Employment Contracts & Termination Rules in Cabo Verde

For investors entering the Cabo Verdean market, understanding the Labor Code (Código Laboral) is essential for operational planning and compliance. The labor market is regulated primarily by Decree-Legislative n.º 5/2007 (amended by Decree-Legislative n.º 5/2010 and n.º 1/2016), which governs employment relationships in private, cooperative, and mixed enterprises. While the system offers flexibility in hiring, specific restrictions regarding termination and foreign labor require careful attention.

1. Types of Employment Contracts

Cabo Verdean law recognizes two primary categories of employment contracts: indefinite (open-ended) and fixed-term. While employment contracts generally don't require special formalities, written agreements are strongly recommended to clearly define terms.

A. Indefinite Contracts (Contrato a Tempo Indeterminado) This is the standard form of employment.

Probation Period: The trial period is typically two months. However, this can be extended up to six months for workers performing highly complex technical duties or holding positions of high responsibility.
Form: While oral contracts are valid, either party can request a written contract at any time, which must include identification, start date, workplace, job category, and salary.

B. Fixed-Term Contracts (Contrato a Termo) Fixed-term contracts are permitted but restricted to specific situations where there's a temporary need. Valid reasons include:

Replacing a worker who is absent (e.g., due to illness or leave).
Seasonal activity or exceptional increases in workload.
Execution of a specific project or defined work.
Launch of a new company (valid during the first 5 years of operation).
Duration Limits: Fixed-term contracts must state their duration and justification. They generally cannot exceed 3 or 5 years, depending on the specific grounds for the contract.
Conversion: If the employer fails to notify the worker about the contract's termination with at least 10 days' notice before it expires, the contract renews for an equal period (unless otherwise stated) or converts to an open-ended contract if maximum limits are exceeded.

C. Contracts for Foreign Workers Special rules apply to non-nationals.

Requirement: Contracts with foreign workers must be in writing.
Validation: These contracts only become effective after receiving a visa/approval from the General Directorate of Labor (Direção-Geral do Trabalho).
Restrictions: Hiring foreign staff generally requires showing that no qualified Cabo Verdean nationals are available for the position.

2. Working Hours and Compensation

Standard Hours: The normal work week is 44 hours, typically limited to 8 hours per day. It may be extended to 9 hours if a half-day of rest is provided during the week.
Overtime: Work performed outside normal hours is considered overtime and is subject to strict limits (2 hours/day and 160 hours/year, extendable to 300 hours with worker consent).
Overtime Pay: Pay for overtime is 35% above the base hourly rate for normal days and 100% above the base rate for work performed on rest days or public holidays.
Paid Leave: Employees are entitled to 22 working days of paid vacation per year.
Social Security: The total contribution rate is 23% of the salary, split between the employer (15%) and the employee (8%).

3. Termination of Contracts

Termination rules in Cabo Verde are considered relatively rigid compared to some similar countries, particularly regarding the cost of dismissal.

A. Expiration of Fixed-Term Contracts When a fixed-term contract ends, the worker is entitled to compensation (severance) based on the duration of the contract:

21 days of base salary if the contract lasted exactly one year.
15 days of base salary per year for every year after the first.
1.75 days of base salary per month if the contract lasted between six months and one year.
For contracts of "uncertain term" (e.g., replacing a sick employee), compensation is 1 day of base salary per month of duration up to one year.

B. Dismissal (Firing) Dismissals are categorized by cause.

Just Cause (Disciplinary): An employer may fire a worker for serious disciplinary violations. In this case, no compensation is typically owed.
Objective Cause (Redundancy/Inability to Perform): This includes collective dismissal or elimination of the job position due to market, technological, or structural reasons.
- Compensation: In cases of collective dismissal or objective cause, the worker is entitled to 20 days of pay for every year of service.
Dismissal Without Just Cause: If a court finds a dismissal was unlawful or lacked just cause, the compensation increases significantly to 40 days of base pay for every year of employment.

4. Investor Risks and Considerations

Rigidity: The "Difficulty of Firing" index and the cost of severance (weeks of salary) are high, which can discourage firms from hiring permanent staff.
Informality: Despite the regulations, a significant portion of the workforce operates without formal contracts (estimated between 48.7% and 73.8% depending on the sector and data year), which poses risks regarding social security compliance and legal protection.
Protection: The dismissal of pregnant workers is legally prohibited, providing strong employment security for this group.

Investors are advised to engage local legal counsel to draft internal regulations (mandatory for firms with 10 or more employees) and ensure all employment contracts meet the specific written requirements to avoid automatic conversion into permanent contracts.

Based on the Cabo Verdean Labor Code (Código Laboral), absences from work are categorized as either justified or unjustified. The law specifies several grounds upon which an absence is considered justified, protecting the worker from disciplinary consequences provided specific notification or proof requirements are met.

The legal grounds for justified absences include:

Marriage: Workers are entitled to up to six consecutive absences on the occasion of their marriage, provided the employer is notified at least 8 days in advance.
Bereavement (Death of Family Members):
- Up to eight consecutive absences are allowed for the death of a spouse, common-law partner (convivente), or relatives in the first degree of the straight line (parents and children).
- Up to three consecutive absences are allowed for the death of relatives in other degrees of the straight line or up to the second degree of the collateral line (such as siblings or grandparents).
Health and Illness:
- Up to three consecutive absences due to illness, which must be proven by a doctor's declaration.
- More than three and up to thirty consecutive absences due to illness, which requires proof via a medical certificate.
Family Assistance and Paternity:
- Absences necessitated by the need to provide urgent assistance to a member of the worker's household, up to a maximum of 5 days.
- Paternity leave: The father is entitled to up to two consecutive absences on the occasion of the birth of a child.
Education: Student workers are entitled to up to one day of absence for each test or exam they must take at an educational or vocational training establishment.
Civic and Union Duties:
- Two absences per month are justified for the exercise of union activities by union delegates or leaders.
- Absences motivated by facts not imputable to the worker, such as complying with legal obligations or judicial and administrative decisions, are considered justified.
Employer Authorization: Any absence that is authorized by the employer, either in advance or subsequently, is considered justified.

Cabo Verde Employment Contracts & Termination Rules

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Cabo Verde Employment Contracts & Termination Rules

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Cabo Verde Employment Contracts & Termination Rules

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Employment Contracts & Termination Rules in Cabo Verde