A possible relaxation of the rules on fixed-term contracts could prevent around 13 thousand workers per year from having open-ended contracts, according to an estimate put forward by ISCTE’s Institute for Public and Social Policies. The projection appears in “Panorama 2026”, a publication that analyzes the impact of the main political decisions planned for next year, based on the draft revision of labor legislation presented by the Government, according to Notícias ao Minuto.
The warning appears in “Panorama 2026”, the new annual publication of the Institute for Public and Social Policies of IPPS-ISCTE, coordinated by Pedro Adão e Silva, sociologist and former Minister of Culture in the third Government of António Costa.
This document anticipates the main developments expected in 2026 in areas such as geostrategic challenges, the national political situation, macroeconomic scenarios and the evolution of the labor market and Portuguese income. Among the topics analyzed is the proposal from the Government led by Luís Montenegro to review labor legislation, currently under discussion within the scope of social consultation.
Proposal provides for longer contracts
According to the draft, the Executive proposes to increase the maximum duration of fixed-term contracts from two to three years. The possibility of the first fixed-term contracts lasting up to one year is also foreseen, whereas currently the legal limit is six months.
These changes are analyzed in the study prepared by Paulo Marques, researcher at IPPS-ISCTE, who sought to estimate the impact of the measure on the conversion of temporary contracts into open-ended contracts.
“If the rules for fixed-term contracts are relaxed again, we can estimate that around 13 thousand workers per year would no longer see their contract converted into a permanent contract”, concludes the analysis, cited by the same source.
What previous reforms show
To arrive at this estimate, the researcher was based on studies that analyzed similar reforms carried out in the past. One of the examples cited is the change introduced in 2003, during the tutelage of Bagão Félix, which increased the maximum duration of fixed-term contracts from three to six years.
This study concluded that “the probability of converting to an open-ended contract decreased by an average of 1.9 percentage points”, at the same time that wage inequality increased between workers with stable and precarious contracts, without lasting gains in the level of employment.
Another work analyzed focused on the changes promoted by Álvaro Santos Pereira, which extended the maximum duration of some fixed-term contracts from three to 4.5 years. In this case, “a reduction of around 20% in the probability of converting these jobs into permanent ones was observed, without relevant gains in terms of employment level”.
Latest data helps quantify impact
Based on these assumptions, the study used the most recent data from INE. In 2022, there were around 685 thousand employees with fixed-term contracts or temporary contracts. That same year, around 34.3% of these workers, equivalent to approximately 235 thousand people, transitioned to open-ended contracts.
According to the publication, if the new reform “reproduces the type of effect observed in 2003”, it is reasonable to admit a drop of 1.9 percentage points in the conversion rate. Applying this reduction to the current universe of workers with temporary contracts, the result points to around 13 thousand people per year who would no longer move to permanent contracts, says the same source.
Impact may vary, but logic remains
The researcher admits that the real impact “could be smaller or greater than that observed in 2003”, since the current proposal foresees an increase in the maximum duration of contracts from two to three years, and not from three to six.
Even so, he emphasizes that the design of the measure is similar in terms of its effects on workers, by extending the period during which companies can use fixed-term contracts and by expanding the situations in which these contracts are permissible.
Measure generates criticism and remains under discussion
According to , extending the terms of fixed-term contracts is one of the measures most criticized by trade unions, along with other proposals included in the draft, such as the return of the individual time bank or the repeal of restrictions on outsourcing in the event of dismissal.
The planned changes cover more than a hundred articles of the Labor Code and continue to be discussed within the scope of social consultation. The next plenary meeting is scheduled for January 14th.
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