Portugal: The Employment Reform - New Challenges Of A Global Market

Last Updated: 11 April 2012
Article by Cláudia Vaz Póvoa and Filipa Farinha Santos

The Commitment for Growth, Competitive and Employment (CGCE) was signed with the purpose of implementing a long term reform in the Employment Sector, whereby a more permanent, stable and competitive model is created, based on a more interventive and thought out legislation.

The new economic policies and the increment of active employment and training strategies within the Commitment will never reach the self set interventive goals if, on a parallel time scale, there isn't a coexisting intervention and restructuration of employment laws.

Thus the final dossier of the CGCE focuses exclusively on Employment Law and approaches various issues which will ultimately revolutionize Portuguese employment foundations and shorten the distance between this system and other European models.

Working Time Rules

The integration of Portugal into a global economy demands from companies a great capacity of adaptation, namely in terms of working hours.

The CGCE suggests a better use of the existing resources within the companies via the adaptation and better organization of the work time, notwithstanding the need to respect the work time limits.

Thus considered, there are three measures to be created and implemented:

  • Set up of a Banco de Horas agreed upon individually between the employer and the employee, in which 2 extra hours of daily work can be negotiated, with a limit of 50 weekly hours and 150 yearly hours. To date, the Banco de Horas could only be negotiated within collective conventions;
  • Set up of a collective Banco de Horas, established in similar terms to those of the group adaptability, whereby all employees of a certain establishment or sector will be covered as long as a majority of 60% or 75% (depending if it is foreseen in a collective Convention or agreed upon individually) of the employees agree to such a measure;
  • Faced with the above, alteration of the current resting periods, whereby an employee that can work over 10 hours must rest between 1 to 2 hours, and cannot work for more than 6 consecutive hours, unlike the current legal limit of 5 hours.

Furthermore, to further stimulate and implement the organization of the work time, the Commitment accrues alterations in the regime established for overtime which will necessarily have to be adapted and implemented within the 1st quarter of 2012, namely:

  • Withdrawal of the compensatory resting periods;
  • Cut in the amounts paid as overtime compensation – 25% in the 1st hour or fraction of hour and 37.5% per hour or fraction of hour thereon, when the overtime is carried out on a working day; and 50% when overtime is to take place on the weekly resting day or on a bank holiday;
  • 50% cut of the current amounts due for overtime stipulated within the Collective Conventions;
  • Notwithstanding, for the following 2 years, the legally imposed limits are applicable to all, individual contracts or collective conventions, and only once the 2 year probation period is over are the aforementioned limits applicable to collective conventions, unless new limits are negotiated during said period;
  • 50% cut of the overtime pay received on a bank holiday in a company with authorization to operate without interruption, notwithstanding the employer's option to maintain the possibility of compensatory rest instead of the overtime compensation payment;

Alterations to the Bank Holiday and Holidays' System

a) Bank Holidays

With reference to Bank Holidays, it has been long discussed that the number of days off will be reduced and, within the Commitment, the parties have agreed upon a reduction between 3 to 4 days, in spite of the non disclosure of the precise dates.

Furthermore, it has been set forward that the date on which the Bank Holidays are commemorated will not be changed, however, should the employer decide to close the company or establishment on the day immediately before or after a Bank holiday that falls on a Tuesday or Thursday, respectively, the employee will be forced to take said day off as a day of holiday or make up the time off in the future.

It is also hereby introduced a new system to avoid unjustified absences between a bank holiday and a weekend, whereby an unjustified absence for a day or half a day immediately before or after a bank holiday translates in an immediate loss of payment for the respective resting days or bank holiday.

b) Holidays

The Commitment has revoked the 3 additional days of holidays, re-establishing the annual holiday period of 22 working days, with no possibility of extensions.

Dismissals

The parties agreed on alterations within the Employment Code as to allow a greater flexibility of dismissals due to individual redundancies and to employee's inadaptability.

a) Individual redundancies

The employer has been given the possibility of determining the criteria for the redundancy, as long as the criteria proves to be relevant, non-discriminatory and adequately justifies the redundancy itself.

