1.7. Lay-off: Reduction of activity or suspension of the labour contracts
The Portuguese Labour Code foresees the possibility of temporary reduction of activity or suspension of the labour contracts.
These measures may be due to the employee (illness, accident or military service) or to the employer (economic crisis, force majeure or employer´s interest).
The lay-off procedure consists in a measure which may be adopted by initiative of a company within a context of economic crisis to assure the company’s economic viability and the maintenance of posts.
The lay-off procedure may be grounded on market, structural and economic reasons.
- a quantitative change of the company’s regular operation that does not imply the total suspension of the employment contracts may consist in
- the reduction of the weekly or daily working periods affecting one or more group of employees rotationally, or
- the reduction of the number of hours corresponding to the employees’ normal daily or weekly working period);
- the employee is temporarily inactive once occurs the temporary closing of the company or production unit.
The lay-off comprehends a formal procedure with communication and information/negotiation with the employees phases.
During the period of reduction or suspension of activity, several effects of the labour contract are suspended. However, please note at some relevant rights and obligations of both the employee:
- Compensatory payment - since the suspension or reduction of activity determines a proportional reduction of the employees remuneration, the employees are entitled to receive a compensatory payment. Such compensation aims to assure that during the reduction or suspension period they receive a monthly salary equivalent to 2/3 of the regular gross remuneration and it shall never be inferior to the national minimum wage (which currently ascends to € 705,00) and with the maximum limit of 3 x national minimum wage (€ 2.115,00). The compensatory payment attributed to each employee is borne in 30% by the employer and in 70% by the Social Security;
- Performance of paid professional activity outside the company (for other entities – exception to the non-competition general rules) during the reduction or suspension period. Should this be case, the employee shall communicate the same to the employer within a maximum of 5 days. Moreover, the compensatory payment of the employees who perform activity outside the company for other entities during the reduction or suspension period shall be reduced in accordance;
- Social Security benefits: During the suspension or reduction period the employee is entitled to maintain all its social security benefits, which are calculated considering its normal remuneration;
- Vacation period and vacation and Christmas allowances: During the reduction or suspension period the employees maintain all their rights as regards the vacation period and vacation and Christmas allowances, in the same conditions as if the same were rendering effective work. Regarding the Christmas allowance, the same is borne by the Social Security Services in 50% of the amount of the compensatory payment and the remaining is directly paid by the employer.
The lay-off may last up to 6 months and may be extended for another 6 months period.
In principle, during the lay-off or in the following 30 or 60 days (in case lay off proceeding which has lasted up to or over 6 months), the employer must not terminate the labour contracts.
Other duties arise for both the employer and employees while the lay-off is in force.
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