Portugal Increases the General Minimum Wage and Grants (Further) Social Protection Measures

On December 7, 2021, the Decree-law no. 109-B/2021 was published in the Portuguese Official Gazette, to increase Portugal’s general minimum wage from EUR 665,00 (€) to EUR 705,00 (€) per month, and to create an exceptional measure of compensation (pecuniary allowance) ultimately destined compensate for the increase of minimum wage, paid by portuguese administrative entities (see here). These measures will be effective January 1, 2022. The annual increase of the minimum wage, as proposed by the Portuguese Government, integrates part of its political program. Despite the pandemic (and political) crisis, such measures have been implemented, alongside social protections provided to both employers and employees. It is estimated that by 2023 the general minimum wage will increase to EUR 750,00 (€).

Decree-law no 109-B/2021 is a result of a “tri-lateral” social dialogue between the Portuguese Government and both employee and employer representatives. The above-mentioned increase, according to the law’s preamble, aims to promote a progressive effort to: (i) reinforce employee bargaining power; and (ii) to recover and provide income stability.

The Portuguese Government stated that reducing salary costs will not be part of the present strategy, despite the aggravated conditions that the COVID-19 pandemic crisis has created. Thus, in accordance with the social protections implemented since the first quarter of 2020, more mechanisms will need to be created to provide an adequate response to meet the compelling needs of employers and employees.

In order to grant this wage increase, the Portuguese Government added an exceptional measure of compensation. The exceptional measure of compensation provides for employers to be paid a pecuniary allowance corresponding to a fixed amount per worker earning the minimum wage [EUR 112,00 (€) max.]. This pecuniary allowance must be provided in a maximum period of 30 days (counted from March 1, 2022, onwards). It is also stated that the financial support per employee who, in the wage statement for the month of December 2021, earned the value of the declared base remuneration between the minimum wage for 2021 and the one below the minimum wage for 2022 corresponds to 50% of the referred amount of EUR 112,00, 00 (€) [EUR 56,00 (€)], also provided to employers, to compensate for the increase of minimum wage, paid by one of the administrative entities mentioned below.

This allowance is supported by IAPMEI (Portuguese Agency for Competitiveness and Innovation), or by the Tourism of Portugal I.P. To access this financial support, an employer must meet certain formal conditions. Specifically, the employer must: (i) present, in the remuneration statement for the month of December 2021, one or more full-time employees with the value of the base remuneration declared equal to or greater than the minimum wage for 2021; and (ii) at the time of payment of the subsidy, have fulfilled their tax and social security obligations with the tax authorities and social security respectively.


David Carvalho Martins, Tiago Sequeira Mousinho @ DCM | Littler