Portugal employers push on after labour reform defeat

Portugal’s main business confederation has pledged to continue working towards labour market reform after Parliament rejected the government’s proposed changes to the Labour Code, arguing that modernising employment rules remains essential to boosting productivity, wages and economic growth.

The proposal, put forward by the centre-right government led by Prime Minister Luís Montenegro, was voted down on Friday after opposition parties united against the measures.

The package was rejected with votes from the Socialist Party (PS), Chega, the Left Bloc (BE), the Portuguese Communist Party (PCP), Livre, PAN and JPP.

In a statement issued after the vote, the Confederação Empresarial de Portugal (CIP) said it would remain committed to “working for a more developed country” despite the setback.

“The CIP engaged fully in improving the government’s proposal during discussions in social dialogue because improving labour rules is fundamental if Portugal is to turn the page on decades of low productivity and low wages,” CIP president Armindo Monteiro said, writes Portuguese business newspaper Eco.

Monteiro rejected suggestions that employers were seeking to weaken workers’ rights.

“Through the many proposals it presented, and the willingness it demonstrated to find common ground with other social partners, the CIP showed the country that business leaders do not want to dismiss workers or reduce employees’ rights,” he said.

“What employers want is job creation, wealth generation and the consolidation of social peace.”

The confederation warned that, without reforms, Portugal risks remaining ill-equipped to improve living standards or retain highly skilled young people.

Monteiro argued that stronger, more competitive businesses with higher productivity levels are essential to enabling companies to scale up and offer better wages.

Following the defeat of the legislation, CIP said it would continue working to remove barriers to economic development and salary growth.

The organisation also urged political parties and social partners not to lose sight of the factors that had driven the proposed reforms: economic stagnation and what it described as the inadequacy of current labour laws in addressing new realities such as digitalisation, the energy transition, remote working and changing expectations around work-life balance.

The outcome came as a surprise to many observers after PSD parliamentary leader Hugo Soares expressed confidence during Thursday’s debate that the proposal would pass.

Although Chega had not publicly disclosed how it would vote, the party had claimed to have secured several concessions on issues including holiday entitlements, breastfeeding rights and dismissal rules.

However, shortly before voting began, Chega requested a 30-minute suspension of parliamentary proceedings before ultimately voting against the government’s package.

Meantime, prime minister Luís Montenegro has already said his government “will not give up” on providing Portugal with what he calls “the conditions for the country to be competitive and productive”, stating these are the objectives of the labour reform package that will remain “intact in the government’s policies”.