Severance and Final Settlement for Domestic Workers in Portugal (2026)
When a domestic employment contract ends in Portugal, final payroll involves more than paying for days worked in the final month. It includes accrued unused vacation pay, pro-rata holiday and Christmas allowances, and, depending on the reason for termination, financial severance compensation. This combined calculation is known as the final settlement (acerto de contas).
This guide demonstrates step-by-step calculations for 2026 on a part-time contract and explains how termination reasons change the final amount payable. To understand vacation days vs allowance rules, see our part-time holiday allowance guide.
For a €400.00/month contract with 3 working days per week, ending by mutual agreement on 31 August 2026, with 7 unused vacation days and allowances already paid monthly in twelfths, the final settlement is €215.38 (representing accrued vacation pay only).
What is included in the final settlement at contract end?
A domestic employment final settlement in Portugal can include up to four separate items:
- Accrued unused vacation pay (retribuição de férias não gozadas): Payment for vacation days accrued in previous years that were not taken, plus proportional vacation days earned in the termination year.
- Pro-rata holiday allowance (subsídio de férias proporcional): Proportional allowance earned for time worked in the termination calendar year.
- Pro-rata Christmas allowance (subsídio de Natal proporcional): Proportional allowance earned for time worked in the termination calendar year.
- Severance compensation (compensação financeira): Statutory compensation payable only under specific termination scenarios defined by law.
When holiday and Christmas allowances are paid monthly in twelfths (duodécimos), their value in the final settlement is €0.00, because they have already been fully liquidated month-by-month. In those cases, final settlement consists solely of unpaid vacation pay and any statutory severance compensation due.
How do you calculate the value of unused vacation days?
The value of each vacation day depends on the schedule. For a full-time contract, each day is worth 1/22 of monthly pay, because Portuguese labor law uses 22 working days as the reference for a working month: for a €920.00 salary, 1 vacation day equals €41.82.
For a part-time contract, each vacation day is worth one regular working day for the employee, under Article 271 of the Labor Code: monthly pay × 12 ÷ (52 × working days per week). For a €400.00/month contract with 3 working days per week, 1 vacation day equals €30.77 (€400.00 × 12 ÷ 156). Dividing by 22 would give €18.18 and would apply the proportion twice, because part-time vacation days are already proportional to working days per week.
If the worker receives food or lodging provided by the employer, its cash value forms part of remuneration when calculating vacation pay rates. Food and lodging terms must be explicitly stated in the written contract, as illustrated in our domestic work contract template.
What is the difference between accrued and pro-rata vacation days?
Accrued vacation days (férias vencidas) refer to annual leave acquired on 1 January of the current year (based on work performed during the previous calendar year) that has not yet been taken.
Pro-rata vacation days (férias proporcionais) refer to leave earned during the current calendar year up to the termination date. Pro-rata fractions are calculated in calendar days worked (divided by 365) rather than full months, subtracting any vacation days already taken in the current year.
In this practical example, employment began on 1 January 2024 and ended on 31 August 2026 (243 calendar days elapsed in 2026). The employee worked 3 days per week, was entitled to 13 vacation days per year, and took 11 days in 2025 and 4 days in 2026:
| Settlement Item | Calculation | Amount |
|---|---|---|
| 2026 calendar fraction | 243 ÷ 365 | 0.6658 |
| 2026 pro-rata days | 13 × 0.6658 = 9 days − 4 taken | 5 days |
| 2025 accrued days remaining | 13 − 11 | 2 days |
| Accrued vacation pay | €400.00 × 12 ÷ (52 × 3) × 7 days | €215.38 |
| Pro-rata holiday allowance | Already paid in monthly twelfths | €0.00 |
| Pro-rata Christmas allowance | Already paid in monthly twelfths | €0.00 |
| Severance compensation (mutual agreement) | — | €0.00 |
| Total final settlement | €215.38 |
Maintaining an accurate written record of vacation days actually taken prevents disputes when calculating final pay.
How do holiday and Christmas allowances work at termination?
If allowances were not paid in monthly twelfths, each allowance is calculated by multiplying monthly base salary by the calendar fraction worked in the termination year. In our example of 243 days worked in 2026 (fraction of 0.6658), each allowance equals €266.30 (€400.00 × 243/365), adding €532.60 total to the final settlement.
If unused vacation days remain from previous years, verify whether the corresponding holiday allowance for those years was already paid, as vacation time and holiday allowances are legally separate entitlements.
Who is entitled to severance compensation upon termination?
Statutory severance compensation depends on the specific reason for contract termination. For a contract with 2.66 years of seniority and a €400.00/month salary, compensation amounts vary as follows:
| Reason for Contract Termination | Statutory Compensation |
|---|---|
| Mutual agreement (acordo) | €0.00 |
| Worker resignation with notice (denúncia) | €0.00 |
| Expiration due to household change in circumstances | €0.00 |
| Death of the employer | €400.00 |
| Worker resignation with just cause (justa causa) | €1,200.00 |
Upon contract expiration due to changed household needs, compensation equals 1 month’s pay for every 3 full completed years of service (up to a 5-month cap). With 2.66 years of seniority, the 3-year threshold has not yet been reached, so statutory compensation is €0.00.
In cases of worker resignation with just cause (e.g. non-payment of wages or employer breach), statutory compensation equals 1 month’s pay per full year or partial year of service. With 2.66 years of service, 3 years are counted, resulting in €1,200.00 compensation (3 × €400.00).
How to report contract termination to Social Security
Social Security (Segurança Social) contributions for the final working month are paid during the following calendar month. Official notification of contract termination must be submitted on Social Security Direct by the 10th of the month following the termination date. For deadlines under the new filing model, see our variable hours Social Security guide.
The tax treatment of final settlement payments depends on the contribution regime: under the Conventional Regime, final lump-sum allowance payments are exempt from Social Security contributions; under the Real Regime, these amounts incur deductions. See our domestic worker rights guide for regime details.
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Simulate final settlement on calculatorSources and legal notice
- Labor Code — Articles 237, 240, 245 (termination and settlement), 263, 264, and 271 (part-time daily rate).
- Decree-Law No. 235/92 — Domestic employment statute (Articles 17, 27, 28, and 32). Articles 19 to 23 were repealed by Law No. 13/2023, applying the Labor Code directly.
- Law No. 110/2009 — Code of Social Security Contributory Regimes (Article 48 on Conventional Regime contribution base).
- Certified Accountants Association Practical Guide — OCC Domestic Service Guide.
Notice: This guide is for informational purposes and is based on the legal standards cited above. To confirm specific requirements for your household, consult Social Security, the ACT, or a qualified lawyer in Portugal.