The minimum wage has gone up… Are companies obliged to increase workers’ pay?

Are companies obliged to increase workers’ salaries? In what situations? And what can the employees expect? This article explains everything you need to know.

First, the answer to the most important question: Are companies obliged to increase workers’ salaries? The answer is no.

In Portugal, there is no legal obligation for companies to increase workers’ salaries on a regular basis. However, wage increases can be influenced by various factors, including collective bargaining agreements, negotiations between employers and workers, and general economic conditions.

First of all, there needs to be a specific clause in the employment contract defining a mandatory and regular increase by the employer.

If there is no such clause, employers may not be obliged to raise employees’ salaries, especially in the private sector.

In the public sector, on the other hand, salary increases are linked to career progression, regulated by the performance appraisal system and the employee’s seniority in the Civil Service.

Thus, in the public sector, these adjustments translate into specific amounts, and follow the Single Remuneration Table. In the private sector, on the other hand, the salary scales only serve as a reference, meaning that companies have no legal obligation to award salary increases.

However, the minimum wage in Portugal is set by the government and can be adjusted periodically based on economic and social considerations. When an increase in the national minimum wage is decreed, adjustments need to be made to the salary scales.

Currently, the national minimum wage has risen from 760 euros to 820 euros as of January 2024. This represents an increase of 60 euros per month and corresponds to the largest increase in the guaranteed minimum monthly wage ever seen, of 7.9%.

The update is the result of the reinforcement of the Medium-Term Agreement to Improve Incomes, Wages and Competitiveness (Agreement), which was signed in October at a social consultation with the social partners. This change comes after a year of growth in the average wage above the national minimum wage, in which the lowest percentage of workers receiving this remuneration since 2016 was reached (20.8% in the second quarter of 2023), despite successive increases in the amount.

In summary, although there is no general legal obligation for companies to increase wages regularly, collective bargaining, union agreements and government policies can influence wage increases in Portugal.