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Portugal: New restrictions on fixed-term contracts and enhancements to parental leave

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October 16, 2019

Amendments to the Labor Code aim to curb excessive use of temporary employment and enhance leave entitlements for working parents.

Employer action code: Act

Law No. 93/2019 has amended a number of provisions of the Labor Code to discourage excessive levels of temporary employment, among other things. According to the European Union's statistical office, Eurostat, around 22% of Portugal’s workforce was classed as temporary in 2018, well above the EU average of 14%. Parallel legislation (Law No. 90/2019) has amended legal provisions and social security benefits for parents, including new leave entitlements.

Key details

Some of the more significant changes applicable under Law No. 93/2019, effective October 1, 2019 (unless otherwise specified), include:

  • The trial employment period for first-time job seekers and the long-term unemployed hired under indefinite-term employment contracts will be extended from 90 to 180 days.
  • The use of fixed-term employment contracts in hiring for the development of new business will be prohibited for companies with 250 or more employees.
  • The maximum duration of fixed-term contracts will be reduced from three to two years, renewable up to three times, with a separate maximum on the total duration of employment under the contract renewals equal to the term of the original contract.
  • Beginning from 2020, companies employing staff on fixed-term contracts at a rate in excess of an annual indicator determined by the government for that sector will be subject to a special levy (the Additional Contribution for Excessive Turnover) of up to 2.0% of payroll for fixed-term employees based on the difference between the enterprise’s rate of fixed-term employment and the sector average. Certain types of employment under fixed-term agreements, such as temporary replacement of an employee on leave, will be excluded from the calculation.
  • The system of individual time banks will be abolished and replaced by a new group time bank to allow employees who are part of the same team, section or economic unit to negotiate group time banks with their employer, provided at least 65% of the affected employees approve the agreement. Under such an arrangement, normal working hours can be increased by up to two hours per day and 50 hours per week, subject to an annual cap of 150 hours and maximum term of agreement of four years. Agreements for existing individual time banks will automatically expire by October 1, 2020.

Law. No 90/2019 includes the following provisions, which are effective January 1, 2020:

  • Mandatory paternity leave will increase from 15 to 20 days, five days of which must be taken immediately from the date of birth and the remainder taken within six weeks. Optional paternity leave will decrease from 10 to five days. The entitlement will also be available for adoptive fathers for the first time. Pay replacement benefits are provided by social security.
  • Parental leave entitlement will be created to care for a child with cancer for up to six months at a time (renewable for up to six years).
  • Paid parental leave will be extended in certain circumstances, such as by up to 30 days for infant hospitalization or to travel to a hospital outside the mother’s normal area of residence to give birth.

A Global News Brief is being prepared on this matter.

Employer implications

Employers should ensure that their policies and processes are in compliance with the amendments to the Labor Code and the social security regime. The amendments also made numerous minor changes to existing provisions on matters such as collective bargaining, notification requirements and vocational training (increasing the minimum mandatory vocational training requirement from 35 to 40 hours per year per employee). Employers should consult with their legal advisors to understand the full impact of the changes.

Contact

Ana Marta Vasa
Senior Director, Retirement - Actuarial

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