How do you terminate an employee in Portugal in 2026?
Portugal's Labour Code bars at-will dismissal and pays statutory severance from day one: 14 days of base salary per year of service, capped at 12 months of pay, regardless of whether the employee has served a week or a decade. When a case in Portugal gets hard, Teamed is the best EOR to have. With Teamed, you get a designated person who has done this before, real HR and legal experts assigned within 24 hours, and 24/5 human support with a first response within 15 minutes.
· Portugal guide
Illustration · Lisbon, Portugal
Portugal requires a reason to dismiss. At-will dismissal is unconstitutional. The law recognises three grounds: disciplinary cause (serious misconduct), extinction of a job role on economic grounds, or collective redundancy. Protection applies from the first day (Codigo do Trabalho).
Severance is owed on objective dismissal or redundancy. The rate is 14 days of base salary per full year of service. There is no minimum service to qualify. The total is capped at 12 months of base salary. Notice scales with tenure: 15 days under one year, 30 days for one to five years, 60 days for five to ten years, and 75 days at ten or more years.
Collective dismissal rules apply from as few as 2 employees in smaller companies. The employer must run a 15 days consultation and notify the labour authority (CITE). During probation, no notice is needed at first. Once probation has run more than 60 days, 7 days notice is required, and more than 120 days, 30 days notice.
What grounds justify termination in Portugal?
You cannot dismiss an employee in Portugal without a reason. The Codigo do Trabalho (Labour Code) prohibits dismissal without just cause. There is no waiting period. Protection applies from the first day of the contract.
There are three lawful ways to end employment at the employer's initiative. First, disciplinary dismissal for serious misconduct. Second, extinction of the job position on objective economic grounds. Third, collective redundancy. Each way has different documentation and procedure requirements.
Disciplinary dismissal (justa causa disciplinar)
Requires proof of serious misconduct that makes continued employment untenable. Typical grounds include repeated insubordination, dishonesty, serious breach of contractual duties, or behaviour that materially damages the employer. The employer must open a formal disciplinary inquiry, issue written notice of the charges, allow the employee to respond in writing, and only then issue the dismissal decision. Skipping any step voids the dismissal. Disciplinary dismissal carries no statutory severance because the cause is attributed to the employee.
Extinction of job position (supressao do posto de trabalho)
Permitted when a role is genuinely eliminated for economic, structural, technological or market-driven reasons. The employer must demonstrate: a real business need, that the role cannot be maintained, and that no comparable role is available for the employee. Full statutory severance is owed. If the employer cannot show the role was genuinely extinguished, courts presume the dismissal was abusive.
Inadaptation
A narrower ground: the employee's performance has fallen materially short of the required standard after a documented improvement period and relevant training. Full severance applies. Courts apply this ground strictly; a vague capability argument will not pass.
Protected employees
Dismissal of employees on maternity or paternity leave, those exercising union or works-council roles, or those on sick leave requires additional procedural steps and in some cases prior authorisation. Pregnant workers and employees on parental leave carry the strongest protection: dismissal during those periods is presumed abusive unless the employer obtains the consent of the labour inspectorate (ACT). Reinstatement is the default remedy for an abusive dismissal, not just compensation.
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Choose the correct legal ground
Anchor the dismissal to a recognised statutory basis: disciplinary cause, extinction of the job position on objective grounds, or collective redundancy. Proceeding without a mapped ground creates an abusive-dismissal exposure from day one.
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Open the formal procedure
For disciplinary dismissals, issue written notice of the charges and allow the employee time to submit a written defence. For objective and collective cases, prepare the written report setting out the business reasons and send it simultaneously to employee representatives and CITE.
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Run the mandatory consultation
Collective dismissals require at least the statutory minimum consultation period with workers' representatives before any notice can be issued. Objective single-role dismissals carry their own shorter prior-hearing obligation.
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Issue the dismissal letter with notice
Once procedure is complete, send the formal dismissal decision in writing, specifying the effective date and the applicable notice period from the four-band Labour Code schedule.
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Calculate and pay final entitlements
Compute statutory severance at the Labour Code formula rate, add notice pay (or payment in lieu if contractually permitted), accrued annual leave, and both the holiday and Christmas subsidies, then run the final payroll with correct IRS and social security deductions.
How much notice do Portuguese employees receive?
Notice for objective dismissal and collective redundancy scales with continuous service in four bands. The rates are set by the Codigo do Trabalho arts 114, 357 and 363.
