The pros and cons of the new pack of laws
by Cláudia Vaz Póvoa [email protected]
Cláudia Vaz Póvoa is a partner and head of the Employment Department in the law firm Neville de Rougemont & Associados R.L. with post graduations and master in Employment Law and the UK Advanced Certificate of Employment Law, and is author of Boa Fé na Formação do Contrato de Trabalho e o Regime do Período Experimental.
In November 2011 a new compensation regime came into force applicable only to new contracts, followed by another piece of legislation allowing an extra renewal for fixed term contracts that applies to all contracts which will terminate before December 2012.
At present another pack of changes in the employment law is expected as per agreement of the social players, the aim of which is allegedly to make the employment market more appealing to investors and less rigid in its essence.
The newly announced package represents quite significant changes in terms of overtime payment and increase of the working hours by reduction of resting periods and the cut of a few bank holidays.
It also aims to extend the existing rules of dismissal compensation amounts to the old contracts and make the individual redundancies and inadaptability dismissals easier to put into practice.
The big question is whether or not these changes will produce the intended effects in terms of investment in the country, reducing the daily increasing unemployment figures affecting especially the youngest employees.
Overtime changes
The package includes changes in the overtime work rules, reducing remuneration by half and excluding the compensatory rest, making it more profitable for the employers to use overtime as a flexibility resource, a positive message to those willing to invest in the country.
On the reverse side, unemployment is likely to increase as a result of this measure and not the contrary, as employers will be attracted to maximize the already existing workforce instead of hiring new employees.
From the employees’ perspective, these changes will turn into a dramatic reduction in their salaries and an increase in their working hours with negative impact in their budgets and resting periods.
Individual redundancies
There has been a lot of criticism about the last in first out criteria used by current legislation for selection in individual redundancies which could be considered as discriminatory on the grounds of age as the youngest employees would be the most likely to be dismissed according to such criteria.
The forthcoming rules no longer use the length of service as criteria as only the performance and productivity will be relevant.
According to the Portuguese Constitution a dismissal can only happen once the employment is no longer possible and this derives from the employment principle of stability at work position.
Contrary to the current regime and with the risk of breach of the Constitution, it will be possible in the future to make an employee redundant irrespective of the existence of other job positions available meaning that dismissals will be possible even in situations where the employment could still be maintained.
Inadaptability dismissals
An option barely used has been that of the inadaptability dismissal, as employers have found it very difficult to apply. As it is currently, employers can only dismiss due to inadaptability those employees who have not been able to adapt to changes introduced in the workplace, these being technological or other structural changes in the productive process.
Once the new regime enters into force, it will be possible for employers to dismiss employees who cannot achieve certain pre-established targets, and this will mean that employers will have better and stronger chances to legally dismiss an employee who is not productive or who does not meet the targets. There will obviously be limits to such dismissals which cannot be discriminatory or in breach of the good faith principle.
Compensation rules
The compensation package is reduced from an average of 30 to 20 days’ basic salary per year of service, fraction of year to be calculated pro rata with the limit of 12 basic salaries.
The idea behind this is to make it less expensive to dismiss so as to allow more flexibility to the employment market. In the long term and once more job positions are available this measure may determine a competitive advantage to the Portuguese based companies.
In the short term, and while the unemployment figures remain so dramatically high, this measure will mean that unemployment may rise even more.
Cláudia Vaz Póvoa can be contacted at email [email protected] or on telephone 213 191 290.
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