Terminating employment in Portugal is a formal process that requires employers to demonstrate valid reasons, adhere to notice periods, and pay severance. Likewise, employees must follow specific steps when resigning.

While the process is complex, understanding the legal requirements and following the proper procedures will ensure compliance with Portuguese employment law and employee rights.

Employee Resignation Process

In Portugal, the termination steps, whether initiated by the employee or employer, are typically outlined in the initial job offer letter or employment contract.

Employee-Initiated Termination

When an employee decides to leave, written notice is mandatory. The notice period varies based on the type of contract:

• Fixed-term contracts generally specify when employment ends as a term of the contract.
• Indefinite-term contracts, however, are subject to varying standards:
  • During probation: The notice period ranges from seven to 15 days.
  • After probation: The notice period is 30 days, but it increases with the employee’s length of service and can reach up to 60 days.
  • Executive-level positions: Notice periods can be longer, as the contract specifies.

Employees who leave before the end of their notice period might be required to compensate the employer.

Valid Reasons for Employee Termination Without Notice

Certain situations allow for the termination of the employment contract by employees without notice, including:

• Late or non-payment of salary
• Harassment or discrimination
• Unsafe working conditions
• Breach of contract by the employer

In such cases, the employee should document the issue and formally inform the employer in writing. They are entitled to compensation for unused annual leave, 13th-month and 14th-month pay (if applicable), and unemployment benefits.

Mutually Agreed Termination

When both parties agree to terminate the contract, they must formalize the termination agreement in writing. This written agreement should outline the terms of separation, including any final payments or benefits due.

Grounds for Employee Dismissal

Employers in Portugal are subject to strict dismissal procedures. Standard termination provisions supersede any modifications outlined in employment contracts, even if such modifications seemingly benefit the employee.

Termination notices must detail a valid reason or “just cause.”

Valid Reasons for Termination

• Serious misconduct (e.g., theft, fraud)
• Repeated unjustified absences
• Incompetence or persistent underperformance
• Significant changes to job requirements that the employee cannot fulfill

Termination without documented just cause is considered unfair dismissal. However, in cases of disciplinary termination, the employer is not obligated to provide notice or severance pay.

Dismissal Process

The termination process in Portugal begins with a written notice from the employer, except in cases of disciplinary dismissal or within the first 60 days of the probation period.

Notice periods vary from seven to 75 days, depending on the employee’s contract type and length of service. Employers can also offer remuneration rather than notice.

Written notice must clearly outline the reasons for dismissal, detailing any alleged wrongdoing. The employee then has the right to respond in writing, request and gather evidence, and present that evidence to support their defense.

The employer must consider this evidence before finalizing their decision. The employee’s representative can also issue a non-binding opinion on the dismissal.

If the employer decides to proceed with termination, they must detail the decision in writing. The contents of this decision depend on the specific termination procedure. Upon receipt of the dismissal notice, the employment contract officially ends.

After being dismissed, employees have five days to seek an injunction suspending the dismissal and 60 days to challenge it in court.

Redundancy

Collective dismissals and redundancies trigger severance pay for affected employees in Portugal. This applies when a company terminates multiple contracts simultaneously due to specific reasons, such as:

• Market downturns, financial difficulties, or technological reasons leading to decreased demand for particular roles
• Organizational restructuring, mergers, or acquisitions resulting in the elimination of certain positions
• Automation or technological changes rendering specific jobs obsolete

The number of employees at a company influences the criteria for collective dismissal:

• Companies with fewer than 50 employees: Dismissing two or more employees within three months constitutes a collective dismissal.
• Companies with 50 or more employees: A collective dismissal occurs when five or more employees are dismissed within three months.

Unfair Dismissal

Pregnant workers, new mothers within 120 days of giving birth, breastfeeding mothers, and employees on paternity leave or parental leave benefit from special protections against dismissal.

Successful challenges of unfair dismissal entitle employees to back pay, compensation ranging from 15 to 45 days of base salary plus a seniority bonus, and the option for reinstatement in their previous position.

Severance Pay

Portuguese law mandates severance pay to compensate employees for lost income and help them transition to new employment opportunities. The amount of severance payments typically depends on the employee’s length of service and salary:

• One month’s base salary plus seniority pay for each year of service for employees hired before October 31, 2012.
• 20 days of base salary plus seniority pay per year of service, at most 20 times the minimum monthly salary, for employees hired between October 31, 2012, and September 30, 2013.
• For employment starting on or after October 1, 2013, employees receive:
  • 18 days of base salary plus seniority pay per year for their first three years of employment.
  • 12 days of base salary plus seniority pay per year for all subsequent years under contract.

In addition to severance pay, employees are entitled to compensation for unused accrued leave.

Stay Compliant with Employee Terminations in Portugal

Partnering with an Employer of Record (EOR) can help ensure businesses follow employment laws, such as employee termination.

An EOR acts as the legal employer of your international workforce, handling all aspects of compliance, from onboarding and payroll to terminations.

To learn more about how your business can minimize legal risk and lessen the potential for financial penalties, book a demo today.