Permanent Employment Contracts: Portugal's Default
The Presumption of Permanent, Full-Time Employment
Article 139 of the Código do Trabalho establishes a fundamental legal presumption: all employment contracts in Portugal are presumed to be permanent and full-time unless expressly agreed otherwise in writing.
This presumption reflects Portuguese labor law's preference for stable, long-term employment relationships. Permanent contracts provide workers the highest level of job security and full statutory protections.
Characteristics of permanent employment contracts:
- No predetermined end date - Employment continues indefinitely until terminated according to legal requirements
- Full statutory protections - All provisions of the Código do Trabalho and applicable collective agreements apply
- Strict termination requirements - Dismissal requires just cause or compliance with rigorous procedural requirements
- Complete benefit entitlements - Workers receive all statutory benefits including vacation, leave, 13th and 14th month payments
- Highest job security - Portugal's dismissal protections make permanent employees difficult to terminate without substantial justification
Permanent contracts represent the gold standard in Portuguese employment, offering workers maximum security and predictability.
Written Contract Requirements
While oral employment contracts are technically valid under Portuguese law, Article 110 of the Código do Trabalho requires employers to provide written communication of essential contract terms within 60 days of employment commencing.
Essential terms that must be communicated in writing:
- Identity of both parties - Full names and identification of employer and employee
- Place of work - Primary work location or indication that work is performed at various locations
- Job category or description - Position title and nature of work to be performed
- Start date - When employment relationship begins
- Expected duration - If not permanent, the term and expiry date
- Normal working hours - Daily and weekly schedule
- Remuneration and payment schedule - Salary amount, payment frequency, and any additional compensation components
- Applicable collective bargaining agreement - If one covers the employment relationship
Practical advice: Always request a written employment contract before starting work. Review it carefully and ask questions about any provisions you don't understand. If your employer doesn't provide a written contract within 60 days, this constitutes a labor law violation you can report to ACT (Autoridade para as Condições do Trabalho).
Fixed-Term Contracts: When and How They're Permitted
Legal Grounds for Fixed-Term Employment
Fixed-term contracts represent exceptions to Portugal's default permanent employment model. Portuguese law permits fixed-term contracts only for specific temporary needs explicitly defined in Article 140 of the Código do Trabalho.
Permissible grounds for fixed-term contracts:
1. Direct Substitution (Substituição Direta)
Replacing an absent worker during:
- Maternity or paternity leave
- Illness or medical leave
- Extended vacation or sabbatical
- Secondment to another position
- Suspension of employment contract
2. Temporary Activity (Atividade Temporária)
- Exceptional and temporary increase in business activity
- One-time projects or campaigns with defined duration
- Seasonal work (tourism, agriculture, retail holiday periods)
- Event-based work (conferences, festivals, exhibitions)
3. Short-Term Work (Trabalho de Curta Duração)
- Launch of new activity with uncertain long-term viability
- Start-up enterprises during initial establishment phase
- Pilot programs or experimental operations
4. Unemployment Reduction Programs
- Hiring long-term unemployed individuals as part of employment support programs
- First-time job seekers entering workforce
- Social reintegration employment initiatives
5. Specific Authorized Situations
- Socially useful work programs
- Professional training and apprenticeship contracts
- Senior management positions (under specific conditions)
Critical requirement: Employers must document and justify which specific ground applies. Fixed-term contracts without valid temporary justification automatically convert to permanent status.
Duration Limits: Termo Certo and Termo Incerto
Portuguese law distinguishes between two types of fixed-term contracts with different duration rules:
Termo Certo (Certain-Term Contracts)
- Predetermined end date specified in contract
- Maximum duration: 2 years
- Renewable up to 3 times provided total duration doesn't exceed 2 years
- Used when the temporary need has a known expiry date (e.g., maternity leave replacement)
Termo Incerto (Uncertain-Term Contracts)
- No specific end date, but linked to occurrence of specific event or condition
- Maximum duration: 6 years for temporary activity needs
- Maximum duration: 4 years for direct substitution situations
- Used when temporary need duration is uncertain at contract start (e.g., replacing absent worker with indefinite health condition)
Exceeding these limits triggers automatic conversion to permanent employment.
The 2023 Decent Work Agenda: Tightened Restrictions
Lei nº 13/2023 (the Decent Work Agenda) significantly strengthened protections against precarious employment by tightening fixed-term contract regulations:
Key changes effective 2023:
Narrowed Definition of "Temporary Needs":
The types of situations justifying fixed-term contracts were more strictly defined, making it harder for employers to claim temporary needs exist.
