Government acknowledges limits on fixed-term contracts

  • ECO News
  • 4 December 2016

Yet, this is not the only measure being assessed. The government has already showed intentions to apply the Single Social Tax (TSU) according to the type of contract employees’ have signed.

The Portuguese government has already acknowledged the possibility of changing the length of fixed-term contracts, but that is not the only option on the table. The changes should be discussed in next year’s social concertation, in order for some of them to start taking effect in 2017. The differentiation of social contributions paid by companies depending on the type of contract will also be up for debate.

“It is possible the length of contracts will be assessed. It has been changed several times: we’ve had a maximum duration of six years for fixed-term contracts, then back to three years […]”, said the minister of Labor Vieira da Silva stated this Friday.

According to the Portuguese Labor Code, the fixed-term contracts can be renewed up to three times, without exceeding three years in the majority of cases. But there are also situations when it can last a shorter amount of time, namely when it concerns people who are looking for their first job. The government had already stated, in the document handed in Parliament concerning the State Budget, they will revoke the law that allows the hiring of unemployed people or people who are looking for their first jobs for permanent positions through fixed-term contracts.

Vieira da Silva’s opinion is that fixed-term contracts cannot be a way to “extend the training period”. The minister said it is possible that the government will either limit the length or the number of renewals possible for fixed-term contracts, or change the criteria that justify that type of bond. These interventions, he states, “do not have to mean changing legislation, but rather creating incentives so that economic agents can choose the more appropriate ties, and not the ones who seem more appealing in the short term”.

The governor has pointed to the proposal already made by the Ministry, to differentiate the contributions to Social Security paid by companies according to the type of contract being used. The Portuguese Code on the Contributory Regime – the law on social security contributions for both employees and companies – already foresees a raise, of three percentage points, of the SS contributions paid by employers for fixed-term contracts (excluding specific situations) and, in return, also defines a decrease in the deductions, of one percentage point, for permanent contracts. The measure, designed by the Vieira da Silva, has yet to be applied because it is still not regulated.

According to the minister of Labor, the technical assessment of the labor market is done; the next step is the proposal of the changes to be made on these types of contracts.