As the summer holiday season approaches, many employers are finalising the scheduling of their employees’ annual leave. At this stage, it is equally important to verify whether there are any outstanding leave entitlements and to ensure that they are managed in accordance with the Portuguese Labour Code or the applicable collective labour agreement.
Annual leave is both a statutory right of the employee and an organisational responsibility of the employer, who must ensure that employees are able to take their leave within the time limits established by law. However, due to operational requirements, inadequate planning or agreement between the parties, annual leave may remain untaken within the period initially scheduled.
Improper management of annual leave may give rise to employment disputes, additional costs and, in certain cases, inspections or enforcement proceedings by the Portuguese Labour Authority (Autoridade para as Condições do Trabalho – ACT). For this reason, employers should be familiar with the applicable legal framework and implement internal procedures that ensure compliance with the Portuguese Labour Code.
Taking Annual Leave in the Following Year: When Is It Permitted?
As a general rule, annual leave must be taken during the calendar year in which the entitlement arises. However, the Portuguese Labour Code allows leave to be carried over and taken until 30 April of the following year in specific circumstances.
This possibility should not be regarded as an automatic extension of the leave period, but rather as an exception subject to the legal requirements laid down by law. Employers should therefore plan employees’ leave well in advance and keep appropriate records of any circumstances justifying its postponement.
Proper holiday planning helps reduce internal disputes, prevents the accumulation of untaken leave and facilitates both operational management and year-end accounting.
The Importance of Taking Annual Leave Before the Employment Relationship Ends
Whenever possible, employers should consider allowing employees to take any accrued annual leave before the termination of the employment contract.
This approach enables employees to exercise their right to rest while simplifying the calculation of the employment-related amounts payable upon termination. It also reduces the risk of disagreements regarding the number of untaken leave days and the corresponding amounts due.
Careful planning of the termination process is therefore an important human resources management measure and an effective way of preventing employment disputes.
How Should Untaken Annual Leave Be Addressed Upon Termination?
Where the employment contract ends and the employee still has accrued or pro rata annual leave that has not been taken, the employer must settle the corresponding entitlements in the final settlement, in accordance with the law.
The calculation must take into account not only the remuneration relating to the untaken leave, but also any statutory employment-related entitlements arising from the termination of the contract, including the holiday allowance where applicable. Incorrect calculations may lead to employee claims, court proceedings or labour inspections.
For this reason, employers are advised to review the final settlement carefully to ensure that all employment-related entitlements have been correctly calculated and paid.
Preventive Management Reduces Risks for Employers
Proper annual leave management goes well beyond preparing the annual leave schedule. It requires continuous monitoring, up-to-date internal records and effective control of the leave actually taken by each employee.
Employers that implement internal procedures for planning, monitoring and verifying annual leave entitlements significantly reduce the risk of employment law liabilities, administrative fines and labour disputes. At a time when compliance with employment legislation is increasingly important, prevention remains the most effective way to protect the business and ensure compliance with its legal obligations.
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The content of this information does not constitute any specific legal advice; the latter can only be given when faced with a specific case. Please contact us for any further clarification or information deemed necessary in what concerns the application of the law.