Proposal on Changes to the Employment Code – Fixed-Term Contracts

A draft law amending the Portuguese Employment Code has been under discussion since August 2025, introducing several significant changes to the rules governing fixed-term employment contracts. These proposed amendments aim to provide greater clarity and flexibility to employers while ensuring compliance with legal standards and protections for employees.

Under the new proposal, the maximum duration of fixed-term employment contracts will increase from two years to three years. The law also establishes that the typical duration of such contracts will be one year, although specific circumstances may justify a different term based on the nature of the employment relationship or operational needs.

The rule allowing up to three renewals of fixed-term contracts will remain in place. However, these renewals must always comply with the overall duration limit of three years. For example, a contract initially entered into for a one-year term may only be renewed twice in order to stay within the legal maximum duration of three years.

To comply with these rules, companies are encouraged to implement internal control mechanisms to ensure that contract terminations occur within the legal deadlines. Such procedures are essential to prevent situations where fixed-term contracts may inadvertently convert into open-ended contracts due to administrative oversight or delays.

It is equally important for employers to conduct a careful assessment of the justification for each hiring. The application of invalid or factually unsupported reasons for fixed-term employment may render a contract null, leading to its automatic conversion into an open-ended employment relationship.

In light of these proposed amendments, companies should adopt a cautious and strategic approach to managing fixed-term employment contracts. This includes monitoring contract durations, verifying the legality of renewals, and ensuring that all hiring reasons are factually substantiated and properly documented.

For tailored advice on how these proposed changes may impact your company’s employment structure or compliance obligations, please contact EDGE International Lawyers.