Portugal’s new law shows that the balance of power is shifting towards workers

If you work at home, should your boss be able to call you outside of working hours? In Portugal, the answer is no. The balance of power between workers and bosses has shifted radically across the developed world – towards workers.

You can see that here in Britain, where the latest unemployment figures show a mass of unfilled vacancies in everything from food production to Uber drivers. Unemployment is down, despite the ending of the furlough scheme. You can also see it in the US, where companies say that there is no end to the labour shortages in sight. The Economist reports that German workers are in the strongest position for 30 years in terms of their labour bargaining power.

And in Portugal? Well, similar market pressures are at work there as across the continent. But what is really novel is that worker demands for better conditions for home workers are not only a result of market forces. They are being backed by law.

There are several elements to Portugal’s new law. One is that bosses are prohibited from contacting workers outside of office hours. Another is that they should pay household expenses for people working from home, including internet and electricity costs. They will not be allowed to monitor productivity outside the office, and workers with young families will have the right to work from home without their employer’s approval.

This is radical stuff. Indeed it is probably the most extensive package of workers’ rights specifically targeting homeworking, that exists anywhere in the world. There are a few loopholes – there are looser requirements on firms with fewer than 10 employees – but not many.

Portugal is a small economy, and has a relatively low GDP per head compared with the rest of western Europe. On that measure, its citizens are poorer this year than they were in 2008. But companies across the EU will be watching closely to see the outcome of Portugal’s new legislation.

They will be watching for two reasons. One is whether the new regulations will have an impact on employment. If someone is working from home, that home can be anywhere. Portuguese companies will have to comply, but will foreign companies that have people in Portugal working for them remotely comply too? Will it push companies to outsource more tasks to self-employed workers? Nearly 17 per cent of the workforce is self-employed, thanks in part to the fact that many freelancers have chosen to move there.

So there are, as you would expect, lots of uncertainties about how the legislation will work in practice, and that will be closely examined. But the second reason is in a way more novel. It is about how the legislation intertwines with the shifting social mood of working people, particularly young ones.

In a weak job market, people are glad to have work, and will put up with a lot of stuff they don’t like. In a strong job market, they don’t have to. It takes a while for the penny to drop, but what we are seeing right across the developed world is a desperate hunt for talent. So if that talent wants to work from home, then potential employers have little leverage to make them come into the office. And if people working from home don’t want to be contacted outside working hours, then they probably can insist on that too.

Legislation is now reflecting what is happening in the job market, and market forces are reinforcing the legislation.

Of course, this is only a segment of the job market in a small country. A majority of jobs require physical presence, and many people would prefer to go into a workplace anyway.  But what may give this legislation legs is that it runs with the grain of society. It is a response to the shifting preferences of a significant proportion of the workforce.

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My guess is that it will take several years for a new etiquette for homeworking to be established. That etiquette will vary from country to country, from industry to industry, and from company to company. In some cases, the rules will be explicit, backed up by legal requirements. In others, they will be informal responses to worker requests and demands.

High staff turnover imposes massive costs on businesses. If companies can reduce this by making homeworking more attractive, then they will do so. If, on the other hand, it becomes hard to train and manage people who are not physically in the office, then there will be rising pressure to get them in. If that means paying higher wages, then so be it.

Meanwhile, there will be many experiments. This one in Portugal may be the start of something big.