PORTUGAL: An Introduction to Employment
Although economic growth in Portugal slowed after the pandemic years in 2023, the labour market has remained robust amid record high employment and activity rates: employment in tourism, construction and administrative services increased when compared to the previous year. Labour activity recovered from previous years, helped by a substantial rise in the number of foreign workers in Portugal. Both employment and activity rates reached record high levels, while wages grew faster than inflation; the national minimum wage being EUR760.
According to Eurostat data, Portugal was one of the European countries where the number of employed people grew more in 2023: unemployment decreased, reaching 6.4% and is forecast at 6.5% for 2024. Along with legislative changes, the most striking of which was Law No 13/2023 of 3 April, which amended the Labour Code and other related legislation, not only were several changes in important labour matters implemented, but the reinforcement of the powers of the Authority for the Labour Conditions and the sanctioning framework regarding non-compliance was also increased, meaning that managers and directors will be jointly liable for the payment of fines.
Main Legislative Changes in 2023
Main changes within the labour legislation were framed by four main goals.
Reinforcement of young people’s value in the labour market and combating precariousness
Internships
The monthly wage of professional trainees was increased, and the amount is now subject to social security contributions paid by the promoting entity, ensuring trainees will be framed as dependent employees, for social security purposes. Trainees will further benefit from a work accidents insurance. A trial period must now be established in writing and there is a reduction/exclusion of respective duration for employees who had an internship with positive a evaluation, for the same activity even with a different employer, which duration was equal or higher than 90 days, within the 12 months prior to the commencement date of the employment contract.
Working conditions and combating precariousness
As of May 2023, the employer can only demand exclusivity of the employee (preventing them from carrying out another professional activity) in specific situations, based on objective grounds, such as health and safety or professional secrecy of the functions performed.
In what concerns the term employment contracts (herein included temporary employment contracts), the employer cannot execute a new contract (term employment contract or services agreement) for the same job positions or professional activity before the lapse of one-third of the respective duration.
For the performance of remote work, the employer and employee must now agree on the amount of compensation paid to the employee for incurring in additional costs of working remotely, which is a tax cost for the employer and does not constitute income for the employee, up to a maximum of EUR1 per day.
Overtime work payment has also increased; when employees reach 100 annual hours, payment doubles.
Legal compensation paid by the employer upon termination of the employment contract has also increased. For permanent employment contracts, compensation was increased from 12 to 14 days of base remuneration and seniority allowances, and for term employment contracts, from 18 days to 24 days of base remuneration and seniority allowances.
As a reinforcement of the Authority for the Labour Conditions, it is now granted the power to inform the Public Attorney of dismissals it considers to be unlawful to bring forth judicial interim procedures to suspend such dismissals.
In addition, two other measures have been implemented that have been subject to controversy regarding their respective legality, such as the prohibition of the employer outsourcing external services which were previously ensured by employment contracts terminated by collective or individual redundancy processes in the previous 12 months (this has been argued to be in contradiction with the employer’s right to free economic initiative, namely, the right to restructure the activity and inherent costs, resorting to outsourcing), as well as the labour credits no longer being able to be deemed extinct by means of a written declaration of the employee, unless it is done within a judicial transaction (meaning that the judicial proceedings will increase, since the employer can only be sure the employee can no longer claim credits when done before a court).
Work-life balance
Work-life balance has also been taken into consideration, being now established as a mandatory non-discriminative treatment when employees use their paternity rights. Furthermore, a new figure has been created, the “informal caretaker”, which refers to employees who may take care of a family member. It is established that these employees cannot be discriminated against in the attribution of payments/benefits related to assiduity, punctuality, evaluation and progress in their professional career. Also, under this regime, employees are entitled to the same number of absence days, as well as to an annual leave, for the purposes of taking care of the family member. Regarding sickness absences, employees may now be absent from work and declare by means of a digital certification of the national health system that they were ill (maximum twice per year, with each declaration being a maximum duration of three working days).
Monitoring the digital transition in companies and regulating new forms of work performance
In face of the global increase of digital work and the lack of respective regulation, a legal presumption has been established concerning all activities performed on digital platforms. It is the beneficiary of the work which has to prove that the working relationship is not a dependent employee relationship. The performance of work is now subject to several criteria, to assess if the existing relationship between the company and the worker is of a dependent nature, in which case, the worker will have the same rights and obligations.
Relaunching collective bargaining
Service providers in a situation of economic dependence now have the right to representation of their socio-professional interests by trade union associations or employees’ committees. In situations where the company outsources services from a third party for the performance of activities corresponding to the corporate purpose of the company, respective collective labour regulation instruments will apply to the service provider. This has brought with it several issues, since it also implies determining the main services provided by the company, as well as framing the outsourcing services within such activity. Furthermore, service providers in a situation of economic dependence also benefit from the CBA being applicable to the company employees.
ESG
The Authority for Working Conditions launched an inquiry into several companies with more than 50 employees, requesting they present a study of the existent remuneration (paid to man and woman), justifying the existing gender pay gap and presenting a one-year plan to fill any gaps. The authority is still analysing the plans presented by the various companies. There is also an obligation for employers to implement minimum quotas for disabled employees, and regarding 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.
2024 Trends
The employment landscape is constantly evolving, shaped by economic factors, technological advancements, and changes in social culture. In 2024, it is essential to understand the emerging trends that will impact the employment market, job seekers, employees, employers, and the overall workforce.
A major global trend in 2024 is the continued growth of the gig economy. Individuals are embracing freelance, seeking flexibility and autonomy in their careers. It will be necessary to evaluate the existing legal terms in which service providers provide their respective services, for companies to avoid comparison with dependent employees and inherent implied costs.
Remote work and flexible arrangements are now the norm, and companies must adapt. Advances in technology make it easier for employees to work from anywhere, allowing companies to recruit talent globally. This shift not only provides a better work-life balance, but also fosters inclusivity and diversity in the workforce, which is essential to accompany societal changes.
Companies must prepare themselves to invest in learning and continuously acquire new skills for the development of existing business or launching into new sectors. Developing a growth mindset and staying adaptable are crucial for success in the face of essential technological advancements. Given all of these remarkable labour changes, 2024 will be a stimulating year for labour law in Portugal. Human resources management will face new challenges in order to be upfront and will have to adapt their policies to fulfil the aspirations of the younger generations and to bring labour relations to a new level.
A major trend will be attaining effective and real inclusion in work environments, providing equal opportunities for growth, and fostering a culture of respect. Implementing diversity training programmes and promoting inclusive leadership will be key strategies for organisations committed to building new inclusive workplaces, with an equal and transparent wage gender policy.