EMCC European Monitoring Centre on Change

Tackling the recession: Portugal

  • Observatory: EMCC
  • Topic:
  • Published on: 12 July 2009

Heloísa Perista and Janine Nunes

Disclaimer: This information is made available as a service to the public but has not been edited or approved by the European Foundation for the Improvement of Living and Working Conditions. The content is the responsibility of the authors.

The recession spreads and deepens across Europe and Portugal is no exception. Against this recession, the Portuguese government implemented some measures to face the economic downturn; most of the measures concerned are directed to workers, regarding training and protection in unemployment, and directed to companies, namely to small and medium enterprises, through support to export and competitiveness, and acceleration of tax refund periods. All these measures have been subject to adjustments according to the most recent events.

1. Measures taken by government to assist businesses and protect jobs

Support to businesses

What formal or legal arrangements (such as job subsidies, bank guarantees, loans or special credit facilities) are in place in your country for supporting firms which are at risk of having to reduce employment? (Please include only measures which are aimed principally at maintaining employment as opposed to those which are aimed, for example, at increasing competitiveness or supporting investment.)

The Initiative for Investment and Employment (Iniciativa para o Investimento e Emprego) has as one of its structural axis the support to employment, economic activity and exports. Giving special attention to small and medium enterprises, some of the most relevant measures of this programme are:

  • Credit line of €2000M for small and medium enterprises (this credit line has been reinforced several times in the last few months);
  • Creation of a fund for industrial restructuring;
  • Support to Export Credit Insurance Mechanisms (€ 4000M);
  • Support to external promotion;
  • Support to the financing of private investment in agriculture and agro-industry co-financed by EU funds;
  • Creation of a credit line to support exports and competitiveness in agriculture, fishery and agro-industry in the amount of €175M;
  • Tax credit to investment in 2009, which may reach 20% of the invested amount, deductible on 4 exercises;
  • Self-settlement of VAT on the provision of goods and services to Public Administration, when the amount exceeds € 5,000;
  • Acceleration of the VAT refund period and elimination of the bank guarantee of the companies regarding the first VAT refund.

Maintaining employment is one of the main aims of the 2009 Employment Initiative (Iniciativa Emprego 2009). The specific measures aiming at maintaining employment include:

a) Retraining of active workers in reduced activity periods aimed at economically viable and competitive enterprises that are facing a decrease in the demand. The periods of reduction or suspension of work are used to improve workers' skills through training – this measure is covered by the Qualification Employment Programme (Programa Qualificação Emprego) (20 thousand workers expected to be covered);

Social security taxes reduction in 3 p.p. for micro and small enterprises (up to 50 workers) and for workers with 45 or more years old (200 thousand enterprises expected to be covered).

Are the arrangements or measures concerned permanent features of the system in your country or have they been introduced in the recent past specifically to combat the effects of the present recession? Please give an indication of the number of firms receiving support of this kind and the number of jobs protected as well as the source of funding.

These measures were introduced in the recent past specifically to combat the effects of the present recession and are expected to be in force during 2009.

According to recent information in the media, based on a debate in the Parliament, only 12.000 of a total of 300.000 companies are covered by these anti crisis measures.

Do the measures apply generally across the economy or are they specific to particular sectors or regions? Please indicate the sectors and/or regions concerned.

All these measures apply generally across the economy. However, initially the Qualification Employment Program (Programa Qualificação Emprego) was only directed to the car sector. Other specific plans have been launched to specific sectors, such as: wood and furniture; tourism; textiles, clothing and footwear; trade and restaurants; and cork.

Is there government support available for companies which introduce short-time working arrangements, give a temporary period of leave to workers or implement similar measures to enable workers to retain their jobs where there is insufficient work for them to do? If so, please give an indication of the extent of the support concerned and the number of companies, and the workers they employ, receiving support.

As mentioned above, the government created the Employment Qualification Program (Programa Qualificação Emprego) aimed at companies in need to resort to temporarily reduction of the normal periods of work or to the suspension of employment contracts and to resort to lay-off in order to ensure its viability and maintenance of the jobs.

