What you need to know before hiring in Portugal: A guide to terminations

Portuguese labor law provides robust protections for citizens against unwarranted or abrupt employment terminations. To avoid wrongful dismissal claims and costly legal disputes, companies must adhere to minimum notice periods and pay requirements, and provide a justifiable reason for involuntary termination.

Admittedly, navigating Portuguese employment law can be a challenging task, especially for new businesses in the country. But that doesn't mean you should let unfamiliar territory hold you back—that's where we come in.

This guide will help you understand the rules governing employee terminations in Portugal and why partnering with an Employer of Record (EOR) like Rippling can ensure compliance with Portuguese labor laws and spare you from any potential legal headaches.

Let's get started.

6 essential things to know before hiring in Portugal

• You must clarify the terms of your organization’s termination policy in the job offer letter. The offer letter to your Portuguese workers should clearly outline termination terms. In Portugal, you can legally dismiss employees if they demonstrate impossible behavior, are unproductive, consistently deliver poor-quality work, or are simply unsuitable for the job. But if both the employer and employee agree to the dismissal and put it down in writing, they can go ahead with the termination of the employment contract.
• You can’t fire full-time Portuguese employees at will. In Portugal, employers can't fire employees without a valid reason, such as theft or workplace violence. But if both the employer and employee agree to the dismissal and put it down in writing, they can go ahead and end the contract legally.
• You need to provide employees prior notice before termination. Before firing an employee, you usually need to tell them beforehand in writing, unless they're still on a probation period or you're firing them for disciplinary reasons. How much notice you need to give them depends on their contract and how long they've worked for you. The shortest notice period is seven days, and the longest is 75 days. But in some cases, you can choose to give the employee remuneration instead of notice.
• You have to clear owed dues (if any) to the employee you plan on terminating. If you fire an employee, you may need to pay them severance and a termination bonus, especially if they were fired because their job was no longer needed. The amount of severance pay depends on how long the employee worked for you and their level of experience. You're also required to pay them for any vacation days they didn't use while working for you.
• You have to let employees return to work in the case of illegal dismissal. If the courts deem a termination illegal, you cannot refuse to let employees return to work if they desire. However, the dismissed employee has the right to choose between returning to work or receiving compensation, so the only expectation for reinstatement is if they agree to receive extra compensation instead.
• Terminated Portuguese employees can challenge dismissal in court. Employees can challenge an unfair employment dismissal in court within 60 days (or six months in the case of a collective dismissal). Additionally, the Portuguese legal system will protect the employee’s position as if they had never been terminated, which means they are entitled to receive monthly wages and monthly salary from dismissal until the court decision becomes final and unappealable in case of a favorable ruling.

Termination rules in Portugal: What are acceptable grounds for firing an employee?

In Portugal, employees can quit their job as long as they hand in their notice beforehand, according to the terms stipulated in their job offer. But an employer can only terminate an employee's contract for disciplinary or objective reasons while following a formal procedure.

Here are the legally accepted reasons for terminating an employee's contract in Portugal:

1. Dismissal attributable to the worker (Despedimento por facto imputável ao trabalhador)

When an employee commits a serious disciplinary offense that makes it impossible for the employment relationship to remain in force, you can dismiss them on grounds of just cause. This is known as illegitimate non-obedience and may include things like:

• Not following orders from the higher management
• Breaking the company's rules about how employees should be treated
• Starting arguments with coworkers multiple times
• Not doing the job properly or with enough care, even after being told to improve
• Doing something that harms the company's money or assets a lot
• Lying about why you didn't come to work
• Not showing up for work without a good reason, especially if it causes a lot of harm to the company
• Not following safety rules at work
• Physically hurting someone at work or breaking the law
• Doing something really bad, like kidnapping someone
• Not following a decision made by a court or government agency
• Doing a considerably worse job than expected

There are also additional reasons for disciplinary dismissal, as outlined in the applicable Collective Bargaining Agreement.

Before deciding to fire someone, be sure to consider how serious the problem was, how much harm it caused, and how the employee acted with others, among other important reasons. If the employee feels they have been sacked unfairly, they can take legal action to protect their rights. Alternatively, they can seek out support from a trade union.

2. Collective dismissal or job position termination (Despedimento colectivo)

In Portugal, employees can be fired for reasons related to the market, changes within the company structure, or advancements in technology.

• Market-related reasons: If the demand for goods or services decreases, or if it's not possible to sell them, the company may reduce its activity and let go of employees.
• Structural reasons: If there are economic or financial imbalances, the company changes its activity, restructures its productive structure, or substitutes dominant products, employees may be dismissed.
• Technological reasons: If there are changes in techniques or production processes, automation of production, construction, or cargo movement tools, as well as computerization and automation of services and communication methods, the company can cut down the number of employees on its payroll.

3. Dismissal for unsuitability (Despedimento por inadaptação)

You can legally dismiss an employee if they're not adjusting well to their job for reasons that arise after their hiring. This is called "maladjustment."

Maladjustment is defined by the law as one of the following conditions that make it practically impossible for the employment contract to continue:

• The employee's productivity and/or quality of work decreases over time.
• The employee repeatedly causes malfunctions in the work instruments they use.
• The employee's work puts their safety or the safety of others at risk.

For example, let's suppose an employee has a high technical or management job. If they don't meet the goals agreed upon during hiring, you can dismiss them on grounds of maladjustment.

Note that this doesn't mean you can fire someone at will—Portugal has laws in place to protect employee rights. But if there's clear evidence of maladjustment, you have legal grounds to end the employment contract.

