur due to serious misconduct occurs when an employee’s conduct or failure to fulfil legal or contractual obligations justifies termination. Common grounds for disciplinary dismissal include disobedience to employer instructions, violations of worker’s rights, damage to company property or unjustified absenteeism.

The process for disciplinary dismissal requires the employer to follow a formal procedure, which includes the issuance of a written notice (“Nota de Culpa”), detailing the reasons for the dismissal. The employee is granted the opportunity to respond and present a defence. Notably, no notice period is required for dismissals based on disciplinary grounds.

Disciplinary proceedings must be conducted by an impartial individual or body well-versed in the complexities of such procedures and committed to upholding the rights of both the employee and employer, thereby guaranteeing a fair and equitable process. The right to a fair procedure is mandated by the Portuguese Constitution, and failure to uphold this right may render the disciplinary process unlawful.

Objective Dismissal and Redundancy

Objective dismissal refers to termination due to factors unrelated to the employee’s conduct, such as economic reasons; structural changes or technological advancements (e.g., redundancy or position elimination)

In these cases, the employer must adhere to a consultation process and notify the affected employee in writing. The notice period for objective dismissals varies according to the employee’s length of service, ranging from 15 to 75 days.

Collective Dismissal

Collective dismissal applies when an employer is required to terminate the contracts of multiple employees due to the objective reasons outlined for objective dismissal. In companies with fewer than 50 employees, at least two employees must be dismissed, and in companies with 50 or more employees, at least five employees must be dismissed. The collective dismissal process involves consultation with employee representatives and mandatory notification to the Ministry of Labor.

Termination by Mutual Agreement

Employment contracts may be terminated by mutual consent between the employer and the employee. Such agreements must be in writing. Employees have a seven-day window to revoke the agreement unless it has been notarized.

Severance

In the case of objective dismissal, the employee is generally entitled to severance pay. If a dismissal is found to be unlawful, the employee may be entitled to reinstatement, back wages, and compensation for damages.

Certain employees enjoy enhanced legal protections, including those who are pregnant, on maternity leave, or on parental leave. Dismissing these employees is subject to stricter legal conditions.

 

For more information contact our Employment Law department.