termination of employment in Portugal: laws & severance policies

Legal Grounds for Termination of Employment in Portugal

Termination procedures in Portugal adhere to standard protocols, involving notice periods unless an employer can demonstrate substantial grounds for immediate dismissal, typically attributed to misconduct or disobedience. Termination can occur due to:

Just Cause Dismissal: Serious misconduct by the employee that makes it impossible to continue the employment relationship. Examples include:      

     
• Illegitimate disobedience to lawful orders
     
• Breach of rights and guarantees of other employees
     
• Repeated unjustified absences
     
• Severe material damages caused to the employer
     
• Unjustified absence from work causing direct damage or serious risks (e.g., five successive or ten intermittent absences)
     
• Intentional non-compliance with health and safety regulations
     
• Physical violence or insults committed at the workplace
     
• Theft or other criminal activities related to the workplace
     
• Critical productivity reduction
     

Collective Dismissal: Termination of multiple employment contracts due to economic, structural, or technological reasons.

Redundancy: Elimination of specific positions due to organizational changes, such as restructuring or technological advancements.

Inadaptation: Employee’s inability to adapt to changes in their job role, especially after modifications in work processes or new technologies.

Employment Laws and Severance Policies in Portugal

When it comes to terminating employment in Portugal, understanding the legal obligations regarding severance pay and contributions is essential. Below is a detailed overview of the key considerations for both employers and employees.

Notice Period in Portugal

In Portugal, the notice period varies based on the type of contracts and the employee’s length of service:

Employers are required to provide written notice detailing the reasons for termination. In cases of dismissal for just cause, no notice is required.

Severance Pay in Portugal

Employees facing termination due to redundancy or unsuitability for the job are eligible for severance pay, based on the type of employment contract:

• Indefinite-term Contracts:  Severance pay is equivalent to 14 days of salary per year of service, capped at 12 months of base pay.
• Fixed-term Contracts: Severance pay is calculated at 24 days per year of service.

In cases of dismissal with just cause, no severance pay is required.

Probation Period in Portugal

In Portugal, the probationary period for permanent employees spans 90 days. However, for roles with high technical or complexity requirements, this period extends to 180 days. Management, directorate, and equivalent responsibility roles have a probationary period of 240 days.

• For fixed-term contracts, the probation period is 15 days when the contract is anticipated to last less than 6 months.
• If the contract duration is equal to or longer than 6 months, the probationary period extends to 30 days.

Process for Ending Employment in Portugal

 
• Written Notification: Employers must provide written termination notices.
 
• Consultation: Required for collective dismissals or redundancies.
 
• Notice Period: Must be followed unless dismissed for just cause.
 
• Final Compensation: Employers must settle all unpaid wages and severance pay.
 
• Documentation: All agreements must be documented in writing.

Employee Rights During Termination in Portugal

Unfair Dismissal Protections

Portuguese law protects employees from unfair dismissal. If an employee is dismissed without valid grounds, they can challenge it in court and may be entitled to reinstatement or compensation.

Grievance Procedures

Employees can file grievances internally before seeking legal recourse for disputes regarding termination.

Final Pay and Benefits

Employers must pay outstanding wages, unused leave, and unpaid holiday bonuses upon termination.

What Termination Documentation Is Required by Law?

Employers must provide:

 
• Termination Letter: Specifies termination details.
 
• Work Certificate: Confirms employment history.
 
• Final Payslip: Details all payments.
 
• Social Security Documentation: Required for legal compliance.

How to Stay Compliant as An Employer in Portugal

Expanding your workforce across international borders is an exciting step, but it can be a logistical nightmare to hire and pay employees in different countries. And if you need to terminate employment, it’s critical to adhere to local compliance laws. That’s the advantage of using a trusted Employer of Record like Playroll. They can:‍

• ‍Handle international compliance: Different countries each have their own federal and local laws governing employee rights. An EOR helps ensure that you are compliant with the unique set of laws for any country in which your company operates. 
• ‍Run payroll for your global team: An EOR will act as your payroll provider, paying your employees on your behalf in the local currency. The company will also have in-depth knowledge of local tax codes, regulatory practices, and everything else that goes into managing global payroll.
• ‍Scale your team anywhere: Legally hire and swiftly onboard new hires in 180+ regions without the need for entity set-up by leveraging Playroll's infrastructure, so you can freely explore new markets and focus on growth.