D​​ismissal due to maladjustment can only occur when certain conditions are met. These include:

• The job position has been modified due to changes in the manufacturing or trading process, or the introduction of new technologies or equipment based on different or more complex technology within the six months prior to the dismissal.
• The employee has received professional training related to the modifications to their job position from a competent authority or a certified training entity.
• After the training, the employee has been given at least 30 days to adapt to their new job position, or a different location if the performance of their duties could cause harm to their safety or the safety of others.

These requirements are designed to ensure Portuguese employees are given the necessary support and training to adapt to changes in their positions and are not unfairly penalized for complications that may arise during the adjustment period.

What are the mandatory notice periods and termination pay for Portuguese employees?

Mandatory notice periods in Portugal

In Portugal, you're required to provide notice before discharging an employee, except in cases of disciplinary reasons or during the first 60 days of a probationary period. The length of the notice period depends on the employee's contract type and the reason for termination.

Here's a table breaking down the required notice period you must provide employees before termination:

Mandatory termination pay in Portugal

1. Severance payment for lawful dismissal:
If an employee is dismissed lawfully with a good reason, you don't have to pay severance.

2. Severance payment for unlawful dismissal:
If a Portuguese court rules the dismissal of a full-time employee is unlawful, the employee has two options:

• Get reinstated with your organization; or
• Receive a severance package. The amount will be between 15 and 45 days of their salary and include a bonus for each year (or part of a year) they worked for your company. Note that the severance payment will not be less than three months' worth of your base salary.

In addition, the employee will also be entitled to:

• Salary payments they would have received if they hadn't been terminated.
• Compensation for any damage resulting from the unlawful termination.

3. Severance payment for termination of employment contract:
For Fixed-term employment contract:

• Severance pay of 18 days' salary for each year of service completed, along with a length of service payment for each full year of service.

For Uncertain-term employment contract:

• For the first three years of the contract, 18 days' salary for each year of service, along with a length of service payment for each full year of service.
• After three years of service, 12 days' salary for each year of service, along with a length of service payment for each full year of service.

Also, the total severance payment (the sum of salary payment days and length of service payment) cannot exceed:

• 12 times the normal monthly basic pay of the employee; or
• 240 times the monthly national minimum wage.

4. Termination agreement:
If you and the employee agree to end a contract mutually, you're not bound to pay severance under Portuguese law.

The easiest way to comply with Portuguese termination requirements

When running a global workforce, you must ensure your global hiring is compliant with local laws. But navigating Portugal's termination requirements can still be daunting, as there are a myriad of factors to consider like conflicting just-cause considerations, probationary and notice periods, and varying severance pay laws both within and among countries. Without proper assistance, you may find it hard to master these complex regulations.

An alternative is to hire through an EOR, which can monitor termination requirements for you.

Frequently asked questions about terminating employees in Portugal

Can you terminate an employee in Portugal?

Yes, you can terminate employees in Portugal, provided there is a written agreement between you and your employee. Unless executed in front of a public notary, the law gives the employee seven days from the effective date to revoke the termination agreement.

In case of involuntary termination, as the employer, you’ll have to give the required advance notice or pay money in place of giving notice. This is in addition to having a just cause for termination. Failing to provide notice or pay can lead to grounds of unfair dismissal.

How do you terminate a Portuguese employee from a company?

In Portugal, an employer can only dismiss an employee with a subjective or objective cause.

• Subjective cause is based on an employee’s bad conduct at work or on the disciplinary grounds
• Objective cause can be for company-related reasons like collective redundancies or dismissal based on the redundancy of job positions, based on the shutdown of company sections—or market, structural, or technological motives.

What is wrongful termination in Portugal?

Any dismissal of an employer without a valid or just reason is viewed as unfair by Portuguese law.

Do employers need to follow any disciplinary procedure when terminating an employee?

The dismissal procedure varies depending on the type of dismissal. Here are some general guidelines:

• For ending a contract during the probationary period or at the end of a fixed or non-fixed term employment contract, you simply need to send the employee a written statement.
• Dismissals on disciplinary grounds require a more complex process that involves three stages: accusation, defense, and decision. Employee representatives may be asked to give their opinion during the proceedings.
• For collective dismissals, you must provide written information and consult with employee reps before issuing a final dismissal decision. Associates from the Ministry of Employment may also be present during negotiations.
• If an employee's job position is terminated, they have the right to oppose the dismissal in writing and request the Authority for Working Conditions to assess specific requirements for the dismissal. This is not negotiable on the employer's part.

You usually don't need authorization from a government agency to fire an employee.

Is there any special protection in Portugal that prevents employees from being fired?

Employees who are pregnant, breastfeeding, taking parental leave or paternity leave, or within 120 days of giving birth are protected from being fired.

You can still dismiss these employees if you get permission from the equality commission. In case the commission doesn't approve, you can request authorization from the court.

Manage the entire lifecycle of your international employees with Rippling

From onboarding to offboarding, Rippling helps you streamline the entire employee lifecycle—globally, and all in one place.

Just click "hire" and Rippling can support your global workforce right out of the box:

• Set up a localized Portugal employment agreement.
• Pay employees and contractors in Portugal and around the world—without waiting for bank transfers or conversions.
• Tailor your policies and employee benefits.
• Easily stay compliant with Portugal overtime, leave, and termination requirements.

Catch Rippling in action and learn how Rippling EOR can monitor the tangled web of global termination requirements—so you don’t have to.

Rippling and its affiliates do not provide tax, accounting or legal advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any related activities or transactions.