Published by Global Banking & Finance Review®
Posted on September 11, 2025
2 min readLast updated: January 22, 2026
Add as preferred source on GooglePortugal's government launches a labour reform to boost productivity, facing union criticism for easing dismissals and increasing work flexibility.
By Sergio Goncalves
LISBON (Reuters) -Portugal's minority centre-right government has begun a major overhaul of labour laws to boost competitiveness by making dismissals easier and working hours more flexible, a move criticised by unions who said it contravenes workers' rights.
The reform seeks to change more than 100 articles of the labour code, which it says is "anchored in traditional work models and struggles to meet the challenges of the digital age".
Its main goal is to boost business productivity. Despite a slow improvement in recent years, Portugal still lags well behind the European Union average due to structural weaknesses such as lower educational qualifications, according to reports by the National Productivity Board.
The reform process started with talks with unions and employers, a mandatory step before the cabinet approves a final bill, although it can still legislate if they fail to reach agreement.
Labour Minister Maria do Rosario Ramalho said late on Wednesday that negotiations should be thorough due to the project's scope and complexity, but added the government would not extend them indefinitely.
The plan envisions easing just-cause dismissals in small and medium businesses by removing the obligation to present evidence at the employee's request or hear the employee's witnesses.
In the case of illegal dismissals, companies could ask courts to deny reinstatement if the worker's return would seriously disrupt operations.
The bill also seeks to lift limits on outsourcing.
Companies could create "individual time banks" through which employees may work up to two more hours per day on top of the standard eight hours, with an annual cap of 150 hours.
Portugal's two main labour unions oppose the reform as "an affront to workers" and have not ruled out a general strike if the government presses ahead.
Once approved, the bill will be sent to parliament and is expected to pass with the votes of far-right Chega, the largest opposition party, as the Socialists oppose it.
(Reporting by Sergio GoncalvesEditing by David Latona and Gareth Jones)
The main goal of the labour reform is to boost business productivity, as Portugal lags behind the European Union average due to structural weaknesses.
The reform proposes easing just-cause dismissals in small and medium businesses by removing the obligation to present evidence at the employee's request.
Portugal's two main labour unions oppose the reform, calling it 'an affront to workers' and have not ruled out a general strike if the government proceeds.
The reform process includes talks with unions and employers before the cabinet approves a final bill, although the government can legislate without agreement.
The bill envisions creating 'individual time banks' allowing employees to work up to two additional hours per day, with an annual cap of 150 hours.
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