Key facts
Despedimento coletivo
14 dias/ano
Art. 366 CT
Caducidade a termo
24 dias/ano
2023 reform
IRS exemption
1 month/year
not a fixed cap
Portuguese severance isn't one number, it's a handful of distinct formulas that depend entirely on why the employment ended, and in one case, no formula at all. Confusing despedimento coletivo with caducidade, or assuming an unlawful-dismissal figure is guaranteed rather than a court's call, are the two mistakes that show up most often.
The tax side surprises people too: Portugal's severance exemption isn't a fixed euro amount, it scales with your salary and years of service, which is why most statutory severance arrives completely tax-free.
Despedimento coletivo and its relatives: 14 days a year
Despedimento coletivo (collective dismissal), extinção do posto de trabalho (redundancy of a specific role), and despedimento por inadaptação (dismissal for unsuitability) all pay the same rate under Article 366 of the Código do Trabalho: 14 days of base salary and regular supplements per complete year of service. This was raised from 12 days by Lei n.º 13/2023, effective 1 May 2023, as part of the broader Agenda do Trabalho Digno labour reform.
Caducidade de contrato a termo pays more
When an employer simply lets a fixed-term or uncertain-term contract lapse rather than renewing it, the rate is higher: 24 days per complete year of service, also set by the 2023 reform, replacing an older formula that paid 18 days for the first three years and 12 days thereafter.
Despedimento ilícito: a range, not a formula
| Category | Basis |
|---|---|
| Despedimento coletivo / inadaptação | 14 days/year, fixed (Art. 366 CT) |
| Caducidade de contrato a termo | 24 days/year, fixed |
| Despedimento ilícito | 15-45 days/year, court's discretion, 3-month floor |
| Justa causa / resignation | No statutory compensation |
Why the exemption is a formula, not a fixed number
Most jurisdictions cap severance tax exemptions at a fixed currency amount. Portugal doesn't: the exempt portion equals your average regular monthly pay over the last 12 months, multiplied by your years (or fraction) of seniority, effectively "one month's pay per year of service." Since both statutory formulas (14 and 24 days) sit under that 30-day/year threshold, ordinary severance is typically fully exempt. Only when a court sets an unlawful-dismissal award above 30 days per year does a taxable excess appear, taxed at the standard IRS progressive brackets.
Acordo de revogação: the negotiated alternative
Many Portuguese departures are resolved through acordo de revogação, a mutual-agreement termination with no statutory formula at all. The amount is whatever the two parties agree, which is precisely why it's popular: it can move faster than a formal dismissal process and both sides can shape the number and its tax treatment. It's negotiable territory, not something to calculate in advance.
Before you sign anything
- Confirm which category actually applies: coletivo, caducidade, ilícito, or an acordo.
- Check the base salary and regular supplements (diuturnidades) used in the calculation.
- Verify your years of service, since fractions count proportionally.
- Ask whether any of your compensation exceeds the one-month-per-year IRS exemption threshold.
- If the stated cause for dismissal seems disputable, a labour lawyer's review is worth the conversation before accepting a number.
Model your own compensação
See the gross and net split, and exactly how the IRS exemption applies, for your salary, tenure, and termination category.
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Frequently asked questions
How much severance am I owed if I'm made redundant?
Despedimento coletivo, extinção do posto de trabalho, and despedimento por inadaptação all pay 14 days of base salary per complete year of service, per Article 366 of the Código do Trabalho (raised from 12 days by the 2023 labour reform).
Is caducidade de contrato a termo the same as redundancy?
No, and it pays more: 24 days per complete year of service when an employer chooses not to renew a fixed- or uncertain-term contract, replacing the older 18-day/12-day split.
Do I get anything if I'm dismissed for cause or I resign?
No. Despedimento por justa causa and an ordinary resignation with proper notice carry no statutory compensation under the Código do Trabalho.
What happens if my dismissal is found unlawful?
There's no fixed formula. A court sets compensação between 15 and 45 days per year of service, with a 3-month minimum, if you opt for compensation instead of reinstatement.
Why do most severance payments arrive tax-free?
Portugal's IRS exemption isn't a fixed euro cap, it's structural: exempt up to one month's average pay per year of service. Since the 14-day and 24-day statutory formulas both sit below that 30-day/year threshold, they typically land fully within the exemption.
Does Social Security apply to severance?
No, not to despedimento coletivo, extinção do posto, despedimento por inadaptação, caducidade, or rescisão pelo trabalhador. Only IRS on any taxable excess matters here.
Related tools and reading
General information only. Check current official guidance and obtain professional advice for a decision affecting your tax, employment or immigration position.