Working after retirement in Portugal: what happens to your contract?

You have retired and the company wants you to stay? You can. But the contract is no longer the same. 30 days after you and the employer both know of the retirement, your open ended contract becomes a 6 month fixed term contract (Art. 348 of the Portuguese Labour Code). It renews by itself, without limit, but either side can end it at the close of each period: the employer with 60 days notice, you with 15. And at the end there is no severance. At age 70 without retirement, the rule is the same.

Retirement ends the contract. But only if someone wants it to

Mr. Manuel is 66 years and 9 months old and has worked for 30 years at a metalworking shop in Leiria. In September 2026 Social Security grants him the old age pension. He tells his boss. The boss says: "Stay, I need you." Mr. Manuel keeps coming to work every day.

What happened to the contract? Two things, one after the other.

First, the law says the employment contract lapses when the worker retires on grounds of old age or invalidity (Art. 343 c). To lapse means to end on its own, without anyone deciding it. It is not a dismissal, there is no charge sheet and no procedure. If Mr. Manuel or his boss had wanted to close the door on retirement day, they only had to stop.

Second, since neither of them wanted to stop, Art. 348 kicks in. No. 1 says the contract of a worker who remains at work 30 days after both parties know of the old age retirement is deemed a fixed term contract. In other words, Mr. Manuel's open ended contract does not die. It transforms. And it transforms into a weaker contract.

Note the detail that decides everything: the 30 days count from the moment both parties know. If the employer does not know you retired, the clock has not started.

[Common interpretation:] the law does not say how that "knowledge" is proven. In practice, it is the date you tell the employer about the retirement, or the date the employer tells you. Do it in writing, with the pension award date. That way nobody argues later about when the 30 days began.

What changes 30 days later

The contract now follows the rules of the fixed term contract (a contract with a deadline), with four rules of its own (Art. 348 no. 2):

Back to Mr. Manuel. The pension was granted on 10 September 2026 and he told his boss that same day. The 30 days end on 10 October. From then on he has a 6 month fixed term contract running to 10 April 2027. If nobody says anything, it renews for another 6 months, to 10 October 2027. And so on, with no limit on renewals (b). The cap of 3 renewals and 2 years that applies to a normal fixed term contract does not exist here.

There is one rule that exists only for normal fixed term contracts and does not apply here: the severance of 24 days of base pay per year of service that Art. 344 no. 2 requires at the end of a fixed term. Art. 348 no. 2 d) expressly excludes it. Mr. Manuel's 30 years of service earn no compensation on the day this contract ends.

How the contract ends after conversion

After conversion, each side has a simple way out. Neither requires a justification.

If the employer wants to end it: it gives written notice 60 days before the end of the 6 month period (c). The contract lapses on that date. No reason needs to be given, there is no procedure and no severance is paid.

If you want to end it: you give 15 days notice (c). Also without reason and without penalty.

An example with dates. Mr. Manuel's period ends on 10 April 2027. For the contract to lapse on that date, the employer must hand him the notice by 9 February 2027 (60 days before). If Mr. Manuel wants to leave on 10 April, he gives notice by 26 March 2027 (15 days before).

[Common interpretation:] what if the employer is late and only gives notice on 1 March? Art. 348 applies the fixed term rules "with the necessary adaptations". Under those rules, if nobody declares in time that they do not want to renew, the contract renews for an equal period (Art. 149 no. 2). So a late notice does not make the contract lapse on 10 April: it pushes it into the next period, to 10 October 2027, and that is when the notice takes effect. This is not a rule written for this case, it is the most common reading. If the employer puts you out without respecting the 60 days and without waiting for the end of the period, keep the notice and the date you received it: what is at stake is the salary up to the end of the period the employer skipped.

In the middle of a period, the usual rules apply. A fixed term contract cannot be ended mid term at the employer's will. If the employer wants you out before the period ends, only through just cause and a disciplinary procedure (Art. 351). Being retired does not remove your right to challenge a dismissal made outside the law.

Age 70 without retirement: the same conversion

Ms. Fernanda is 69, works as an accountant at a company in Coimbra and has never claimed her pension. She is not required to: nobody is forced to retire. But on the day she turns 70, her contract converts into a 6 month fixed term contract, with the same four rules (Art. 348 no. 3).

The difference is the trigger. On retirement, the 30 days count from the moment both parties know. At 70, the date is the birthday, which the employer has known since the day it hired you.

[Common interpretation:] the law says "a worker who reaches 70 years of age without having retired" and applies "the provisions of the previous paragraphs". The usual reading is that the conversion takes place 30 days after you turn 70, following the same count as no. 1. For those who retired before 70, no. 3 adds nothing: the conversion already happened on retirement.