Enhanced Scrutiny of Renewals:
Each renewal now requires fresh justification demonstrating the temporary need still exists. Automatic or pro forma renewals without genuine justification trigger conversion to permanent status.
Increased Penalties for Abuse:
Administrative fines for improper use of fixed-term contracts increased substantially. ACT has made enforcement a priority.
Strengthened Presumption of Permanent Employment:
When violations occur, the presumption of permanent employment applies more forcefully, providing workers stronger grounds to challenge improper classification.
These reforms reflect Portugal's commitment to reducing precarious work and ensuring fixed-term contracts are used only for genuinely temporary situations.
Automatic Conversion to Permanent Status
Fixed-term contracts automatically convert to permanent employment when:
1. Duration Exceeds Legal Maximum
If a termo certo contract exceeds 2 years or a termo incerto exceeds 4-6 years (depending on type), permanent status applies automatically.
2. Renewals Exceed Permitted Number
More than 3 renewals of a termo certo contract, regardless of duration, triggers conversion.
3. Work Continues After Contract Expiry
If the worker continues performing work after the fixed-term contract expires without a new written contract, permanent employment is presumed.
4. Lack of Valid Justification
If ACT or a court determines the purported temporary need doesn't fall within Article 140 grounds, or the justification is pretextual, the contract is deemed permanent from inception.
Worker rights upon conversion: You're entitled to retroactive permanent status from the date conversion occurred, including any compensation or protections that apply.
Equal Treatment Principle
Workers on fixed-term contracts have the same rights and obligations as comparable permanent workers regarding:
- Pay rates (equal pay for equal work)
- Working conditions and hours
- Access to training and professional development
- Social benefits and perks
- Vacation and leave entitlements
- Protection from discrimination
Employers cannot treat fixed-term workers less favorably simply because of their contract type. Any difference in treatment must be objectively justified by the nature of the temporary arrangement.
Part-Time Employment Contracts
Legal Definition and Requirements
Article 150 of the Código do Trabalho defines part-time employment as any employment contract where the worker's normal working hours are less than those of a comparable full-time worker in the same establishment.
Key characteristics:
- Written agreement required - Part-time status must be agreed in writing
- Hours specified - Contract must clearly state the weekly or monthly working hours
- Schedule defined - Work schedule must be specified or method for determining it
- No minimum hours - No legal minimum for part-time hours (can range from very few hours to just below full-time)
Part-time contracts can be permanent or fixed-term. All restrictions on fixed-term contracts apply equally to part-time fixed-term arrangements.
Rights and Protections
Part-time workers enjoy equal treatment with full-time workers:
Equal Treatment Principle:
- Pro-rata pay (proportional to hours worked compared to full-time)
- Same hourly rate as comparable full-time workers
- Pro-rata vacation days, public holidays, and leave entitlements
- Access to training and career development
- Same dismissal protections
- Equal consideration for promotion opportunities
- Pro-rata social security contributions and benefits
Protection Against Discrimination:
Workers cannot be treated less favorably because they work part-time. Any differences must be objectively justified.
Pro-Rata Calculations
Part-time workers' entitlements are calculated proportionally to their working hours:
Example 1: Vacation Days
- Full-time worker: 22 vacation days per year
- Part-time worker at 50% hours: 11 vacation days per year
- Part-time worker at 75% hours: 16.5 vacation days per year (typically rounded)
Example 2: 13th and 14th Month Payments
- Full-time monthly salary: €2,000
- Part-time at 60% hours: €1,200 monthly base
- 13th month payment: €1,200
- 14th month payment: €1,200
Example 3: Weekly Hours
- Full-time: 40 hours per week
- Part-time at 50%: 20 hours per week
- Part-time at 30%: 12 hours per week
Overtime and Supplementary Hours
Part-time workers can work supplementary hours (the part-time equivalent of overtime) beyond their contracted hours:
Limits on supplementary hours:
- Cannot exceed 25% of contracted weekly hours for permanent part-time contracts
- Cannot exceed 50% of contracted weekly hours for fixed-term part-time contracts
- Annual limit applies: supplementary hours cannot exceed 150 hours per year for permanent contracts or 175 hours per year for fixed-term contracts
Compensation for supplementary hours:
- First hour: paid at normal rate + 25% increase
- Subsequent hours: paid at normal rate + 37.5% increase
- Rest day/public holiday supplementary work: paid at normal rate + 50% increase
Important: Refusal to work supplementary hours is not grounds for disciplinary action except in cases of force majeure or urgent need to prevent serious harm.
