In recent years, we have witnessed a profound transformation of the labour market, resulting from a confluence of factors, including technological advances, the emergence of human capital as a key element in people management, demographic changes, and the impact of the COVID-19 pandemic as a catalyst for different forms of remote working.

These transformations have also driven forms of work that challenge traditional labour concepts of employee, employer and, of course, the employment relationship itself.

It was in this context of adjustment and reformulation of some of the classic paradigms of the employment relationship that atypical contractual relationship models began to emerge, in which certain entities formally assume the role of employer in employment relationships whose traditional materiality belongs to other entities.

These models have been particularly popular among multinational companies interested in expanding their workforce to new countries where they do not have a legal structure, or in hiring talent based in jurisdictions where they do not operate.

This model works by hiring employees in a given country through an intermediary entity – the Employer of Record (EoR) – which, in turn, assigns these employees to the company benefiting from their work. This beneficiary company, most often without a legal structure in the country where the activity is carried out, exercises managerial authority over the employees. Essentially, EoRs act as formal employers of workers whose activities benefit a third party on a temporary or permanent basis.

The EoR is responsible for managing all administrative aspects of the employment relationship in the country where the work is carried out: drawing up employment contracts, processing salaries, paying taxes and social security contributions, taking out the necessary insurance, and complying with all other rules and requirements applicable to the employment relationship.

Hiring workers through EoRs not only reduces the risk of non-compliance with local legislation by the companies benefiting from the work, but also acts as an outsourcing of administrative functions, leaving the beneficiary companies more space to focus on their business strategy.

EoRs act as strategic partners for these companies benefiting from the work, enabling them to enter new markets more efficiently and quickly.

However, the EoR model is still under development and lacks regulation in Portugal, which raises several legal challenges regarding its current legal framework and the obligations imposed on the parties. Specifically, among other things, the scope and effectiveness of the protection of business interests – confidentiality clauses, intellectual property ownership, loyalty, post-contractual non-competition. Questions also arise, naturally, regarding the effects of unilateral termination by either party and its place in the legal framework.

What is certain is that this new landscape is here to stay in the future of labour relations. For this reason, there is a clear need to update Portuguese labour legislation, which is still based on a traditional model of labour relations, and it is essential that it keeps pace with and regulates these dynamic changes.

The challenge lies in balancing rights and security at work without compromising innovation or restricting the flexibility already achieved. The new rules must take into account the benefits of digital transformation alongside the risks of precariousness, ensuring that the modernisation of the labour market brings real benefits to employees and employers and that labour standards do not act as obstacles based on outdated conceptual premises.

The future of work is constantly evolving. Understanding these changes is essential to creating a sustainable working environment that is adapted to new realities.