Hiring Employees in Cabo Verde: What Business Owners Need to Know

If you're considering establishing a business in Cabo Verde, understanding the country's labor regulations is essential. The Cabo Verdean Labor Code, governed primarily by Legislative Decree No. 5/2007, establishes a framework that heavily protects workers while imposing significant obligations on employers. Here's what you need to know before hiring your first employee.

Contract Types: The Foundation of Employment

In Cabo Verde, employment contracts are presumed to be indefinite (open-ended) unless you explicitly establish otherwise in writing. This is the standard form of employment and offers workers the most protection.

Fixed-Term Contracts: Use with Caution

Fixed-term contracts are permitted only for specific, temporary situations—such as replacing an absent worker, handling a temporary surge in business activity, or completing a defined project. These contracts must be in writing and justified by objective reasons.

The key limitations are strict: a fixed-term contract cannot exceed 60 months (5 years), including any renewals. If you use a fixed-term contract for what is effectively permanent work, or if you fail to put the contract in writing, it will automatically convert to a permanent, full-time position.

Be aware that some employers attempt to circumvent job security protections by cycling workers through repeated short-term contracts (3 or 6 months), terminating them just before they would gain permanent status. This practice, sometimes called "surgical redundancies," is widely criticized and may face increased scrutiny as the government seeks to reform labor practices, particularly in the tourism sector where such arrangements have been common.

Special Economic Zones

If you're operating within the Special Economic Zone for Maritime Activities (ZEEMSV), different rules apply. Companies in this zone can establish fixed-term contracts for a minimum of five years and up to the duration of the company's license, without the usual Labor Code constraints—offering greater flexibility for qualifying businesses.

Probationary Periods

You can include a probationary period in employment contracts, during which either party can terminate the relationship without cause or notice. The maximum duration depends on the position:

• Standard employees: 60 days (2 months)
• Technical or trust positions: 90 days
• Management or senior roles: Up to 180 days (6 months), or even 12 months for the most senior positions

The probationary period must be explicitly stated in the written contract. Some employers utilize successive trial periods under permanent contracts, potentially extending the evaluation phase to 6 months before the contract becomes definitively permanent.

Termination: A Costly and Complex Process

This is where Cabo Verde's labor law becomes particularly challenging for employers. The system is designed to make dismissals difficult and expensive.

Notice Period Requirements

If you terminate an employee (or if they resign), notice periods apply based on length of service:

• Up to 1 year: 7 days
• 1-3 years: 15 days
• 3-5 years: 30 days
• Over 5 years: 60 days

Failure to provide the required notice period will obligate you to pay compensation in lieu of notice.

Severance Pay: Expect Significant Costs

Severance is mandatory for dismissals without just cause or collective redundancies. Recent reforms have set compensation at 40 days of basic pay per year of service for dismissals without just cause. For collective redundancies, expect to pay one month's salary for each year of service.

On average, severance for redundancy dismissals equals about 15 weeks of salary. However, labor courts—which consistently favor workers in disputes—often award approximately 2 weeks of pay for every year of employment, plus additional damages.

An alternative formula sometimes applied calculates compensation as 1.5 times the number of years of service multiplied by average monthly remuneration (including seniority benefits). Given the courts' worker-friendly stance, prudent employers should budget conservatively for potential termination costs.

Just Cause Dismissals: High Bar, Strict Procedures

Dismissal for just cause (serious employee misconduct) is possible, but you must follow rigorous procedural requirements. This includes providing written notification of the grounds for dismissal and allowing the employee at least 5 working days to submit a written defense. Any procedural misstep can render the dismissal unlawful, potentially requiring reinstatement or additional compensation.

When dismissal is for disciplinary just cause, the employee is not entitled to severance compensation—but only if you've followed all procedures correctly. Even when following proper procedures, it's described as "almost impossible" to fire workers except at great cost due to the labor courts' consistent pro-worker stance.

Collective Redundancies: Additional Requirements

If you need to conduct collective redundancies, you must notify the Directorate General of Labour and relevant trade unions at least 60 days in advance. You're also obligated to attempt to place affected employees in other compatible positions within your organization and provide vocational training if necessary. These requirements add both time and cost to workforce restructuring efforts.

Other Key Costs and Obligations

• National minimum wage: Currently 13,000 CVE (approximately €120), with government targets to increase this to 19,000-20,000 CVE by 2027. For public administration workers, the minimum guaranteed monthly remuneration is already 19,000 CVE as of 2025.
• Standard work week: 44 hours (maximum 8 hours daily, across 6 days)
• Annual leave: 22 working days
• Overtime premium: 35% above hourly pay
• Night work premium: 25% above hourly pay
• Work on rest days: 100% premium

Hiring Incentives: Government Support

The government does offer some incentives to encourage employment. If you hire long-term unemployed workers or youth, the state may co-pay 50% of the salary (up to 25,000 CVE) for 12 months. To qualify, your business must meet certain criteria, such as being classified as a micro or small enterprise with organized accounting, and you cannot have eliminated jobs on a net basis. These incentives can help offset some initial hiring costs for qualifying businesses.

The Bottom Line

Business owners frequently cite Cabo Verde's labor law as rigid, bureaucratic, and expensive, particularly regarding dismissals. The system is explicitly designed to protect workers, and labor courts enforce this protection stringently. The complaint that it's "almost impossible" to fire workers reflects the genuine challenge employers face in workforce management.

Before hiring in Cabo Verde, factor in not just salaries but the substantial costs and administrative complexity associated with employment contracts—especially the potential expenses of termination. Consider consulting with a local labor law specialist to ensure full compliance and to structure your hiring strategy appropriately.

While these regulations may seem daunting, they reflect Cabo Verde's commitment to worker protection. Understanding and planning for these requirements from the outset will help you avoid costly mistakes and build a sustainable employment relationship with your workforce. The key is to hire carefully, invest in proper contracts and procedures from day one, and recognize that employment relationships in Cabo Verde are designed to be long-term commitments.