Temporary Agency Work (Trabalho Temporário)
The Triangular Relationship
Temporary agency work involves three parties:
- Temporary Work Agency (Empresa de Trabalho Temporário) - Licensed agency that employs the worker
- Worker - Employee of the agency, not the user company
- User Company (Utilizador) - Company where work is actually performed
The agency is the legal employer and responsible for wages, social security, and statutory obligations. The user company directs the day-to-day work but has no direct employment relationship with the worker.
Permitted Situations for Temporary Agency Work
Temporary agency work is permitted only in situations where fixed-term contracts would be allowed under Article 140, plus:
1. Replacement of Absent Workers
- Maternity/paternity leave, illness, vacation coverage
2. Temporary Activity Increases
- Seasonal peaks, special projects, exceptional workload
3. Work of Occasional Nature
- One-time events, short-term needs
4. Launch of New Activities
- Start-up operations, pilot programs
5. Activity of Short Duration
- Projects with defined short timeframe
6. Training and Insertion Programs
- Professional training initiatives
The user company must provide written justification for using temporary agency workers, specifying which permitted ground applies.
Duration Limits
General Limit: Maximum 2 years for the same worker at the same user company, with up to 6 renewals permitted during this period.
Important rule: If a temporary agency worker continues working for the user company beyond the permitted duration or without a valid justification, the user company becomes the direct employer, and the worker gains permanent employee status with the user company.
Worker Protections
Temporary agency workers are entitled to:
Equal Treatment with User Company Employees:
- Same working conditions (hours, breaks, safety equipment)
- Equal access to user company facilities (cafeteria, transportation, childcare)
- Equal pay for equal work (same base salary as comparable permanent employees at user company)
- Equal treatment regarding overtime, night work, and shift premiums
Employment Rights from Agency:
- Permanent employment contract with the agency (between assignments)
- Guaranteed monthly salary even if no assignment (after initial period)
- Vacation days and public holiday pay
- Social security coverage and unemployment insurance
- Training and professional development
Conversion to Direct Employment:
User companies must offer direct employment if they hire for the same position within 90 days after the temporary assignment ends or if the assignment exceeds permitted duration.
Telework Contracts (Regime do Teletrabalho)
Legal Framework: The 2021 Telework Law
Lei nº 83/2021 established comprehensive telework rights and protections in Portugal, making it one of Europe's most progressive telework frameworks. The law was further refined in 2023.
Definition: Telework means work regularly performed outside the employer's premises using information and communication technologies.
Types of Telework Arrangements
1. Full Telework
All work performed remotely from home or another location outside employer's premises.
2. Hybrid Telework
Work performed partly at employer's premises and partly remotely, with schedule defined in agreement.
3. Occasional Telework
Remote work on an ad hoc basis by mutual agreement.
Employer Obligations
Employers must fulfill specific obligations for teleworkers:
1. Written Agreement Required
Telework arrangements must be agreed in writing, specifying:
- Days/hours of telework
- Location of telework
- Costs covered by employer
- Equipment provided
- Contact hours and availability expectations
2. Equipment and Costs
- Employers must provide necessary equipment (computer, phone, software licenses)
- Employers must cover costs including internet, electricity proportional to work use
- Maintenance and technical support employer's responsibility
3. Health and Safety
- Risk assessment of telework location
- Provision of ergonomic equipment
- Coverage under workplace accident insurance
4. Equal Treatment
- Same career development opportunities as office workers
- Equal access to training
- Same performance evaluation criteria
- Equal consideration for promotion
5. Privacy Protections
- Cannot require cameras to be on continuously
- Cannot monitor personal spaces
- Data protection compliance required
6. Communication
- Regular contact maintained
- Clear communication channels established
- Reasonable notice for in-person meetings
7. Insurance Coverage
- Workplace accident insurance must cover telework location
- Employer-provided equipment covered for damage/theft
Worker Rights and Protections
Right to Disconnect:
Workers have the right to disconnect from work outside normal working hours. Employers cannot:
- Contact workers outside agreed working hours except emergencies
- Expect responses to communications outside working hours
- Penalize workers for not responding during off-hours
Right to Request Telework:
Workers can request telework arrangements. Employers must respond in writing within 30 days. Refusal must include reasons.
