Payroll and Benefits Guide Madeira

Termination Process

In Madeira (Portugal), employment contracts can be terminated by mutual agreement, the employee’s resigna-tion, dismissal by the employer, the expiry of a fixed-term contract, or retirement. Dismissal by the employer must be based on valid grounds such as redundancy, misconduct, or unsuitability for the role. For redundancy or other economic reasons, employers must follow strict procedures, including providing written notice, con-sulting the employee, and, in some cases, informing the labor authorities or employee representatives. Termination must always respect procedural fairness and comply with the Portuguese Labor Code.

Notice Period

• During probation: 7–30 days depending on length of probation
• After probation:
  • 15 days (up to 1 year service)
  • 30 days (1–5 years)
  • 60 days (5–10 years)
  • 75 days (over 10 years)

Severance Pay

When termination occurs due to economic reasons or redundancy, employees in Madeira are entitled to severance pay. The standard calculation provides 20 days of base pay and seniority allowances for each full year of service, capped at 12 months’ pay. Severance is not required for dismissal due to disciplinary reasons when proven misconduct occurs.

Probation Period

The probationary period in Madeira varies according to the employee’s role. It is 90 days for most standard contracts, 180 days for employees in positions with higher technical complexity or trust responsibilities, and 240 days for management-level employees or company directors. During this period, either party may terminate the employment contract with reduced or no notice, depending on the duration of the probation.