PORTUGAL: An Introduction to Employment
2022 Employment Overview
As the pandemic crisis seems to be coming to an end, climate imbalance worsens, new tensions arise with the Ukraine war, the economy fails to recover as initially predicted, inflation and stagnation become normalised, labour law and employees are under pressure, the urgency of rethinking the economic development model pursued in recent decades and the legal labour regime that has supported it is brought into focus.
This scenario clearly favours a revision of labour laws, when taking into account an absolute governing majority and the financial availability provided by the Recovery and Resilience Plan, an exceptional support programme financed by European funds, running until 2026 – which has resulted in a set of legislative amendments about to enter into force (known as “Decent Work Agenda”).
Latest Legislative Main Changes
Decent Work Agenda
The Portuguese Parliament just approved a set of legislative measures aimed at promoting decent work and fulfilling objectives considered priorities in the labour market, which will soon lead to the amendment of the Labour Code and related regimes, after a long and troubled legislative process (estimated entry in force for April 2023).
The following points can be highlighted as particularly relevant:
(i) promotion of sustainable employment and combating precariousness (for instance, by strengthening the regulation of operators in the temporary work sector, combatting false independent work and undeclared work, discouraging the resource to non-permanent work, preventing risks and abuse related to the trial period);
(ii) reinforcement of young student-employees’ protection and policies regarding professional internships;
(iii) new work forms associated with work transformations and digital economy (including telework);
(iv) improvement of work-life balance (including for informal caregivers);
(v) strengthening collective labour relations and collective bargaining; as well as
(vi) strengthening labour public services’ powers and facilitation of administrative simplification.
Legal Framework for Foreigners in National Territory
With the publication of two new diplomas, there have been substantial changes to this legal regime, which occur in a context of growing mobility and with a view to simplifying processes for obtaining the necessary titles to enter and/or stay in Portugal.
The implementation of the following measures stands out:
(i) simplification of procedures for requesting/granting visas to citizens of States in which the CPLP Mobility Agreement is in force;
(ii) new visa of limited duration which allows the legal entry of immigrants with the aim of seeking work;
(iii) possibility of temporary stay/residence visas also having the purpose of providing remote work, as well as accompanying of family members;
(iv) simplification of procedures in general and increase of documents’ validity;
(v) allowing residence permit holders to perform a professional activity for research, study, professional internship or volunteer work, complementary to the one that originated the visa.
Equal Pay
The Authority for Working Conditions has recently notified 1540 companies to present remuneration differences, that they now have 120 days to submit a pay gap assessment plan and 1 year to implement it and correct unjustified pay gaps. Currently, in Portugal, the pay gap is 13.3%.
This notification arises from a recent law regarding equal pay between men and women, which has been in force since 2019 and aims to reduce the pay gap and value women’s presence in the labour market.
We would also underline the Pay Transparency 2022 Directive, which was approved by the European Council on 15 December 2022, and is just a few steps away from being formally voted upon by the European Parliament (expected in March 2023). The Directive introduces a framework of obligations on employers requiring them to prepare gender pay gap reports, be interrogated on those reports and be subject to compulsory pay assessments where the reports reveal pay disparities of 5% or more. It also requires employers to be more transparent and objective in their hiring and salary determination processes.
2023 Trends
Remote Work
Following the introduction of social distancing measures in response to the COVID-19 pandemic, more people started working from home. In the context of the increasing importance of remote work, Portugal approved new employment legislation aimed at regulating this new model of work. Effective as of 1 January 2022, new rules are in place, addressing not only remote work, but also the employee’s right to disconnect. The first impressions of this new legislation were somehow doubtful or questionable, since there are several questions that remain to be answered and legal provisions to be clarified. Nevertheless, despite some new challenges, Portugal remains focused in getting the conditions for wider implementation of flexible ways of work, in the long run to consolidate these work models and to add new worldwide trends, such as increased flexibility or digital nomads.
ESG
Increasingly, ESG factors are being recognised as being key to driving progress and growth in Portugal. Employment-related considerations, supported by existing laws, are recognised as a significant element of ESG and are starting to have an impact on recruitment and talent retention. Such laws include legislation governing health and safety, pay transparency, labour standards and discrimination, diversity and inclusion.
Diversity and inclusion is a particular area of focus. Alongside Portugal’s comprehensive discrimination laws, there is an obligation for employers to implement minimum quotas for disabled employees (transition period is now over) and to the composition of directive and supervisory bodies of public and listed companies – which must have gender diversity representing at least 33.3% of the total members of such bodies, thereby recognising the importance of diversity in corporate governance, in view of driving wider diversity, reducing risk and increasing value.
Four Day-Week
The four day-week pilot project is part of the Government's plan to explore and promote new ways of managing working time. Its main purpose is to collect data regarding the impact of this measure on employees’ efficiency, physical and mental health, as well as on the economic and functional impact of organisations (mostly, productivity and competitiveness).
According to the programme, the project will have three phases:
(i) preparation (briefing sessions conducted for companies interested in participating);
(ii) implementation (for a period of six months, estimated to occur in 2023 2nd semester);
(iii) post-implementation (participating companies will reflect on the experience developed, which is expected to take place during December 2023).
The main characteristics of the project are the following:
(i) participation is open to all interested private sector companies (not public sector at this stage), and is totally voluntary and reversible;
(ii) companies’ selection will take place in 2023 1st semester;
(iii) there will be technical support, but no public financial benefits;
(iv) the experiment cannot involve salary decreases and must imply a reduction of the weekly working hours.
While this is a promising prospect, the possible and/or effective implementation of a four-day week in Portugal is on a very early stage.
Given all of these remarkable labour changes, 2023 will be a stimulating year for labour law in Portugal. Human resources management will face new challenges and will have to adapt their policies to fulfill the aspirations of the younger generations and to bring labour relations to a new level.