14 November 2013: Severance Payments in Portugal

23 October 2013: Income Tax in Federation of Bosnia and Herzegovina
23rd October 2013
8 January 2014: Employment Practices in Mexico
8th January 2014

New Contracts – Update of Blog Post dated 16 October 2013 –

Compandben’s Payroll and Employment Partners in Portugal

 

Portugal flag

In Portugal as in other countries there are minimum sums required when employees are fired or made redundant.

A Law 69/2013 of August 30th, which took effect on 1st October 2013, establishes a new severance regime for employees in Portugal:

For Defined Term Contracts

  • 18 days per year of service of base salary and seniority payment.

For Undefined Term Contracts

  • 18 days per year of service of base salary and seniority payment for the first 3 years of contract;
  • 12 days per year of service of base salary and seniority payments for the following years of contract.

In cases of Collective Dismissal

  • 12 days per year of service of base salary and seniority payment.

A new law was published on 7th November _Law 76/2013 of November 7th_ which establishes again a new regime of extraordinary renewal of temporary contracts which reach their legal end limit from November 8th 2013 to November 8th 2015.

Contracts can now be renewed twice with a total 12 month limit for each contract. The severance pay would still be as per the Law 69/2013 of August 30th mentioned above.

PROVISION FOR THESE SEVERANCE PAYMENTS

In order that Portuguese firms and foreign firms operating Portugal MAKE PROVISION for these payments, a new law was approved Law_ 70/2013, August 30th _that defines a new mandatory regime for new Contracts signed after 1st October 2013.

This law defines the legal regimes of Fundo de Compensação do Trabalho (FCT), Mecanismo Equivalente (ME) and Fundo de Garantia de Compensação do Trabalho (FGCT).

Decree-ruling 294-A/2013 establishes the practical procedures of these new regimes and also the regulation in terms of Fiscal Framework.

According to this law:

The employer is responsible to monthly contribute to the funds which correspond to 1% of the employee’s base salary and seniority payments (0,925% for FCT or ME and 0,075% for FGCT);
20 days before the employee’s dismissal, the employer should request the return of the amounts of FCT;
If the employer doesn’t guarantee the severance, the employee can activate the FGCT (only covers until half of the employee’s severance).

New obligations:

To enroll the company in FCT or ME;
To enroll the employees who have signed contracts since 1st October 2013;
To pay contributions – between the 10th and 20th of the month following the pay month.

This information was contributed by Patricia Isabel Nunes Dias for Compandben’s client service in Portugal.

Our payroll partners are happy to help clients implement this ruling and this will be done automatically for existing Compandben clients.

Contact Compandben or visit Compandben Main Website – International Payroll HR Services – Portugal

John Tinsley

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