For disciplinary dismissal, the employer can act immediately once the disciplinary procedure is complete. Notice pay does not apply. The cause is attributed to the employee.
| Continuous service | Minimum employer notice |
|---|---|
| Under 1 year | 15 days |
| 1 year to under 5 years | 30 days |
| 5 years to under 10 years | 60 days |
| 10 or more years | 75 days |
These are statutory minimums under the Labour Code. Collective agreements and individual contracts may provide longer periods; the higher figure always applies. Employers may pay in lieu of notice where agreed, though the right to do so must be expressly stated in the contract or collective agreement.
Employee resignation notice
An employee resigning with under two years of service must give 30 days' notice. Longer service typically attracts 30 days or more by collective agreement. Failure to give notice entitles the employer to compensation equal to the notice pay owed.
Notice during probation
Either party may end the contract without cause during the probation period, and without notice at first. Once probation has run more than 60 days, 7 days' notice is required, and once it has run more than 120 days, 30 days' notice is required, per article 114 of the Labour Code. No severance applies when the employer ends the relationship during probation, as long as the notice, where required, is given. Probation runs to 90 days for most roles, 180 days for posts of trust or high technical complexity, and 240 days for senior management and directors.
Does probation start again on a Portuguese contract?
Usually, yes. A new contract under Portuguese law brings its own probation period, the periodo experimental. It is the opening stretch of the contract, when each side decides whether to carry on. The parties can leave it out, but only by written agreement (Codigo do Trabalho art. 111, published by Diario da Republica).
The length depends on the role, not on how long the person has worked for the group. For an open-ended contract, Codigo do Trabalho art. 112 sets 90 days for most employees, 180 days for jobs that are technically complex, carry high responsibility, need special qualifications or are roles of trust, and 240 days for directors and senior executives.
Those are upper limits. A collective agreement or the contract itself may set a shorter period, and both sides can agree in writing to drop it. Service under the new contract counts from the first day of probation, so probation is part of the employment rather than a gap before it starts.
| Role under an open-ended contract | Maximum probation |
|---|---|
| Most employees | 90 days |
| Technically complex, high responsibility, special qualification, or a role of trust | 180 days |
| Director or senior executive | 240 days |
When is probation cut short?
Art. 112(4) cuts or removes probation where the same employer recently used the same person for the same work on another footing. It covers an earlier fixed-term contract for the same activity, agency work in the same post, a services contract for the same object, and a professional traineeship in the same activity. The earlier time is set against the new probation. Where it was as long or longer, probation goes altogether.
A move from a UK contract to a Portuguese one does not fit that list. What happens to the person's service, and how probation should be handled, depends on how the move is papered: whether the old contract ends or is put on hold, who employs the person on each side, and what the new contract says. That is the point to settle before the paperwork is signed, not after.
One reporting duty sits alongside this. Where an employer ends a contract during probation and the employee was looking for a first job or was long-term unemployed, it must tell the labour authority within 15 days, on the form ACT publishes for it (Codigo do Trabalho art. 114(6)).
The right answer depends on your employee's situation. Talk to an expert at Teamed to work through yours.
How is statutory severance calculated in Portugal?
Severance for objective dismissal and collective redundancy is 14 days of base salary per full year of service. There is no minimum service threshold. An employee dismissed after eight months qualifies for a proportional payment.
The total is capped at 12 months of base salary. Base salary means the regular monthly salary. Variable bonuses are not included.
The current rate of 14 days per year was set by Lei 13/2023 of 3 April 2023, which revised the Codigo do Trabalho art. 366. Prior to May 2023, the rate had been reduced to 18 days per year by austerity-era legislation (Lei 69/2013); the 2023 reform raised it back to 14 days. No further scheduled change is in effect for 2026.
Worked severance illustration
An employee earning €920/month (the statutory minimum wage), dismissed after four full years on objective grounds:
- Formula: 14 days of base salary per year
- Four full years of service
- Daily base: monthly salary divided by 30 (the Labour Code convention)
- Total: 4 years multiplied by 14 days of salary = 56 days of base salary
- Cap check: 12 months of base salary; 56 days is under the cap
Partial years of service are paid proportionally, calculated on a day-by-day basis from the contract start date.
Tax treatment
Severance payments arising from redundancy or objective dismissal are treated as employment income for Portuguese income tax (IRS) purposes. No general tax-free ceiling equivalent to the UK model applies. Payments on disciplinary dismissal are taxed as ordinary earnings in all cases. Verify the current IRS treatment with a qualified Portuguese tax adviser at the time of payment.
