US vs Portugal Employment Law: What Changes for a US Employer

No. At-will employment has no equivalent in Portuguese law, and a US employer putting a role in Portugal should plan around that from the first day of hiring. In the United States, employment is at will in every state except Montana, which requires good cause once an employee has finished a probationary period, and the main federal notice duty (the 60 days under the WARN Act) is reserved for qualifying plant closings and mass layoffs rather than individual exits.

In Portugal, article 340 of the Código do Trabalho sets out a closed list of ways an employment contract can end. An employer can rely on only two families within that list: dismissal for the employee’s fault, which Portuguese law calls just cause, and the objective grounds, which are collective dismissal, redundancy of a single post and dismissal for unsuitability. Everything else on the list is agreed between the parties or triggered by the employee.

The practical effect is that a recognised reason and a written procedure both have to exist before a contract ends, and both have to hold up in court. A US performance file helps, but it does not replace the Portuguese procedure, which has its own fixed steps and deadlines.

None of this makes Portugal slow to hire in. Contracts are usually ready within hours when you employ through Employer of Record Portugal, and onboarding for an EU national is typically one to two days once the details are in. The gap between the two systems opens at the end of the relationship, not at the start.

A Portuguese employer needs either just cause or one of three objective grounds, and each route carries its own written procedure. Just cause under article 351 means culpable conduct by the employee that makes the working relationship immediately and practically impossible to continue. Five consecutive or ten separate unjustified absences in a calendar year are among the examples the Código do Trabalho gives.

A just cause dismissal runs as a disciplinary procedure: a written statement of charges (nota de culpa), the employee’s reply, then a written decision with reasons issued within 30 days. Where it holds, no notice and no compensation are due.

The objective grounds work differently. Collective dismissal under article 359 covers two or more employees in micro and small companies, or five or more in medium and large ones, within three months, for market, structural or technological reasons; worker representatives are consulted, and the decision cannot be issued earlier than 15 days after the notice of intent. Redundancy of a single post is open only where the reason is nobody’s fault, no fixed-term contract covers equivalent tasks, no other compatible post is free and collective dismissal does not apply. Where several identical posts exist, the employer ranks them on set criteria, beginning with the worst performance review. Dismissal for unsuitability covers a sustained fall in output or quality, and for technical and management roles it also covers objectives agreed in writing and then missed.

One rule tends to surprise US employers: for 12 months after a collective dismissal or a redundancy, the employer may not buy in outside services to cover the work the dismissed employees were doing. Our guide to ending a contract in Portugal works through each ground in turn.

Notice in Portugal is set by statute and by length of service, not by the offer letter or the handbook. For an objective dismissal the employer gives 15 days where the employee has less than one year of service, 30 days from one year to under five, 60 days from five years to under ten, and 75 days at ten years or more. Short notice is paid for in cash.

Employees are held to notice as well. A resignation needs 30 days where the employee has up to two years of service and 60 days above that, and the contract or a collective agreement can extend it to six months for directors and other senior roles. An employee who walks out without giving notice owes base pay for the days not worked, under article 401.

Fixed-term contracts have separate timings. When a fixed-date contract reaches its term the employer gives 15 days and the employee 8 days. For an open-date contract the employer gives 7, 30 or 60 days, according to whether it has run for up to six months, six months to two years, or longer.

Against the US position, where an individual exit generally carries no statutory notice at all, the Portuguese calendar is longer and far easier to forecast. It can be priced before anyone is hired, like the contribution rates in our comparison of employer costs on each side.

Severance for an objective dismissal is 14 days of base pay plus seniority payments for each full year of service, with part-years counted pro rata, under articles 366, 372 and 379. The daily rate is monthly pay divided by 30. Expiry of a fixed-term contract pays more, at 24 days per full year, unless it was the employee who chose to end it.

Two caps apply. The monthly pay used in the calculation is capped at 20 times the national minimum wage, which is €18,400 in 2026 at a minimum wage of €920. The total is capped at 12 times monthly base pay, or at 240 times the minimum wage (€220,800) where the first cap bites. Payment falls due by the end of the notice period, and an employee who accepts the full amount is presumed to accept the dismissal unless the money is given back.

