Fixed-Term vs Permanent Employment Contracts: Differences, Rights and When to Use Each (2026)
The 3 Types of Employment Contracts in Portugal
The Portuguese Labour Code provides for three main contract types:
| Type | Duration | When to use |
|---|---|---|
| Permanent Contract | No end date | Permanent company needs |
| Fixed-Term Contract | Defined start and end dates | Foreseeable temporary needs |
| Uncertain-Term Contract | Defined start, uncertain end | Worker replacement, construction, projects |
📌 General rule: the permanent contract is the default. Fixed-term contracts are only valid when there is a specific legal justification.
Fixed-Term Contract: What Is It and When Is It Valid?
A fixed-term contract has a predefined start and end date. The company can only enter into this type of contract in specific situations under Article 140 of the Labour Code:
⚠️ If the company enters into a fixed-term contract without valid justification, the contract automatically converts to a permanent contract.
Maximum Duration of Fixed-Term Contract
| Situation | Duration |
|---|---|
| Maximum duration of each contract | 2 years |
| Maximum renewals | 3 renewals |
| Total maximum duration (contract + renewals) | 3 years |
| New activity or company startup | 4 years |
| First job or long-term unemployment | 4 years |
Uncertain-Term Contract: What Is It?
An uncertain-term contract has a defined start but no established end date — it lasts until the reason for hiring ceases. Common in:
Maximum duration: 6 years. After this period, it automatically converts to a permanent contract.
Permanent Contract: Rights and Protections
The permanent contract offers the greatest stability. It has no end date and can only be terminated by:
✅ Workers with permanent contracts are protected against dismissal without just cause.
Complete Comparison: Rights in Each Contract Type
| Right / Obligation | Permanent | Fixed-Term | Uncertain-Term |
|---|---|---|---|
| Holiday allowance | ✅ Yes | ✅ Yes | ✅ Yes |
| Christmas allowance | ✅ Yes | ✅ Yes | ✅ Yes |
| Holiday days (full year) | 22 working days | 22 working days | 22 working days |
| Sick leave rights | ✅ Yes | ✅ Yes | ✅ Yes |
| Compensation at end | Only if dismissed | Yes (18 days/year) | Yes (18 days/year) |
| Notice by worker | 30 to 60 days | Not required | Not required |
| Notice by company | 15 to 75 days | 7 to 15 days before end | 7 to 15 days before end |
| Automatic renewal | N/A | Yes (up to 3x) | Not applicable |
| Automatic conversion | N/A | After maximum limit | After 6 years |
Compensation at End of Fixed-Term Contract
When a fixed-term contract ends by expiry (the company decides not to renew), the worker is entitled to compensation.
💰 Compensation = 18 days of base pay + seniority bonuses × years of service
Practical Example
Worker with €1,200 salary on a 2-year fixed-term contract:
Probationary Period: What Changes in Each Contract?
| Contract Type | Situation | Probationary Period |
|---|---|---|
| Permanent | General rule | 90 days |
| Permanent | Complex/trust roles | 180 days |
| Permanent | Management/senior roles | 240 days |
| Fixed-term ≥ 6 months | — | 30 days |
| Fixed-term < 6 months | — | 15 days |
When Should a Company Use Each Contract Type?
Use permanent contract when:
Use fixed-term contract when:
Use uncertain-term contract when:
Frequently Asked Questions
Does a fixed-term worker have the same rights as a permanent one?
In terms of salary, allowances, sick leave and holidays, yes — the law prohibits discrimination based on contract type.
Can the company dismiss a fixed-term worker before the deadline?
Only with duly substantiated just cause or by mutual agreement.
Can I refuse the contract renewal?
Yes. However, if the company offers renewal on equal or better terms and you refuse, you lose the right to expiry compensation.
📋 Need help drafting or analysing an employment contract? Talk to our team — we support companies in HR management and accounting.
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