Entrepreneurship in Portugal: aspects of labour legislation

Brief notes on portuguese labour legislation

A common doubt among those wishing to exercise a business activity in Portugal concerns the labour rights and charges linked to it.

Unlike what happens in Brazil with the CLT, Portugal has a Labour Code and a Labour Procedure Code, both complemented by special legislation.

Of course, the Labour Code (Código do Trabalho) is the primary basis of workers' rights in the country, but European law also has a strong influence in this area. The law currently in force is from 2009, and has already undergone 13 changes.

Working hours are 8 hours per day and 40 hours per week, except for civil servants (35 hours), and overtime may not exceed 200 hours per year (article 203 of the Labour Code).

The worker with an employment contract for at least 1 year is entitled to 22 working days of paid vacation.

The vacation and Christmas allowances (equivalent to the 13th salary) are paid respectively in the summer (June) and Christmas (in full, in November, or in twelfths, at the choice of the worker, pursuant to articles 263 and 264 of the Labour Code).

The food subsidy, with a daily value in 2019 of 4.77€, is not mandatory for companies, unless it is expressly included in the employment contract or in an instrument of collective labour regulation.

In cases of dismissal for just cause, the employer must communicate the intention to the employee in writing, attaching a note of guilt that will describe the facts that give basis to the decision. The deadline for replying is 10 days, and the employee may request evidential measures.

The employer is not obliged to hear more than three witnesses for each fact described in the notice of guilt, nor more than 10 in total.

Once the procedure is concluded, the decision on dismissal must be rendered within 30 days, under penalty of loss of the right to apply the sanction.

Social security charges

Employers are responsible for the payment of social security contributions and contributions in respect of their employees or trainees.

For most employees, the applicable rate is 34.75%, with 23.75% being borne by the employer and 11% by the employee.

Responsibilities in the event of transfer of the company or establishment

The most recent reform in the Labour Code, of 19 March 2018, changed the regime applicable to the transfer of a company or establishment, reinforcing the rights of workers.

The changes are of particular interest to those who intend to acquire shareholdings in companies or take on an establishment, in the contractual modality called trespasse.

According to the new article 285, paragraph 1, in case of transfer, by any title, of the ownership of a company or establishment (or even part of a company or establishment that constitutes an economic unit), the employer's position in the employment contracts of the respective workers is transferred to the acquirer, as well as the responsibility for the payment of a fine imposed for the practice of labor administrative infraction (the so-called "coima").

Paragraph 5 of the provision introduces the concept of economic unit:

The set of organized means that constitutes a productive unit endowed with technical-organizational autonomy and that maintains its own identity, with the purpose of exercising an economic activity, principal or accessory.

On the subject, the Court of Appeal of Évora decided on March 16, 2017 that the notion of transfer of a company or establishment is limited to the idea of ownership of a set of tangible assets, also encompassing a service activity, provided it is provided in an organized manner so as to constitute "an individualized and autonomous economic unit".