Pension and salary: can you receive both?

This question is not in the Labour Code. It sits in the Social Security rules. The answer depends on the type of retirement.

Retirement at the normal age. In 2026 that is 66 years and 9 months (Portaria 358/2024/1); in 2027 it becomes 66 years and 11 months. Anyone retiring at this age can work and combine pension and salary, as an employee or as a freelancer. You keep paying Social Security contributions and, in return, receive a pension supplement (Acréscimo de Pensão) calculated on those contributions. It is automatic, no application needed, and is paid the following year, in March or November.

Early retirement under the flexibility scheme. If you brought your pension forward (from age 60 with 40 years of contributions, with a penalty for each month of anticipation), there is a hard rule: for the next 3 years you cannot work, paid or unpaid, for the same company or the same group where you retired. If you do, you lose the pension while you work, repay what you received and pay a fine between 50 EUR and 350 EUR (double if there were undue payments). An employer that knows of the situation is also liable for repaying the pension. You can work for any other company.

Early retirement for very long careers or long term unemployment. The Social Security practical guide treats the 3 year restriction as a rule of early pensions for employees, without distinguishing between schemes. [Case by case:] before agreeing to stay at the same company after any early retirement, confirm your own situation on Segurança Social Direta or at a Social Security desk. The risk of losing the pension is too high to guess.

Invalidity pension converted into old age pension. It cannot be combined with income from work. Full stop.

Reporting duties. Anyone on an early pension must inform the National Pensions Centre within 30 days if they go back to work for the same company or group within the following 3 years. Failing to report is a fine.

And for those who do not retire and keep working after they could claim the pension? Two effects. The pension earns a bonus for each extra month of contributions after your personal retirement age. And contributions go down: for workers aged at least 65 with 40 years of contributions, or already entitled to a pension without reduction, the overall contribution rate falls to 25.3% (17.3% for the employer and 8% for the worker). The employer applies for the reduction at Social Security with your documents.

What stays the same

The contract became weaker at its end, not in daily life. After conversion you still have:

• The same salary and allowances, including the holiday allowance and the Christmas bonus. Art. 348 does not touch pay.
• 22 working days of holidays per year and, at the end of the contract, the pro rata holidays and allowances for the year you leave, as in any fixed term contract.
• Seniority for length of service payments and any other rights the contract or collective agreement ties to years in the company.
• Protection against mid period dismissal: only just cause with a procedure.
• Working hours, rest, health and safety, everything the law gives any worker.

What you lose is what Art. 348 takes away: the stability of the open ended contract, severance at the end and the long notice period.

What to do before and after retirement

If you are about to retire and want to stay:

1. Decide whether it pays. Compare the pension alone with pension plus salary plus the pension supplement. If yours is an early retirement, the same company is off limits for 3 years.
2. Notify the retirement in writing to the employer, with the pension award date. Ask for a written reply confirming you stay on. That fixes day zero of the 30 days.
3. Mark the 6 month periods in your calendar. You always know by when the employer must give you notice (60 days before the end of each period) and by when you must give yours (15 days).
4. Do not sign a "new" fixed term contract with worse conditions just because you retired. The conversion is automatic and keeps your salary and rights. A new contract with lower pay is a proposal you can refuse.

If the employer wants to end the contract after conversion:

• Check that the notice is in writing, gives 60 days and points to the end of a 6 month period.
• On your last day, ask for the end of contract paperwork and check pro rata holidays and allowances.
• Do not expect severance: the law does not grant it. But the pro rata amounts are yours and you can claim them up to 1 year after leaving (Art. 337).

For employers: keeping a retired worker without risk

If a worker has retired and you want them to stay, you do not need a new contract: the conversion under Art. 348 happens by itself 30 days after the company learns of the retirement. What you need is proof of the date of that knowledge. Ask the worker for written notice of the pension award and reply in writing. From there, note the 6 month periods and the 60 day deadline for the lapse notice. A late notice renews the contract for another 6 months (Art. 149 no. 2, with the necessary adaptations), and a forced exit mid period without just cause is an unlawful dismissal, with the salary for the remaining period at stake. If the worker took early retirement, be aware that they cannot work for your company or group for the next 3 years and that an employer who hires them knowingly is liable for repaying the pension. For workers who have not yet claimed their pension and meet 65 years of age with 40 years of contributions, apply to Social Security for the reduced 25.3% rate. Where a collective agreement regulates retirement or sets its own deadlines, checking the clauses with a lawyer is the prudent recommendation.