A worked example, assuming base pay of €5,000 per instalment, no seniority payments and four full years of service all falling after 1 May 2023: the daily rate is €166.67, so each year earns €2,333.33 and the compensation is €9,333.33. Service earned before 1 May 2023 is calculated at the lower rates set by the transitional rules, so a long-serving employee needs a year-by-year calculation rather than a single multiplier.

US practice sits at the other end of the scale. Federal law imposes no statutory severance, and payments are usually a matter of policy or of a negotiated release. In Portugal the compensation is owed by law and worked out the same way for everyone at the same length of service.

An employee has 60 days to bring a claim, counted from receipt of the dismissal notice or from the termination date if that falls later, under article 387(2). Individual dismissals are challenged on a set form. Collective dismissals follow article 388, which allows six months from the date the contract ends.

The exposure behind that deadline is what makes the procedure worth getting right. If a court finds the dismissal unlawful, the employer owes compensation for all loss, material and non-material, plus back pay from the dismissal to the final judgment, and the employee is entitled to reinstatement. An employee who prefers money can ask instead for an indemnity of 15 to 45 days of base pay and seniority payments per year of service or part-year, with a floor of three months’ pay.

In micro-companies, and for directors and managers, the employer can ask the court to rule out reinstatement. If the court agrees, the indemnity rises to 30 to 60 days per year with a floor of six months. Where the grounds are proved and only the procedure was defective, the indemnity is halved.

The US comparison is a charge with the EEOC, normally within 180 days of the act complained of and 300 days where a state or local fair employment agency has jurisdiction. The Portuguese window is shorter, the remedy can include the employee’s job back, and the burden of showing the reason sits with the employer.

Probation is the one part of Portuguese employment law that behaves a little like at-will employment, and it is the main flexibility a US employer has. An open-ended contract carries 90 days of probation in general, 180 days for technically complex or highly responsible roles, roles needing special qualifications, positions of trust, first-job seekers and the long-term unemployed, and 240 days for directors and senior managers. Fixed-term contracts carry 30 days where the contract runs for six months or more, and 15 days where it is shorter.

During probation either side can end the contract without giving a reason and without compensation. The employer owes 7 days’ notice once more than 60 days of probation have passed, and 30 days’ notice once more than 120 days have passed; unserved notice is paid. Two reporting duties sit alongside that. CITE must be notified within five working days where the employee is pregnant, has recently given birth, is breastfeeding, is on parental leave or is a carer, and ACT must be told within 15 days where the person was a first-job seeker or long-term unemployed.

Probation can also be shorter than the headline figure. Time already served with the same employer on a fixed-term contract, an agency assignment, a services contract or a traineeship counts against it.

There is one trap. If the employer fails to give the employee the required written information about the probation period on time, the parties are presumed to have excluded probation altogether under article 111(4). The flexibility is lost through an administrative slip rather than a decision.

The core written terms are due within seven days of the start date. Article 106(3) of the Código do Trabalho, as amended by Lei 13/2023, requires the employer to give the employee written information on at least 18 items, and article 107(4) splits the timing: identity of the parties, place of work, job, dates, any term, pay, working hours, probation and intermittent-work details by day seven, and the remaining items within one month.

The wider list includes training rights, social protection, the compensation fund and the rules behind any algorithm used in decisions affecting the employee. Paper or electronic delivery is fine, the employer keeps proof of delivery, and failure is a serious offence for ACT purposes.

The contract itself is a separate question. An open-ended contract needs no special form and can be verbal under article 110, although nobody sensible hires that way. A fixed-term contract must be in writing under article 141 and must state the specific facts that justify the term, which is the clause most often challenged. Fixed-date contracts run for a maximum of two years with up to three renewals, and open-date contracts for four.

Collective regulation adds a layer that has no close US parallel. Contratos coletivos, acordos coletivos, acordos de empresa and portarias de extensão can improve on the Code’s minimums for pay, hours and leave, and the instrument that applies follows the employer’s activity. Our guide to written terms, probation and fixed-term limits covers the drafting points, and the consolidated Labour Code is published on diariodarepublica.pt.

• Identity of the parties, place of work and job description
• Start date, and the term and its justification where the contract is fixed-term
• Pay, its components and when it is paid
• Working hours and the daily and weekly schedule
• The probation period that applies to the role