Portugal adopts new measures on prohibition of dismissal

Large companies with positive net results this year and receiving state support cannot dismiss workers over the next year and must retain the number of employees, according to a preliminary version of the 2021 budget.

This scheme covers companies that make use of credit lines with state guarantees, but also those that benefit from tax incentives for productive investment, the investment support tax scheme (RFAI) and the business research and development tax incentive system (SIFIDE II).

Companies that benefit from the extraordinary tax credit for investment are also unable to dismiss workers, just like those that opt for the conventional return on capital, known as a dividend distribution.

The prohibition of dismissal also covers the collective dismissal procedure. This applies to “employees working for the company, as well as economically dependent self-employed workers and those working for any other entity that is in a relationship of control or group with the entity subject to the regime, as long as it has its headquarters or effective management in Portuguese territory or has a permanent establishment in that territory.”

In addition, companies must maintain their employment level until the end of 2021, i.e., have at their service an average number of workers equal to or higher than they had on October 1, 2020, and cannot initiate procedures of this type during the next year. However, these rules do not cover micro, small or medium enterprises (SMEs).

The companies that violate these impositions immediately lose the state support or tax incentives they were using and must return or pay the amounts already received or exempted, to the competent authority.