Portugal's Labour Code Overhaul Collapses in Parliament After Chega Withdraws Support

The government's flagship overhaul of Portugal's labour law has collapsed. After almost eleven months of negotiation, parliament rejected the "Trabalho XXI" ("Work XXI") reform of the Código do Trabalho (Labour Code), leaving the existing rules in place and dealing a sharp political blow to the minority PSD-led government. The decisive vote came when Chega, the party the government had counted on, swung against the bill at the last moment.

On the day of the vote, PSD, CDS-PP and Iniciativa Liberal backed the package, but Chega joined the Socialists (PS) and the left in voting it down. A string of competing labour bills from other parties was also rejected the same morning, closing a process that had begun the previous summer with the government's promise of a "profound" revision.

What was on the table — and what dies with the vote

Presented in July 2025, Trabalho XXI proposed more than 100 changes to the Labour Code, ranging from dismissal procedures to parental-leave rules. Among the measures that now fall away:

• An individual "banco de horas" (hours bank) letting employers and workers average working time directly, without collective agreement.
• Longer fixed-term contracts and changes to how temporary work is renewed.
• Revised dismissal rules and adjustments to shift and overtime arrangements.

The reform had already failed to win agreement in Concertação Social (Social Concertation), the forum where the government negotiates with employers' confederations and the UGT union federation. It then drew a general strike on 3 June before reaching its parliamentary dead end.

The politics behind the collapse

Chega had signalled it might support the text, but pushed demands the government would not meet — chiefly lowering the retirement age to 65, or to 40 years of contributions. With the executive refusing to trade pension concessions for labour reform, Chega withdrew its backing and the bill fell. Labour Minister Maria do Rosário Palma Ramalho called the outcome "above all a defeat for the country," dismissed questions about her own position, and kept the public confidence of Prime Minister Luís Montenegro. The episode is a stark illustration of how little room a minority government has when its reforms depend on an unpredictable partner — the same fragility shadowing the looming debate on Social Security sustainability.

What This Means for Expats

• The current rules stand. If you work in Portugal, nothing changes for now: existing contract types, dismissal protections, working-time limits and leave entitlements remain exactly as they were.
• Employers wanting more flexibility will not get it yet. The individual hours bank and easier fixed-term contracts are off the table, so plan hiring around today's framework — see our guide to finding a job in Portugal for how that market works.
• Labour demand keeps leaning on foreign workers. Even amid cooler summer hiring plans, immigrants now make up nearly one in five Social Security contributors.
• Expect the issue to return. Reform has been shelved, not buried; a future attempt is likely, so keep an eye on any revived proposals.

For workers and employers alike, the immediate effect is certainty: the rules you signed up to still apply. For the government, the defeat is a reminder that, on the most contested questions of Portuguese economic life, having a programme is not the same as having the votes.