Right to Return to Office Work:
Workers can request to return to office-based work. Request must be granted unless there are serious operational reasons preventing it.
Protection from Retaliation:
Workers cannot be penalized, discriminated against, or dismissed for requesting or refusing telework arrangements.
Hybrid and Flexible Arrangements
Flexibility Principle:
Telework arrangements can be adjusted by mutual agreement, including transitioning between full telework, hybrid, and office-based work.
Temporary Telework:
Workers can request temporary telework for specific circumstances (childcare needs, temporary health conditions, etc.). Employers must respond favorably when operationally feasible.
Parent and Caregiver Rights:
Parents of children under 8 years old and workers with caregiving responsibilities have enhanced rights to request telework arrangements.
Employee vs Independent Contractor: Understanding the Distinction
The Presumption of Employment Relationship
Article 12 of the Código do Trabalho establishes that when work is performed, the relationship is presumed to be employment unless proven otherwise. This presumption protects workers by shifting the burden of proof to employers who claim a contractor relationship exists.
The presumption means: if you're working for someone, Portuguese law defaults to treating you as an employee with full labor protections unless the employer can demonstrate you're genuinely self-employed.
Classification Criteria: The Five-Factor Test
Portuguese courts and ACT (labor inspectorate) apply five primary criteria to distinguish employees from independent contractors:
1. Subordination (Subordinação Jurídica)
The most critical factor. Subordination exists when:
- Employer controls how, when, and where work is performed
- Worker must follow employer's instructions and directives
- Employer establishes work schedule and methods
- Worker cannot refuse tasks within job scope
- Employer supervises work and can impose discipline
Example of subordination: Chef works 9 AM-5 PM Tuesday-Saturday at restaurant, follows head chef's recipes and instructions, cannot refuse assignments, receives regular supervision → Employee
Example of no subordination: Chef contracts to provide catering for specific event, chooses own recipes and suppliers, sets own preparation schedule, completes work independently → Contractor
2. Economic Dependence (Dependência Económica)
Examines whether the worker relies on a single client for most or all income:
- Worker derives majority of income from one client
- Worker doesn't actively seek other clients
- Worker's business isn't independently viable without this client
- Economic vulnerability exists if relationship ends
Important: Economic dependence alone doesn't create employment status, but it strengthens the presumption when combined with other factors.
3. Integration into Business Operations
Assesses whether the worker is functionally part of the employer's business:
- Work performed is central to employer's core business activities
- Worker uses employer's brand, premises, equipment, materials
- Worker identified as part of employer's organization (business cards, uniforms, email)
- Services provided directly to employer, not to employer's clients
- Work integrated into employer's regular workflow
Example: Web developer works exclusively for Software Company A, uses their office space, attends daily team meetings, has A's email address, reports to project manager → Integrated (Employee)
Example: Web developer has own office, works for 5 different clients, maintains own brand and website, provides finished projects to clients who integrate them → Independent (Contractor)
4. Ownership of Work Tools and Materials
Who provides and owns the tools, equipment, and materials for the work:
- Employer provides all necessary tools, equipment, software, materials
- Worker doesn't invest in own business equipment or assets
- Employer maintains and repairs equipment
- Worker doesn't bear economic risk of equipment costs
5. Assumption of Economic Risk
Who bears the financial risk of the work:
- Worker receives fixed regular salary regardless of employer's profits/losses
- Worker doesn't risk own capital or assume business expenses
- Worker doesn't profit from business success beyond salary
- Employer covers all operational costs
Example of employee: Receives €2,000/month whether company has profitable or unprofitable months, doesn't bear costs of materials or equipment failures → Employee
Example of contractor: Charges per project, can profit or lose depending on efficiency, bears costs of materials and equipment, invoices for services → Contractor
False Self-Employment (Falsos Recibos Verdes)
"Falsos recibos verdes" (false green receipts) refers to situations where employers misclassify employees as independent contractors (recibos verdes = invoices issued by self-employed individuals) to avoid employment obligations.
Why employers do this:
- Avoid social security contributions (23.75% employer cost)
- Avoid vacation pay, 13th/14th month payments
- Avoid dismissal protections and severance obligations
- Avoid worker rights and benefits
- Reduce costs by shifting tax burden to worker
This is illegal. Portuguese law considers false self-employment a serious labor violation.
Consequences for employers engaged in false self-employment:
1. Automatic Reclassification:
ACT or courts can reclassify the relationship as employment retroactively, often back to the beginning of the relationship.
