Lay-off in Portugal: what you receive and how long it lasts

What is the lay-off?

The lay-off is a temporary measure in Portugal's Labour Code (articles 298 and following)¹ for companies in business crisis: market reasons (a drop in orders, for example), structural or technological reasons, or a catastrophe or similar event that severely hits normal activity.

Instead of dismissing staff, the employer may, for a limited period:

• reduce normal working hours (people work fewer hours); or
• suspend employment contracts (people do not work at all).

The essential point: it is not a dismissal. The contract stays alive, seniority keeps accruing and the worker returns to the job when the measure ends. It is the Portuguese equivalent of a furlough or short-time work scheme.

How much do you receive?

While the hours are reduced or the contract is suspended you are entitled to a guaranteed monthly amount: two thirds of your normal gross pay, with two limits in 2026 (article 305(1))²:

Minimum: €920 (the national minimum wage³) · Maximum: €2,760 (three times it)

Here is how it works out by salary:

Compute your own case, with your modality, in the lay-off calculator.

Who pays: the employer or Social Security?

The compensation pay (compensação retributiva) is funded 30% by the employer and 70% by Social Security (article 305(4))². In practice the worker receives everything together, through the employer, which is then reimbursed for the Social Security share.

Suspension or reduced hours: the difference

• Contract suspension: you do not work and receive the guaranteed amount in full as compensation pay.
• Reduced hours: you receive the pay for the hours you work (paid by the employer as normal salary) and, if that falls short of the guaranteed amount, a compensation payment that tops up the difference. If the worked hours already pay the guarantee or more, there is no compensation.

On a €1,500 salary with the schedule cut in half: €750 for the worked hours plus €250 of compensation pay, €1,000 in total (the same two thirds as under suspension).

How long can it last?

The measure may not exceed six months, or one year in case of catastrophe or a similar event, and can be extended for a maximum period of six months (article 301)¹.

Can I be dismissed during the lay-off?

During the lay-off and in the 30 or 60 days that follow (depending on the measure's duration), the employer cannot terminate the contract of a covered worker through collective dismissal or job-position extinction (article 303)¹.

If a dismissal happens after that protection period, the normal rules apply: severance pay and, if you qualify, unemployment benefit.

The rights you keep

During the lay-off the worker keeps the essential rights of the contract:

• Holidays and the holiday bonus in full, as if working;
• the Christmas bonus in full: under suspension, Social Security bears half of the amount corresponding to the compensation pay and the employer pays the rest (article 306)²;
• you may take other paid work outside the company, informing your employer; that income counts towards the guaranteed amount and the ceiling, and the compensation may be reduced accordingly;
• under suspension, no sickness benefit is granted for illness occurring during the measure (the compensation pay keeps being paid).

To compare the holiday and Christmas bonuses with what you received while working, see the holiday & Christmas bonus calculator.

Does the lay-off pay tax and Social Security?

Yes. The compensation pay is employment income (category A): it is subject to IRS withholding per the tables and pays the 11% employee Social Security, like the rest of the salary. The figures on this page are gross; to see the net effect, use the net salary calculator.

What about the simplified lay-off?

In moments of crisis the Government sometimes creates exceptional simplified lay-off regimes, temporary and with their own rules: the pandemic one in 2020, and the 2026 regime for the areas hit by storm Kristin (Decree-Law 31-C/2026), with percentages and funding splits different from the general regime. If your employer is covered by one of these, check that law's rules; what we describe here is the general Labour Code regime.

A worked example, start to finish

Imagine a €1,500 gross salary and a suspended contract:

• Guaranteed amount: 2/3 × €1,500 = €1,000 (above the €920 floor, below the ceiling).
• The employer funds €300 and Social Security €700, all delivered by the employer.
• Against your salary, you lose €500 gross a month (33%).
• The €1,000 is subject to IRS withholding and the 11% employee Social Security.

Compute your own case in the lay-off calculator.