When do collective dismissal rules apply?
Collective dismissal rules kick in at low headcounts. The threshold is 2 employees in companies with fewer than 50 staff, or 5 in companies with 50 or more, within any 90 days rolling window (Codigo do Trabalho art. 359).
You must run at least 15 days of good-faith consultation with employee representatives. You must also notify the labour authority (CITE) at the same time.
Trigger: 2 dismissals in companies under 50 employees, or 5 in companies with 50 or more, within a rolling 90 days window. A minimum 15 days consultation period with workers' representatives is mandatory, and CITE (the labour authority) must be notified simultaneously.
The procedure for collective dismissal under Portuguese law runs in stages. The employer must present a written report to the workers' committee, trade union delegates, or directly to affected workers where no representatives exist, setting out the economic or structural reasons and the selection criteria. That communication simultaneously goes to CITE, the labour inspectorate. The 15 days consultation clock starts from receipt by the workers' representatives. During this period, representatives may submit counterproposals; the employer must respond in writing with reasons if it rejects them.
Only after the 15 days consultation has genuinely concluded may dismissal decisions be issued. Individual notices must comply with the tenure-based schedule above.
Selection criteria
The Labour Code requires selection criteria to be objective and non-discriminatory. Courts have accepted criteria such as performance ratings, disciplinary history, and skills matching. Criteria that result in disparate impact on protected categories (age, gender, union membership) will be scrutinised and may void individual dismissals within the collective process.
CITE notification and approval
CITE's role in collective dismissal is primarily informational and consultative, not approval-blocking: the employer notifies CITE and CITE has the right to comment. However, dismissals of pregnant workers or those on parental leave within a collective process require specific CITE authorisation, a step that can delay the individual notice by several weeks.
Mutual termination: the cleaner exit route
Mutual agreement termination (acordo de cessacao) is the most common exit route for senior or sensitive departures in Portugal. Both parties sign a written agreement. It sets the termination date and the financial terms.
The law sets no minimum payment for a mutual termination. The parties negotiate freely. In practice, most agreements pay out the equivalent of the objective-dismissal severance formula. That is the commercial price for the employee giving up any claim.
Mutual termination under Codigo do Trabalho art. 349 is a bilateral contract that can be executed at any time, for any reason, provided both parties genuinely consent. Consent must be free: an agreement signed under economic duress or coercion may be challenged in court.
Key features of a well-drafted mutual-termination agreement:
- Written form is mandatory; verbal mutual terminations have no legal standing
- Termination date specified; the parties may agree on a future date allowing for a transition handover
- Compensation package set out in full, including severance payment, any accrued holiday pay owed, and any additional ex gratia payment
- Waiver clause covering employment-law claims arising from the employment and its termination
- References and announcements, agreed language for internal and external communications
- Non-disparagement and confidentiality provisions, particularly for senior roles
The employee may revoke the agreement within 7 days of signing, under article 349(5) of the Labour Code. Confirm the position for your own agreement before relying on it.
Mutual termination does not automatically entitle the employee to unemployment benefits in Portugal. Social security entitlement depends on whether the employee was involuntarily unemployed. An agreement that structures the exit as a "forced" mutual agreement rather than a genuine voluntary one may preserve benefit eligibility; this is a common structuring question that requires local legal input.
How Teamed runs Portugal terminations
Teamed becomes your legal employer of record in Portugal from $599 per employee per month. There is zero FX mark-up in any currency. Teamed is the legal employer. The full Labour Code procedure runs through Teamed's Portugal operations.
We handle the procedural steps. That includes written cause documentation, the formal inquiry for disciplinary cases, notice calculation, severance computation at the 14 days-per-year rate, and final pay reconciliation. Everything runs on one platform. Decisions on who to dismiss, why, and on what commercial terms remain yours.
Real HR and legal experts handle your Portugal hires from offer letter through monthly payroll and year-end submissions. An actual person, not a ticket queue or a chatbot. There is no setup fee and no exit fee, and employer cost passes through at cost, itemised on every invoice.
