Essential Business

Portugal’s new Labour Law – what it means for investors

 In News

The Portuguese President has given the green light to a raft of changes to the country’s labour laws which will impact investors and potential overseas employers thinking of relocating or setting up a company in Portugal.

The PS Socialist Government led by Prime Minister António Costa managed to get the amended law through parliament with the help of the centre-right parties PSD and CDS-PP.
The economic slowdown in the international economy and the virtual impact this could have on Portugal’s economy is one of the reasons cited by President Marcelo Rebelo de Sousa to justify his decision.
Among the measures that were approved by the parliament is the limitation on fixed-term contracts, the doubling in the length of short-term contracts, setting the maximum number of temporary contract renewals, the elimination of the so-called Individual Hours Bank (a voluntary arrangement in which work hours, accrued leave or monetary benefits swapped to compensatory leave can be saved or borrowed as agreed and was designed to promote competitiveness and productivity), the creation of an additional social security contribution paid by companies which most use fixed and short term contracts.
It also increases the trial period for young people looking for their first job and for the long term unemployed.
In short, the new law means that employers will no longer be able to hire people looking for their first job and the long term unemployed on short-term temporary renewable contracts in the government’s fight against precarious working conditions.
But the President of the Portuguese Industrial Confederation (CIP), António Saraiva says that changes to the Portuguese labour laws were not necessary since 90% of all new contracts are already open-ended contracts.
In an indirect criticism of the position held by one of Portugal’s largest unions, the General Confederation of Portuguese Workers (CGTP) “the legal changes in question were not necessary because the economy is already working”.
“Proof of this is that currently around 90% of new contracts are open-ended” he told the online news wire ECO and concluded that the revised law was a reflection of the Government’s desire to fulfil its election promises.
He also said he was not overly concerned by the social security surcharge on employers using temporary and fixed-term contracts since 90% of new contracts were now open-ended.
On the overall agreement for the Employment Code (Código do Trabalho), Saraiva says that it was “essentially respected” which was thanks to successful efforts of cross-party negotiations.
“It is not through shouting, strikes and demonstrations that problems are resolved in a democracy,” he said in a nod to the unions and some left-wing parties in parliament.


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