Background information

On 7 October 2023, after the first year of implementation of the medium-term agreement to improve income, wages and competitiveness signed on 9 October 2022 (PT- 2022-42/3007), the Government and social partners represented in the tripartite Permanent Commission of Social Concertation (CPCS) signed the tripartite commitment 'Strengthening the Medium-Term Agreement to Improve Income, Wages and Competitiveness' (Reforço do Acordo de Médio Prazo de Melhoria dos Rendimentos dos Salários e da Competitividade), including reformulations and new measures. While the tripartite agreement 2022 had the support of the government and all the social partners, except for the trade union confederation CGTP, the Strengthening of the Medium-Term Agreement did not have the support not only of CGTP, but also of the employer confederation CIP.

Content of measure

This tripartite agreement encompasses a wide range of measures (54 measures/proposals), including revising the guidelines for wage policy for 2024 (minimum wage and collective bargaining wage increase benchmarking), improving workers income (fiscal policy and other measures), and improving fiscal incentives to companies. The most relevant having into consideration purchasing power and inflation trends are the following:

Wage Policy

It provides for an increase of the minimum wage by 7.9% to reach €820 in 2024 (above the increase foreseen by the tripartite agreement 2022 for next year which was to €810). In provides guidelines for companies and collective bargaining setting the goal of a nominal wage increase by 5% per worker in 2024 (above the increase foreseen by the tripartite agreement 2022 for next year, which was 4.8%).

Fiscal Policy

Tax Incentives to companies for wage increase: it reformulates the measure tax incentives for salary increase (PT-2023-1/3008) set by the Tripartite agreement 2022 (PT-2023-1-3009), simplifying the fiscal benefits for companies that increase the wages at least by 5%: it extends the universe of companies entitled to the increase to 50% tax deductions in return for salary increases, to companies that increase wages by at least 5%, even when the collective agreements that regulate their wages set increases below 5%; furthermore, the universe of eligible companies now includes members of the companies' corporate bodies who were previously excluded and, during the years 2023 and 2024, companies covered by extension ordinances will also be eligible.

Increasing workers ‘net income: reducing the Personal Income Tax (IRS), updating IRS brackets, exempting minimum wage from IRS and review of IRS Youth Benefit.
Deduction of 100% of workers contribution for trade unions in relation to IRS.

Taxation and housing solutions: tax and contributory exemption for housing provided by the employers to the workers and mobilization of funds from the Labour Compensation Fund for housing solutions for workers.

Use of measure

The wide range of measures goals do not specify estimated number of workers.

Contents

• Income protection
• Pay increases
• Training and employability

Target groups

Workers	Businesses	Citizens
Employees in standard employment	Applies to all businesses	Does not apply to citizens

Actors and funding

Actors	Funding
National government Trade unions Employers' organisations	No special funding required

Social partners

Social partners' role in designing the measure and form of involvement:

	Trade unions	Employers' organisations
Role	Agreed (outcome) incl. social partner initiative	Agreed (outcome) incl. social partner initiative
Form	Consultation through tripartite or bipartite social dialogue bodies	Consultation through tripartite or bipartite social dialogue bodies

Social partners' role in the implementation, monitoring and assessment phase:

• Social partners jointly
• Main level of involvement: Peak or cross-sectoral level

Involvement

Social partners involvement took place in the context of the tripartite Permanent Commission of Social Concertation (CPCS), which includes: government representatives; representatives of employer confederations, i.e., the Entrepreneurial Confederation of Portugal (CIP), the Confederation of Commerce and Services of Portugal (CCP), the Confederation of Farmers of Portugal (CAP), and the Confederation of Portuguese Tourism (CTP); and the representatives of trade union confederations, i.e., the General Confederation of Portuguese Workers (CGTP) and the General Union of Workers (UGT). Their involvement was requested by institutional setting by the initiative of the government. Neither CGTP, the largest trade union confederation, nor the employer confederation CIP signed the agreement, but participated in its discussion at the CPCS.

Views and reactions

In the context of the CPCS, three employer confederations - the Confederation of Commerce and Services of Portugal (CCP), the Confederation of Farmers of Portugal (CAP), and the Confederation of Portuguese Tourism (CTP) - signed the agreement, while the most representative employer confederation in the manufacturing sector, the Entrepreneurial Confederation of Portugal (CIP), did not sign. CIP argued that the agreement lacked ambitions and measures targeting companies did not compensated for the high wage increases foreseen (CIP, 7 October 2023). The president of CIP declared in a press conference (Público, 17 de Outubro 2023) that this confederation is released from the original tripartite agreement signed in 2022 (because the parameters were changed by the tripartite commitment 2023) and is not part of the reinforcement, adding that companies affiliated of CIP will apply the increase in the minimum wage to 820 euros next year, complying with the law, while the remaining salary increases will be negotiated between employers' associations and unions (Público, 17 de Outubro 2023). Nevertheless, he admitted reviewing CIP position if the State Budget (OE) for 2024, incorporates some of the companies' concerns.

The trade union confederation UGT signed the agreement highlighting the positive contribution of the various measures in line with their concern to improve workers wages and income. CGTP criticized the agreement considering unsatisfying the minimum wage increase and the increase of wages by 5% to deal with inflation and combat poverty and argued against fiscal compensation for the companies. This confederation claimed and increase of the minimum wage to €910 and a general significant wage increase of 15%, not inferior to an increase by €150, for all the workers in 2024.

Sources

• 09 October 2022: Acordo de Médio Prazo de Melhoria dos Rendimentos dos Salários e da Competitividade (ces.pt)
• 07 October 2023: Reforço do Acordo de Médio Prazo de Melhoria dos Rendimentos, dos Salários e da Competitividade (www.portugal.gov.pt)
• 07 October 2023: Público, 7 de Outubro de 2023_Parceiros sociais assinam reforço do acordo de rendimentos, CIP e CGTP de fora (www.publico.pt)
• 07 October 2023: CIP: CIP não subscreve acordo de rendimentos: o que falta no acordo faz muito falta (cip.org.pt)
• 07 October 2023: Público, 7 de Outubro_Acordo de Rendimentos revisto (www.publico.pt)
• 10 October 2023: CGTP: Resolução do Conselho Nacional de 10 de Outubro de 2023 (www.cgtp.pt)
• 17 October 2023: Público, 17 Outubro de 2023_CIP diz-se "desobrigada" do acordo (www.publico.pt)
• 27 November 2023: UGT: Resolução do Secretariado Nacional (www.ugt.pt)