Lay-off in Portugal: what you get paid and your rights

Your company in Portugal announced a lay-off? The short answer: your contract does not end. It is suspended, or your hours are cut, and you are entitled to at least two thirds of your gross pay, never less than the minimum wage for your working hours and up to a cap of 2,760 euros (Article 305 of the Labour Code). Social Security funds 70% of that compensation, and the company is banned from dismissing you, paying out profits or hiring for your post.

What a lay-off is (and when a company can use it)

A components factory in Braga loses its main client and is left with half the orders. There is not enough work for everyone, but the company does not want to dismiss people, so it suspends the contracts of 30 workers for 4 months. That is a lay-off: a temporary pause (or reduction) to avoid closure and redundancies.

The Portuguese Labour Code never uses the word "lay-off". The legal name is temporary reduction of the normal working period or suspension of the employment contract in a company crisis situation (Articles 298 and following). A company may only use the measure based on (Article 298(1)):

• Market reasons, such as a fall in orders or demand, as in the Braga factory;
• Structural or technological reasons, such as reorganisation or the replacement of production lines;
• Catastrophes or other events that have seriously affected the normal activity of the company.

And one condition cuts across all of them: the measure must be indispensable to secure the viability of the company and keep jobs. A lay-off is not a routine management tool. It is a crisis measure.

There are two forms (Article 298(2)):

1. Suspension of the contract: you stop working and stop receiving your normal salary, and you receive the pay compensation instead;
2. Reduction of working hours: you work fewer hours per day or week (possibly in rotating groups of workers) and receive the hours worked plus the compensation.

A company using the lay-off regime must have its contributions to the tax authority and Social Security in order (Article 298(4)), unless it has been declared in economic difficulty or is in a recovery process (298(3)).

How much you get: the two thirds rule, the floor and the cap

During the lay-off you are entitled to a monthly amount of at least two thirds of your normal gross pay, or the minimum monthly wage corresponding to your normal working hours, whichever is higher (Article 305(1)(a)). That amount has a ceiling: three times the minimum wage, which means 2,760 euros with the 2026 minimum wage of 920 euros.

Three examples with a full suspension:

• Marco earns 1,200 euros. Two thirds would be 800 euros, below the minimum wage. He works full time, so the floor is 920 euros: that is what he receives.
• Ana earns 2,100 euros. Two thirds is 1,400 euros, above the floor and under the cap. She receives 1,400 euros.
• Rui earns 4,500 euros. Two thirds would be 3,000 euros, but the cap stops at 2,760 euros. That is what he receives.

Mind the detail in the floor: the law uses the minimum wage corresponding to your normal working period. If you work part time, the floor is the minimum wage in proportion to your hours, not the full 920 euros.

With a reduction of hours the calculation has two steps (Article 305(2) and (3)). First, you are paid your salary in proportion to the hours you work. Then the pay compensation tops it up to the guaranteed amount. Sofia earns 1,500 euros and her hours were cut in half: she receives 750 euros for the hours worked, and since her guarantee is 1,000 euros (two thirds of 1,500), the compensation adds 250 euros.

Who pays what? The pay compensation is funded 30% by the employer and 70% by Social Security (Article 305(4)). In Marco's case: of the 920 euros, the employer pays 276 euros and Social Security 644 euros. But you never deal with Social Security directly. It transfers its share to the employer, and the employer must pay you the full amount, on time (Article 305(6)). You keep paying Social Security contributions on these amounts (Article 304(1)(a)), and the employer keeps paying its own (Article 303(1)(b)).

Can I work somewhere else during the lay-off?

You can, and it is a right written into the law, not a favour from your employer (Article 305(1)(c)). With two rules:

1. Tell your employer within 5 days of starting the new activity (Article 304(1)(b));
2. The compensation can be reduced. The two thirds guarantee counts everything you earn, inside and outside the company (Article 305(3)).

Marta, suspended and receiving 920 euros, finds a part-time job in a cafe paying 400 euros a month. Her guarantee stays at 920 euros: the compensation drops to 520 euros, which added to the 400 euros from the cafe gives the same 920 euros. If the part-time job paid more than 920 euros, the compensation could drop to zero, but then Marta would be earning more than the guarantee while keeping her main job.

The risk of staying silent is serious: hiding the new activity means you lose the compensation, return what you received and commit a serious disciplinary offence (Article 304(2)). The same applies if you skip, without justification, the training organised during the lay-off.

Holidays, Christmas, seniority and sick leave: what is protected

The lay-off is designed to freeze as little as possible:

• Seniority: lay-off time counts in full (Article 295(2));
• Holidays: the accrual and length of your holidays are not affected, and you book and take them under the general rules. The holiday allowance is paid by the employer, in full, at the value due under normal working conditions (Article 306(1) and (2));
• Christmas allowance: you receive the Christmas allowance in full: Social Security pays an amount equal to half of the pay compensation and the employer pays the rest (Article 306(3));
• Social Security benefits: you keep your benefits, and their calculation base does not shrink because of the lay-off (Article 305(1)(b));
• Sick leave: if you fall ill while your contract is suspended, you do not receive sickness benefit for that period; you keep receiving the lay-off compensation without interruption (Article 305(7));
• Training: the company may organise a training plan aimed at saving the business or raising your employability (Article 302). If the plan is approved by IEFP, the public employment service, it pays a top-up of 30% of the IAS social support index, 161.14 euros with the 2026 IAS of 537.13 euros, half for you and half for the company (Article 305(5)).

