Portugal approves sweeping labour reform package

Portugal’s Council of Ministers on Thursday, May 14, approved a wide-ranging overhaul of the country’s labour legislation, sending the draft law to parliament after nine months of negotiations with trade unions and business groups.

The reform package, titled “Trabalho XXI,” is designed to boost productivity, increase wages, and adapt the labour market to the demands of the digital economy.

Labour Minister Maria do Rosario Palma Ramalho said the final version of the bill incorporates more than 50 changes compared to the original draft presented in July 2025, as well as 12 proposals submitted by the General Union of Workers (UGT).

Among the key measures, the reform extends the maximum duration of fixed-term contracts from two to three years and increases the limit for open-ended temporary contracts from four to five years. It also allows workers to take up to two additional days of justified absence per year as an extension of their annual leave.

The package removes a restriction introduced in 2023 that prevented companies from outsourcing activities following collective redundancies.

It also broadens the scope of minimum services required during strikes to include care services for vulnerable groups, such as the sick, institutionalised children, people with disabilities, and the elderly.

In addition, the government agreed to introduce a 25 percent premium on overtime hours that remain unused at the end of a six-month period under individual “time bank” arrangements. This provision represents a compromise between the UGT’s proposal of a 50 per cent premium and the government’s initial position of offering no additional compensation.

Armindo Monteiro, president of the Portuguese Business Confederation (CIP), said the negotiations produced "important consensuses" and a balanced compromise. He added that the reform would help strengthen corporate productivity while improving working conditions.

UGT deputy secretary-general Sergio Monte also acknowledged the government’s compromise but noted that the final text still retains the main contested provisions, including those related to working time banks, contract duration, and the organisation of working time.

By Tamilla Hasanova