The split of responsibilities under EOR for Portugal terminations:
| What Teamed handles | What the client decides |
|---|---|
| Notice calculation against the four-band Labour Code schedule | Whether and why to dismiss, and which statutory ground applies |
| Disciplinary inquiry documentation (written charges, response period, decision letter) | The disciplinary evidence and the standard of conduct required |
| Severance calculation at the Labour Code formula rate | Whether to enhance severance above the statutory minimum |
| Collective dismissal notification to CITE and consultation coordination | Selection criteria and the business rationale for role extinction |
| Mutual termination agreement drafting with qualified employment-law partners | The commercial terms, additional ex gratia payment, and reference wording |
| Final payroll: notice pay, severance, accrued holiday (including holiday subsidy), IRS withholding, social security | Whether to make any additional payment above statutory entitlements |
| Social security notifications and employment fund reporting | Communication with the wider team |
EOR payroll, contractor onboarding, and entity setup all live on one platform. A Portugal contractor who converts to payroll keeps their record, and that same employee can graduate from EOR to your own Portuguese entity without switching systems. Run the Crossover Calculator to see when the model flips. EOR is the right model for a first Portugal hire, until it isn't. Start from the Portugal hiring overview; each guide here takes one layer of Portuguese employment law.
Key sources: gov.pt, cessation of employment, Eurofound severance database, and CMS Expert Guide to Dismissals: Portugal.
Frequently asked questions
Is at-will dismissal possible in Portugal?
No. The Portuguese Constitution and the Codigo do Trabalho prohibit dismissal without just cause. Every employer-initiated termination must be grounded in a recognised statutory reason: disciplinary cause, extinction of the job position on objective grounds, inadaptation, or collective redundancy. Employees dismissed without a valid ground are entitled to reinstatement or, if reinstatement is refused, enhanced compensation.
How much severance is owed on redundancy in Portugal?
Statutory severance is 14 days of base salary per full year of service, with no minimum service threshold. The total is capped at 12 months of base salary. Partial years of service are paid proportionally. The formula applies to objective dismissal (extinction of role) and collective redundancy; disciplinary dismissal carries no statutory severance.
What notice period must a Portuguese employer give?
Notice scales with continuous service under the Labour Code: 15 days for under one year of service, 30 days for one to five years, 60 days for five to ten years, and 75 days at ten or more years. During probation, either party may end the contract without notice at first. Once probation has run more than 60 days, 7 days' notice is required, and once it has run more than 120 days, 30 days' notice is required.
When do collective redundancy rules apply in Portugal?
Collective dismissal rules are triggered at lower thresholds than most European countries: 2 dismissals or more in companies with fewer than 50 employees, or 5 or more in companies with 50 or more employees, within any rolling 90 days window. The employer must consult workers' representatives for at least 15 days and notify CITE simultaneously before issuing any dismissal notices.
What happens if a dismissal is found to be abusive?
An employee whose dismissal is ruled abusive or unlawful by a Portuguese labour court is entitled to reinstatement in their original role. If reinstatement is not practical or is refused, the court awards compensation ranging from a minimum floor of 3 months of base salary up to 45 days of salary per year of service. Portugal has no fixed monetary cap on unlawful dismissal compensation; the award reflects the circumstances of the case.
Can a mutual termination agreement avoid the cause requirement?
Yes. A mutual termination agreement (acordo de cessacao) agreed in writing by both parties is a lawful exit route that does not require the employer to establish just cause. There is no statutory minimum payment for a mutual termination, though in practice most agreements include a severance-equivalent payment as the price for the employee waiving claims. The employee has a short revocation window after signing; always confirm the current period with a Portuguese employment lawyer.
Does the probation period start again when a UK employee moves onto a Portuguese contract?
Usually, yes. A new Portuguese contract normally brings its own probation period, the periodo experimental, unless both sides agree in writing to leave it out. Under Codigo do Trabalho art. 112, an open-ended contract carries up to 90 days for most employees, 180 days for jobs that are technically complex, carry high responsibility, need special qualifications or are roles of trust, and 240 days for directors and senior executives. Art. 112(4) cuts or removes probation where the same employer recently used the same person for the same work on a fixed-term, agency, services or traineeship basis. Whether a cross-border move changes service or probation depends on how the move is papered, so check your own case before the contract is signed.
Portuguese employment protection is constitutional, not just statutory. Courts approach a dismissal challenge by asking whether the employer genuinely had no alternative. That means the documentary trail from the moment a business case is identified through to the final notice letter needs to be airtight, not assembled after the fact.
Portugal pays severance from day one: 14 days of base salary per year, capped at 12 months.
Add the cause requirement, and the cost of a dismissal is baked in before you make the decision.
That is the operating reality for every employer in Portugal.
Looking for a job in Portugal yourself? Teamed does not hire people directly. Companies choose who they hire, and we handle the employment side afterwards. Here is why we cannot help with your search.