The procedure step by step (and how long it can last)

A lay-off cannot be decreed overnight. The Labour Code imposes a procedure (Articles 299 to 301):

1. Written notice to the workers' committee or, failing that, to the union committees, and, if there are none, to each worker covered. It must state the grounds, the staffing table, the selection criteria, the number and categories of workers covered, the duration and the training areas (Article 299(1) and (3)). The accounting documents that support the claimed crisis must be made available for consultation (299(2)). Without representative structures, workers have 5 days to appoint a committee of 3 or 5 members, depending on whether the measure covers up to 20 or more than 20 people.
2. Negotiation: within the following 5 days, an information and negotiation phase opens, aiming at an agreement on the form, scope and duration (Article 300(1)).
3. Individual notice: with an agreement, or 5 days without one, the company notifies each worker in writing of the concrete measure, with the grounds and the start and end dates (Article 300(3)). On the same day it sends Social Security the negotiation minutes and the list of workers covered (300(4)).
4. Start: the measure can only start 5 days after that individual notice. It can start immediately if there is an agreement, or if an immediate impediment to work is known to everyone (Article 301(2)).

Duration: the lay-off must have a length defined upfront, at most 6 months, or 1 year in case of a catastrophe or event that seriously affects the company's activity (Article 301(1)). Either period can be extended by 6 months with a written, reasoned notice (301(3)). During the measure, the company must update the representatives (or the workers) every quarter on how the crisis is evolving (Article 307(1)).

And there are no back-to-back lay-offs: to apply the measure again, the company must let half the time of the previous lay-off pass first (Article 298-A). If it used 6 months, it waits 3.

ACT, the labour inspection authority, oversees all of this: on its own initiative or at the request of any interested party, it can terminate the lay-off if the grounds do not exist or have ceased, if the notices were skipped, if the company refuses to negotiate or if it breaches the duties of Article 303 (Article 307(2)).

What the company cannot do during a lay-off

While it receives public money to pay salaries, the company is tied to a list of bans (Article 303(1)). It cannot:

• Distribute profits, in any form;
• Raise the pay of directors and managers while Social Security is co-funding the compensation;
• Hire or renew contracts for posts that could be covered by workers on lay-off;
• Pay late, whether the compensation or the contributions.

And the most important ban: it cannot terminate your contract during the lay-off, nor in the 30 days after it (measures up to 6 months) or 60 days after (longer measures). The only exceptions are dismissal for cause, the end of a fixed-term contract and the end of a service commission (Article 303(2)). A collective redundancy in the middle of a lay-off breaks this rule. A company that does it must return all the public support received for the dismissed worker (303(3)), on top of a serious administrative offence.

Three more protections with their own article:

• If you are a union delegate or a member of a workers' representative body, the lay-off does not stop you from exercising those functions in the company (Article 308);
• When the lay-off ends, the company must let you return to your normal activity; blocking your return is a serious administrative offence (Article 295(4) and (5));
• If the company shuts its doors without opening a lay-off procedure or a collective redundancy, that is not a lay-off: it is a temporary closure, and it owes you 75% of your pay if the cause is unforeseeable circumstances or force majeure, or 100% if the closure is due to the employer or in its interest (Article 309(1)).

If the compensation does not arrive, do not just wait: check the guide on late wages in Portugal (Article 305(8) even lets you suspend the contract during a reduction) and report it to ACT. If the lay-off ends in dismissal, see how to apply for unemployment benefit.

The simplified lay-off after the 2026 storms

In February 2026, after storm Kristin, the Government created a special transitional regime for the affected areas: the simplified lay-off of Decree-Law 31-C/2026 of 5 February. According to the Government's official note, in the first 60 days Social Security covers 80% of the remuneration due to the worker and the employer the remaining 20%; after that, the usual 70/30 split applies. It is an exceptional measure for companies hit by the calamity. The standard regime remains the Labour Code one described in this guide. Note also that under the standard regime a catastrophe allows a lay-off of up to 1 year (Article 301(1)).

Six situations, six outcomes

For companies: a lay-off buys time, with strings attached

If your company faces a serious downturn, the lay-off is the legal alternative to redundancies, but use it inside the lines. First confirm your contributions are in order (Article 298(4)) and document the grounds with accounting evidence, because you will have to make it available (Article 299(2)). Follow the sequence: written notice with the six contents of Article 299, five days of negotiation, individual notices with dates, minutes and worker list sent to Social Security (Article 300(4)). Budget the real costs: 30% of the pay compensation, contributions on the salary you pay, the holiday allowance in full and your share of the Christmas allowance (Articles 303, 305 and 306). Respect the bans on profits, board pay rises, hiring and terminations, because a breach costs the return of all support plus a serious administrative offence (Article 303), and ACT can end the measure at the request of any interested party (Article 307(2)). Plan the day after too: you can only repeat the measure after half of the period used has passed (Article 298-A).

For unusual situations, such as company groups, lay-offs chained with collective redundancies or doubts about the grounds, confirming with a lawyer is the prudent route.

General information, not legal advice. Always confirm amounts and deadlines with the official sources.