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:
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.
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:
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.
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.
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:
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:
Unions or Workers commissions may be involved in both collective dismissals and simple redundancies.
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:
The notice periods depend also on the type of contract:
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:
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.
Notice periods depends on the number of years of service:
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:
Most employees negotiate more time than this, especially in the case of a mass lay-off.