This program provides for measures to support the delivery of training for the employees of companies during the period of temporary reduction of the normal periods of work or suspension of the employment contracts.

The companies joining the program will have to pay a tenth of the wages of the workers chosen to do this training during working hours.

Companies in the car industry may propose 35% of workers for training. In the other sectors this proportion is of 25% of the workers.

Only firms without debts both to employees and to the State and which have economic viability may join this project.

According to the Prime Minister, only in the car sector, 3.300 workers are currently in training. There are no figures for other sectors.

Are there are plans or proposals to introduce measures of the various kinds indicated above in order to assist businesses and protect jobs? If so, please describe them briefly.

For the time being all the already announced measures are mentioned above.

Support to workers

What formal or legal measures (such as partial unemployment benefit or similar kinds of social transfer) are in place in your country to support workers who have been put on to short-time working by employers or who have been given temporary leave with reduced rates of pay (i.e. who still formally have jobs but who are either not working or working reduced hours)? Please describe the measures concerned and indicate the scale of support provided. Please also give any figures available for the number of workers receiving payments of this kind as well as the source of funding.

The partial unemployment benefit is given to beneficiaries who are receiving unemployment subsidy and, cumulatively, have:

  • A part-time work contract;
  • A remuneration for part-time work lower than the amount of the unemployment subsidy;
  • A number of weekly hours of part-time work higher than 20% and lower than 75% of the normal full time working period.

The source of funding for this subsidy is the Social Security system. Figures for the number of workers receiving partial unemployment subsidy were required but these were not yet made available.

Are the measures concerned permanent features of the system in your country or have they been introduced in the recent past specifically to combat the effects of the present recession?

The measure concerned is a permanent measure in Portugal.

Has the coverage of the social benefit system which provides income support to workers who lose their jobs been widened in the present recession in order to ensure that those concerned are protected (such as, for example, through a relaxation of the rules and regulations governing the payment of unemployment benefits or other forms of social transfer or through an extension to workers not previously entitled to support)?

Some measures are directed to address the economic downturn by the reinforcement of the support provided to families with unemployed people and/or pensioners:

-The state contribution in generic medicines/drugs will rise from 15% to 30% to pensioners earning pensions lower than the national minimum wage.

- Students who are beneficiaries of family allowance, and who have one parent unemployed for more than three months, will have 100% of support (i.e., school meals and a greater benefit in school textbooks for next school year)

- Families with housing mortgages having one of the couple members unemployed for more than three months may require a moratorium on the supply of housing credit which may extend for two years, representing until then a reduction of 50% in the monthly amount due to the bank.

As to unemployment protection, it is to be mentioned the extension of the social unemployment subsidy from 12 to 18 months. This measure will be in force during 2009 only, integrating the plan to combat the crisis that the Government approved in November 2008 with the aim of encouraging investment and employment.

Are there any plans or proposals to provide income support for those working short-time or on temporary leave? If so, please describe them briefly.

For the time being all the already announced measures are mentioned above.

2. Action taken by companies to maintain workers in employment

What action, if any, has been taken by companies during the present downturn to keep workers in jobs in situations where the work for them has declined? Please describe briefly cases where companies have introduced short-time working (such as fewer hours per days or fewer days per week), temporary periods of leave or other means of maintaining people in jobs.

The actions usually taken by companies during the present downturn to keep workers in jobs relate to a reduction or suspension of work. Currently, there are 192 cases of reduction or suspension of work.

In the case of Oliva foundry, a temporary reduction of working time (lay-off) affects nearly 180 workers of a total of 198. 178 workers are in partial reduction of working hours, six workers with suspended contract in full and five were released by early retirement.

The employees were divided into groups and work five, seven or ten days a month.

On the other hand, Peugeot-Citroen enters into 'lay off' in May, following the unsuccessful decisions to tackle the crisis. The company had to resort to this measure in order not to affect the income of the workers without recourse to redundancies.

Employees covered by the lay off are engaged in the production sector. In May, the company has already provided five days of stopping. The company pretends to adhere to lay-off for six months, between May and October.700 worker of a total of 900 will be affected.

