Inauguração do edifício de apoio à Base de Helicópteros em Serviço Permanente de Loulé com a presença da Ministra da Administração Interna em Loulé - C.M.Loule - Mira (1).JPG

Redundancy compensation slashed in 2012

A new law which will make it easier for company bosses to get rid of staff could mean a reduction in compensation payments by up to 70%.

The law, which comes into effect this year, will affect all current employees, but the cut in compensation will depend on the length of career service.

It means that if employees were sacked the day after the new law comes into force – sometime in the third quarter of 2012 – they would suffer cuts of up to 70% compared with the current law in force.

The new law, meant to make companies more competitive and productive, is one of the structural reform measures proposed by the ‘troika’ in the Memorandum of Understanding between it and the Government.

The worst cuts will be felt by employees who have been working for less than 12 years in the job market or for a particular company.

The cut, according to the Government and ‘troika’s, will bring compensation payments in line with the European Union average.

The measure was agreed in principle by the PS government of José Sócrates, but the devil in the detail was worked out by the present PSD government.

Compensation is fixed at between eight and 12 days of salary for each year of service. This reduction will represent the last expected phase in the changes; the first being the reduction for new contracts.

That reduction in the law has been approved by Parliament and foresees a reduction from 30 to 20 days compensation per year of service, a maximum limit of 12 salaries and an end to the minimum limit of three salaries compensation.

The specific details of the harmonisation with the European Union average will be known in the first quarter of this year and approved by parliament in the third quarter.

According to the National Council of Education, Portuguese graduates under 25 are the worst affected by unemployment levels registered nationally over the past decade.

Yet in Europe, on average, the worst affected were those with low educational attainments.

The NCE’s latest report on the State of Education in Portugal looked at the development of qualifications and employment prospects nationwide between 2000 and 2010.

But despite graduates being the most penalised, those with higher education levels were still the group most likely to be employed.

“A degree or higher education certificate continues to hold advantages, both in getting a job and in keeping it,” the report states.