2. Financial Penalties:
- Administrative fines: €2,040-€204,000 depending on company size and violation severity
- Multiple violations: fines multiplied by number of misclassified workers
- Payment of retroactive social security contributions (employer's 23.75% share)
- Payment of retroactive benefits (vacation pay, 13th/14th month, overtime premiums)
3. Back Taxes and Social Security:
Employers must pay:
- All unpaid employer social security contributions retroactively
- Interest on late contributions
- Administrative penalties from Segurança Social
4. Worker Entitlements:
Workers gain retroactive employment rights and protections, including potentially challenging any "termination" as unlawful dismissal.
High-Risk Sectors for False Self-Employment
ACT has prioritized enforcement against false self-employment in sectors with high misclassification rates:
- Hospitality and restaurants - Waitstaff, cooks, cleaners classified as contractors
- Construction - Trades workers and laborers
- Cleaning services - Domestic and commercial cleaners
- Transportation - Drivers (including traditional delivery)
- Personal services - Beauty, wellness, tutoring
- Platform economy - See next section
If you're classified as an independent contractor in these sectors, carefully assess whether your working conditions reflect genuine self-employment or employment.
Digital Platform Workers: The 2023 Reform
Presumption of Employment for Gig Economy
The 2023 Decent Work Agenda (Lei nº 13/2023) introduced groundbreaking protections for digital platform workers (Uber, Glovo, Bolt, etc.) by establishing a presumption of employment relationship for platform workers.
How the Presumption Works
When several indicators of subordination exist, the law presumes an employment relationship between the platform and the worker. The platform bears the burden of proving the relationship is genuinely independent.
Key indicators triggering the presumption:
1. Platform Determines Remuneration or Rates:
Platform sets prices or maximum rates workers can charge customers, rather than workers setting their own prices.
2. Platform Establishes Binding Rules:
Platform imposes binding requirements regarding:
- Appearance or dress code
- Conduct or behavior standards
- Performance metrics or quality standards
- Customer service protocols
3. Platform Supervises Work Execution:
Platform monitors and evaluates work performance, including:
- Electronic tracking and monitoring
- Rating or scoring systems
- Performance-based rewards or penalties
- Route or task assignment algorithms
4. Platform Restricts Work Organization Freedom:
Platform limits workers' freedom to:
- Choose when to work (penalties for not accepting assignments)
- Organize their own workflow
- Select which tasks or deliveries to accept
- Take breaks or set own pace
5. Platform Restricts Client Base Development:
Platform prevents workers from:
- Building their own customer relationships
- Working directly with customers outside the platform
- Establishing independent business presence
Practical Impact for Platform Workers
If you work for a digital platform and multiple indicators above apply to your situation:
- You may legally be considered an employee of the platform under Portuguese law
- You're entitled to employment protections including minimum wage, working hour limits, vacation, social security contributions, 13th and 14th month payments
- The platform cannot unilaterally "deactivate" you without following dismissal procedures
- You can file complaints with ACT if the platform isn't treating you as an employee
Platform's burden: To claim workers are genuinely independent, platforms must demonstrate workers have real autonomy, control their work, set their own terms, and aren't subject to platform subordination.
This reform represents a major shift in gig economy regulation, providing stronger protections to platform workers while allowing genuinely independent arrangements to continue.
Practical Guidance: Protecting Your Employment Rights
Before Accepting Employment
1. Request a written employment contract with all essential terms clearly stated. Review carefully before signing.
2. Verify contract type: Ensure you understand whether you're being offered permanent, fixed-term, part-time, or another contract type.
3. If offered fixed-term employment, confirm:
- The specific Article 140 justification for the temporary contract
- Contract duration and any renewal terms
- Your rights to conversion to permanent status
4. If offered "independent contractor" classification:
- Carefully assess whether working conditions reflect genuine self-employment
- Consider the control, economic dependence, and integration factors
- Seek legal advice if uncertain - misclassification has serious implications for your rights
5. Ask about applicable collective bargaining agreements that may enhance your statutory rights.
If You Suspect Misclassification
Document everything:
- Work schedules and evidence of control over your time
- Communications showing supervision or instructions
- Evidence of economic dependence on single employer
- Any indication you're integrated into company operations
File complaint with ACT:
- Online through ACT website
- In person at ACT regional offices
- ACT maintains complainant confidentiality
- Retaliation against complainants is prohibited
Seek legal advice:
Consider consulting a Portuguese employment lawyer who can assess your situation and advise on the best course of action.
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