Temporary Incapacity (TI) has a maximum duration of 365 days, which may be extended by a further 180 days when the employee is expected to recover and return to work during this additional period. Thus, the maximum duration of TI is 545 calendar days.
Once the 545-day period has elapsed, the INSS must assess the employee’s situation and determine whether Permanent Incapacity (PI) should be recognised. As a general rule, this assessment must be completed within three months, although it may be postponed where there is a reasonable expectation of recovery that justifies continuing treatment. In any event, the total period of Temporary Incapacity and the extension of its effects may not exceed 730 calendar days.
What happens to the employee after 545 days of TI?
Once 545 days have been reached, the maximum period of Temporary Incapacity comes to an end. However, the financial effects of TI may continue while it is determined whether Permanent Incapacity should be recognised.
During this period, the employer is no longer required to make Social Security contributions for the employee and may process their deregistration from Social Security. However, this does not mean that the employment contract is automatically terminated. The employment relationship may remain suspended while the employee’s situation is assessed, with the employee retaining, where applicable, the right to return to work if they are medically cleared.
What happens to the substitution contract?
When an employee is on Temporary Incapacity and has the right to have their position held for them, the employer may hire another person to temporarily cover that position under a substitution contract.
This contract must identify the employee being replaced and state the reason for the substitution, as established by Article 15.3 of the Workers’ Statute.
The fact that the employee being replaced reaches 545 days of Temporary Incapacity does not, in itself, automatically terminate the substitution contract. If the circumstances justifying the substitution continue and no final decision has yet been made regarding the employee’s situation, the contract may remain in force.
The substitution contract will end when the reason for the contract ceases to exist, for example:
- The return of the employee holding the position, if the INSS does not recognise Permanent Incapacity and the employee is medically cleared to return to work
- The termination of the employment relationship of the employee being replaced as a result of the recognition of Permanent Incapacity, where legally applicable.
In the latter case, it should be noted that the amendment introduced by Law 2/2025 removed the automatic termination of employment contracts due to total or absolute Permanent Incapacity or severe disability.
Before terminating the contract, other possibilities must be considered, such as making reasonable adjustments to the position or transferring the employee to another vacant and available position compatible with their new situation. The employer will have a maximum period of three months to make the reasonable adjustments or transfer the employee or, where applicable, terminate the employment contract, providing reasons for its decision.