Furthermore, the obligation to place the employee in a compatible work position within the company or establishment is to be ceased.

b) Employee's inadaptability

The dismissal due to the employee's inadaptability is facilitated as it is no longer dependant on technological or production innovations, and now includes further criteria such as the inability to comply with goals and the inability to adapt to new rules or work methods.

Thus considered, within this regime of dismissal, it is equally suggested that the obligation to place the employee in a compatible work position within the company or establishment is removed and therefore the employee is offered, besides the legal compensation, all the credits due as a result of the termination of the contract until the end of the notice period.

The consultation period is reduced and a deadline for the employer to issue the dismissal is established, which should be carried out in writing and presented with the due justification.

The employee can appeal the dismissal decision based on inadaptability if it is not directly based on any changes to the employment position, therefore the inadaptability will have to be verifiable and substantial, and the employer would have had to make available all the necessary means to eliminate the inadaptability situation.

Once the inadaptability situation is communicated to the employee there will be a 30 day trial period granted to the employee in which substantial modifications can be shown, however, it is equally accepted that the employee immediately terminates the contract without giving up the rights to compensation.

Compensation for the Termination of Employment Contracts

Notwithstanding the signing of the contracts until November 1st 2011, the compensation will be calculated according to new rules, although the employees acquired rights have been taken into consideration and are safeguarded:

  1. The employee is entitled to the compensation to which he/she was entitled to up to the date the new law comes into force;
  2. Should this compensation be equal or above 12 basic salaries and diuturnidades or 240 National Minimum Wages, the employee is entitled to the amount in 1), and to no further amounts accrued;
  3. Should said compensation be lower than 12 basic salaries and diuturnidades or 240 National Minimum Wages, the employee is entitled to 1) and will continue accruing the due amounts he/she is entitled to according to the new compensation laws (applicable to contracts signed after November 1st 2011) to a maximum limit of 12 basic salaries and diuturnidades or 240 National Minimum Wages.

The present alterations to the compensation calculations are mandatory and applicable to all employment contracts and collective conventions, without exception.

The CGCE further adds that the present calculation may not be definite to date. Currently, there are studies carried out comparing the various compensation payments within other European countries, and the current proposal is open to additional alterations in November 2012.

New Compensation Fund

It is only hereby referred that there is a commitment from the Government to present a Legal Project during the 2nd quarter of 2012, as to have the Fund operational in November.

Other Contract Types

With reference to the Very Short Term Contracts, whose name translates' their precise nature, an important alteration has been implemented due to the highly reserved set of activities in which this contract can be used, as it has been considered justifiable to extend the maximum duration of the contract to 15 days.

Notwithstanding, the maximum duration of the contract with the same employer cannot exceed 70 days a year.

With reference to the Service Commission, it has been agreed to include, by means of Collective Convention, new management positions.

Unemployment Benefit

Referencing the commitments already undertaken by the Government within the Memorandum of Understanding from Troika, the following changes to the unemployment subsidies are to be noted:

  • Those who are currently unemployed will maintain the benefit amounts for the duration and the amount initially approved;
  • A limitation to a maximum duration of 18 months of unemployment benefit for newly hired employees, although those who have contributed towards the system for a longer period of time will be entitled to a longer period of benefit;
  • For employee who are currently employed there will be a double standard of calculation:
  1. Those who are entitled to over 18 months of unemployment benefit will not lose these rights;
  2. All others will only be entitled to a maximum of 18 months.
  • Reduction of the maximum amount payable to 2.5 of the Social Index (€ 1,048.05), unlike the current amount of 3 SI; The minimum amounts are maintained.
  • 10% cut of the benefit after 6 months of unemployment;
  • Should both elements of a couple be beneficiaries of the unemployment benefit and have children in their care, the above will not be applicable (also applicable to single parents);
  • Reduction from 15 to 12 months of the time necessary to access the unemployment benefit;
  • Further coverage of unemployment benefit, namely to freelance workers employees who supply a service in 80% or more to a single entity, and pay Social Security.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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