Article

Labour Code, Article 366; Decree-Law 210/2015 of 25 September; Law 69/2013 of 30 August; Law 70/2013 of 30 August; Law 13/2023 of 3 April

Description

In 2011, severance entitlements were reduced from 30 to 20 days pay per year of service. Law 69/2013 further reduced severance entitlements to a maximum of 12 times the individual’s base salary plus seniority pay or 240 times the statutory minimum wage (or 18 times the individual's base salary plus seniority pay in case of fixed-term or temporary contracts). Law 13/2023 of 3 April changes the calculation of the compensation.

As a result of these and prior changes, severance will generally be based on three different formulas for periods of service before, during and after the following dates:

• Employment contracts prior to 1 November 2011: compensation is equivalent to one month of base salary per year of seniority.
• Employment contracts between 1 November 2011 and 30 September 2013: compensation is equivalent to 20 days of base salary per year of seniority.
• Employment contracts from 1 October 2013 to 30 April 2023: compensation is equivalent to 18 days of base salary per each complete year of seniority (in the first 3 years, when the contract has not reached 3 years on October 1 2013) and to 12 days of base salary per each complete year of seniority (in the subsequent years until the date of termination).
• Employment contracts before 1 May 2023 (Law 13/2023 of 3 April): compensation is increased from the current 12 to 14 days times the individual’s base salary plus seniority pay per each complete year of seniority (article 366). The new amount will only be applicable as from the entering into force of the new law, which means that for older contracts the compensation will be calculated based on 12 days in relation to the previous years.

The compensation cannot exceed 20 times the minimum national wage (€760 in 2023, total €15,200). To view the current national minimum wage, visit Eurostat.

This refers both to individual and collective dismissal.

Additionally, Law 13/2023 of 3 April amends Labour Code in its articles 344 and 345 and establishes the amount of the compensation as a result of the termination of fixed-term contracts is increased to 24 days times the individual’s base salary plus seniority pay per each complete year of seniority.

The Compensation Fund (Fundo de Compensação do Trabalho) and the Guarantee Fund for Work Compensation (Fundo de Garantia de Compensação do Trabalho - FGCT) were extinguished since May 2023. They were used to partly finance severance payments and were applicable in situations of both individual and collective dismissals.

Commentary

The new regulation is based on the 'Agenda for Decent Work' that was approved in the Assembly of the Republic, with favorable votes of the Socialist Party (PS) and abstentions of the Social Democratic Party (PSD), Right Party (Chega), Animals and nature Party (PAN) and Livre Party. The Left Bloc, the Liberal Initiative and the Portuguese Communist Party (PCP) voted against.

Additional metadata

Cost covered by

Employer

Involved actors other than national government

National government Employer organisation Trade union Works council

Involvement (others)

None

Thresholds

Affected employees: No, applicable in all circumstances
Company size: No, applicable in all circumstances
Additional information: No, applicable in all circumstances

Sources

• Labour Code (Law 7/2009, of 12 February) – updated version
• Law 210/2015 of 25 September
• Law 69/2013 of 30 August
• Law 70/2013 of 30 August
• Clauwaert, S., Schömann, I. (2013), The crisis and national labour law reforms: A mapping exercise, Country report: Portugal, ETUI.
• Law 13/2023 of 3 April - rectified