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End of Employment in Portugal

General Guidelines

Employment terminations agreed between the employer and employee are relatively simple, requiring just a written statement. Employees have seven days from the effective date to revoke the termination agreement unless executed in front of a public notary.

Terminations initiated by employers, on the other hand, are a bit more complicated and require a valid reason, disciplinary procedure and compensation corresponding to 12 days of basic pay and seniority allowances for each year of service.

The employer cannot unilaterally terminate employment without just cause.

Employers must provide employees with a notice period according to the number of years they have been working for the company. The process takes several weeks and, if not done correctly, the dismissal is considered unlawful and void. Reasons for termination include:

  • Just cause (serious offences that render the job unreasonable).
    • Illegitimate disobedience to lawful orders
    • Breach of rights and guarantees of other employees
    • Repeated conflict provocation with coworkers
    • Repeated lack of interest in performing duties that are part of the job role
    • Severe material damages caused to the employer
    • Untrue statements without justification
    • Unjustified absence from work causing direct damage or serious risks to the employer (5 successive or ten interrupted absences)
    • Intentional non-compliance with health and safety at work
    • Physical violence or insults committed at the workplace to coworkers
    • Kidnapping, theft, or any crime related to people’s essential rights
    • Breach or refusal to comply with court decisions
    • Critical productivity reduction
  • Redundancy
  • Expiration 
  • Revocation
  • Collective dismissal for economical, structural or technological reasons
  • Dismissal for inability to adapt
  • Dismissal for disciplinary grounds subject to prior internal dismissal disciplinary procedure
  • Unilateral termination of the contract by the employee with or without just cause
  • Mutually agreed termination

A business transfer is only a valid cause for termination by the employee in case such transfer represents serious damage to them.

In cases of disciplinary dismissal, the employer doesn't have to pay compensation for the termination of the employment contract or provide for a notice period. However, they must also always complete the dismissal procedure. The dismissal is in effect once the employer informs the employee of their formal decision to dismiss. This is the last step of the mandatory disciplinary process.

Employment contacts cannot establish different rules on termination, even if they are more beneficial to the employee. They also cannot set out in advance the value of the termination compensation.

Employees are exempt from paying taxes on the compensation they receive, up to the average of their regular taxable 12-month salary multiplied by the years of work. This does not include labour credits paid to the employee when of the termination date (allowances, retribution, etc.) The exemption does not apply for termination payments to directors and board members.

Employers should submit a Declaração de Situação de Desemprego form to the Social Security authorities indicating the reason for termination. Termination by the employer entitles the employee to severance pay where there has been termination for objective reasons.

Procedure guidelines

Employers must ensure to follow a standard and documented disciplinary procedure before terminating an employment contract (if employing ten workers or more). It comprises three stages:

  1. Accusation: the employer supplies a written description to the employee about their wrongdoing and extends a warning about the intention to dismiss
  2. Defence: the employee reviews the disciplinary file, responds to the accusation in writing and requests probative diligences, which the employer cannot refuse (unless an irrelevant or a delaying tactic).
    1. Employee representative bodies may issue a non-binding opinion on the dismissal, which the employer must take into consideration before reaching their decision
  3. Decision: the employer gives a detailed, written dismissal decision (the mandatory content of which depends on the specific procedure for termination)

The contract of employment ends upon receipt of the dismissal decision by the employee. The employee has five days to seek an injunction to suspend the effect of dismissal and 60 days to challenge it in court.

Disciplinary procedures must be initiated within 60 days upon the employer becoming aware of the wrongdoing and, within one year from the moment the offence took place.

If employing less than 10 workers, the formal steps are the same. What changes is the timeline as well as the need to communicate with  Unions and the workers' representatives.

Unfair Dismissal in Portugal

Superior protection against dismissal is extended to pregnant workers, employees who have given birth in the past 120 days, breastfeeding mothers, and those on paternity leave. 

Dismissed employees may file a claim before a labour court to challenge the dismissal. If the court decides that there was any illegal procedure or lack of reasons or formalities for a dismissal, employees are entitled to the salaries which they would have received if the dismissal had not taken place and to an eventual compensation for damages suffered ranging between 15 and 45 days of base salary plus a seniority bonus. They may also choose to be reinstated in the company.

Redundancy Procedure

Employees who are terminated due to collective dismissal or redundancy are entitled to severance. The amount an employee will be paid depends on their seniority within the company.

Collective dismissal happens when:

  • Two or more employees in a company with less than 50 employees are let go within three months
  • Five or more employees in a company with more than 50 employees are let go within three moths

Collective redundancies are considered dismissal due to termination of a job position when the employer terminates an employment contract and justifies it on said elimination, if due to economic, structural or technological reasons related to the business.

Grounds for collective dismissal include:

  • The closure of one or more sections of the company
  • The reduction of the number of employees for the market, structural or technological reasons

Unions or Workers commissions may be involved in both collective dismissals and simple redundancies.

Resignation Procedure in Portugal

For employees who want to leave their jobs, they must inform their employers in a written letter of their desire to resign and respect the notice period, which varies according to how long they have been with the company:

  • Less than six months: 15 days notice
  • Between six months and two years: 30 days
  • More than two years: 60 days

The notice periods depend also on the type of contract:

  • Fixed-Term contracts: 30 or 15 days in advance, if the contractual duration is at least six months or less
  • Other contracts: 30 or 60 days in advance, depending on whether the employee has worked up to two years or more than two years

Employees representing a union, as well as highly technical or executive level professionals may have a notice period of six months, according to their employment contract or collective bargain agreement. Employees who do not comply in whole or in part with the notice period must pay the employer compensation in an amount equal to base pay and seniority pay for the period in question.

If the employee has a just cause reason for resigning, they can include that in their letter and take it to the labour court (not obligatory), requesting compensation (15 to 45 days of base pay plus an extra remuneration for every year of service, minimum 3 months' wage). Just cause reasons are:

  • Salaries are paid late by the company knowingly
  • The employer doesn't follow the collective bargain agreement or respect the employee's rights
  • The company doesn't provide the appropriate health and safety measures
  • The employee is discriminated, harassed or physically and emotionally hurt by the employer

Regardless of the reason for resigning, it is an employee's right to get paid for unused annual leave and accrued Christmas pay.

The employee will also be entitled to unemployment subsidy but the amount depends on their salary levels and contributions profile.

Other End of Employment Guidelines in Portugal

Notice period

Notice periods depends on the number of years of service:

  • Fifteen days for employees with less than one year of service
  • Thirty days for employees with one to five years of service
  • Sixty days for employees with five years or more and up to ten years of service
  • Seventy-five days for employees with more than ten years of service

Severance

Employees are entitled to compensation calculated in the Labour Code terms, corresponding to 12 days’ salary for every year of work, with the following maximum limits:

  • The salary used as a basis to calculate the compensation may not be higher than €12,700 (20 times the national minimum wage)
  • The global amount of compensation may not be higher than 12 times the monthly salary or €152,400 (240 times the national minimum wage)
  • For a partial year, compensation is calculated proportionally

Most employees negotiate more time than this, especially in the case of a mass lay-off.

This page was last updated on 
22 September, 2022,
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