In general, the procedures of lay-off in Portugal are all very similar. The temporary suspension of work is normally 6 months. Companies can stop a few days per week or for complete periods. Sometimes, the suspension of employment contracts happens and for some workers this takes the form of early retirement. Normally the majority of workers are affected and the workers get a value close to the national minimum wage.

Some of these companies opt to join the Employment Qualification Program.

How extensive has such action been in terms of the number of companies and workers concerned and the sectors in which it has occurred?

According to the available data from the Ministry of Labour and Social Solidarity (Ministério do Trabalho e da Segurança Social), between January and April 2008, 548 workers were involved in 24 lay-off cases. This year the number reached 10,539 by April 24 corresponding to 192 cases.

Have particular types of company (e.g. multinationals or domestically-owned firms) or firms in particular sectors been more prepared to take this kind of action than others?

Car, footwear and textile are among the sectors which usually take this kind of action.

Has the action in question typically entailed a reduction in pay? If so, please give an indication of the typical extent of this.

Yes. Lay-offs usually entail a reduction in pay. However, according to the law in force workers shall not receive an income inferior to the national minimum wage or to two-thirds of gross salary, whichever is higher. These two-thirds have a ceiling of €1.350 (three minimum wages). The employee is entitled to leave and to receive the holiday benefit.

The workers who have been laid off for a temporary period are not eligible for unemployment benefits.

To what extent has this kind of action been accompanied by the provision of training or education to the workers concerned – i.e. how far have companies taken advantage of the lack of work to improve the skills of their work force?

As described above, companies may take advantage of the Employment Qualification Program.

3. Joint action taken by companies and trade unions to maintain jobs

How far has the kind of action described in Section 2 above been the subject of collective agreements between companies and trade unions? Please give summary details of the content of some of the most important collective agreements.

This information was required but it was not yet made available by the trade union confederations.

To what extent has other action been taken under collective agreements to reduce business operating costs so as to avoid job losses? Has there been an increase in instances of trade unions, or worker representatives, agreeing to accept cuts in pay, or to work longer hours without additional pay, in order to maintain employment levels? If so, please give an indication of the extent of such agreements and describe briefly typical cases.

This information was required but it was not yet made available by the trade union confederations.

Are such agreements more prevalent in some sectors than others?

This information was required but it was not yet made available by the trade union confederations.

What other forms of action have trade unions taken, apart from strikes and other action designed to put pressure on employers, in order to try to prevent job losses and maintain employment levels? How effective has such action been?

This information was required but it was not yet made available by the trade union confederations.

4. Measures to provide income support

To what extent do collective agreements include provision for higher rates of compensation in the event of workers being made redundant than they are entitled to under national legislation? How far do collective agreements providing more generous compensation than the statutory amount vary between sectors?

The information on collective agreements was required but it was not yet made available by the trade union confederations.

Has there been an increase in the number of collective agreements which include such provision during the present downturn?

To what extent are redundancies being concentrated on older workers, i.e. taking the form of early retirement, in the present downturn? Is there any evidence that the use of early retirement as a means of effecting reductions in employment has increased in importance during the present downturn

According to the Social Security data for the period January to November 2008 over half (51%) of the new early retirement pensioners come from a situation of long-term unemployment.

By November 2008, there were 15.244 more long-term unemployed who gave up finding a job and who were seeking access to early retirement pension.

Source: Ministry of Labour and Social Solidarity

According to the current information available in the Ministry of Labour and Social Solidarity in March 2009 there was an increase of 3.331 people with early retirement representing an increase of 2.3% compared to July 2008.

5. Lessons from research studies

Have any studies been undertaken in the past in your country on the effectiveness of attempts made in previous periods of recession to maintain employment levels similar to those covered here? If so, please outline the studies concerned and their main findings.

If partial unemployment benefit, short-time working or similar schemes which provide income support to those working short hours are a permanent part of the social security system in your country, please briefly describe any studies which been undertaken on their effects and the main conclusions to emerge from them.

Heloísa Perista and Janine Nunes, Cesis

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