Portugal's Council of Ministers on Thursday approved a sweeping overhaul of the country's labor legislation, sending the draft law to parliament after nine months of negotiations with trade unions and business groups.
The reform package, known as "Trabalho XXI," aims to boost productivity, raise wages, and adapt the labor market to the digital economy.
Labor Minister Maria do Rosario Palma Ramalho said the final text included more than 50 changes to the original draft presented in July 2025, as well as 12 proposals from the General Union of Workers (UGT).
The measures include extending the maximum duration of fixed-term contracts from two to three years and open-ended temporary contracts from four to five years. Workers will also be allowed to take up to two additional days of justified absence per year as an extension of annual leave.
The reform also removes a restriction introduced in 2023 that barred companies from outsourcing activities following collective redundancies.
Under the reform, minimum services during strikes will be extended to cover care services for vulnerable groups, including the sick, institutionalized children, people with disabilities and the elderly.
The government also agreed to pay a 25 percent premium on overtime hours remaining at the end of a six-month period under individual "time bank" arrangements. This marks a compromise between the UGT's proposal of a 50 percent premium and the government's initial offer of no additional pay.
Armindo Monteiro, president of the Portuguese Business Confederation (CIP), said the negotiations produced "important consensuses" and a balanced compromise. He said the reform was possible to strengthen corporate productivity and improve workers' conditions.
UGT deputy secretary-general Sergio Monte also acknowledged the government's compromise but said the final text still retained the key disputed provisions, including rules on working time banks, contract duration, and working time organization.
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