Increase of compensation in fixed-term and uncertain-term employment contracts

Last Thursday, February 2nd, an increase in compensation to be paid to the Employee in the event of the expiry of fixed and uncertain-term employment contracts was approved by the Portuguese Members of Parliament within the project called “Decent Work Agenda”.

In this regard, amendments are foreseen to the provisions of article 344 of the Portuguese Labour Code – in its no. 2, which provides for the compensation to the Employee due to the expiry of a fixed-term employment contract – and in article 345 of the same Code – in its no. 4, which provides for the compensation due to the expiry of an uncertain-term employment contract.

Upon the termination of a fixed-term employment contract due to verification of its expiry, the Employee is entitled to receive compensation from the Employer, which corresponds to 18 days of the respective base remuneration, plus seniority pay for each full year of seniority. With the changes approved last Thursday, this compensation will increase to a value corresponding to 24 days of the respective base remuneration (plus seniority pay), thus increasing six days of base remuneration.

About the compensation due to the expiry of an uncertain-term employment contract, what the Portuguese law currently provides is that in cases when the Employee has more than three years of seniority, the referred compensation corresponds to a sum of 18 days of the respective base salary regarding the first three years of the Employee’s seniority, and 12 days of the individual base salary payments for the remaining, following years  (always with the addition of seniority payments).

With the amendments approved by the Members of the Parliament, the calculation of this compensation will correspond to 24 days of the respective base salary and seniority payments for each full year of seniority, regardless of the number of years of seniority of the Employee – thus ceasing the distinction made until now regarding the number of years of the work performed.

It should be noted that these measures aim to provide more excellent protection for the Employee during the termination of his contract in these particular circumstances. However, they will come into force after some time since it is expected to only happen on the first working day of the month following the publication of the approved changes. Therefore, as its publication is planned for March, it is expected that these new provisions will come into force in April 2023.